The time between a borrower going into default and the foreclosure sale date being set on a commercial property is known as commercial pre-foreclosure. The pre-foreclosure period of a nonjudicial commercial foreclosure is crucial because it comes with its own set of compliance rules, depending on the state.
Read on to learn more about exactly what a commercial pre-foreclosure is, the key indicators that a property is in the pre-foreclosure stage, and how an expert partner like Total Lender Solutions can help you determine the best route to take when foreclosing on a commercial property.
How to Know a Commercial Property is in Pre-Foreclosure
When a borrower defaults on their payment, they are in the commercial pre-foreclosure stage. Because it is often a more costly and lengthy process for lenders to foreclose than to help a borrower out of default, the commercial pre-foreclosure stage is often where a lender will try to negotiate alternative terms, such as:
- Refinancing: Borrowers may consider refinancing the loan with another lender, but it can be difficult to achieve for borrowers already in default.
- Loan Modification: Lenders might agree to modify the terms of the loan by reducing monthly payments and lengthening the loan terms.
- Forbearance or Temporary Stays: If the lender can determine that the financial setback for a borrower is only temporary, they may suspend payments on the loan for a short period.
- Short Sale: Lenders can use the surrounding property values to determine whether or not a short sale of the property may be a better option than a long sale.
But if a borrower can’t get out of their default, the lender then must move through the foreclosure process. Commercial nonjudicial foreclosures can only be completed on real estate secured by a Deed of Trust.
A Deed of Trust is sometimes used interchangeably with a mortgage, but they are different. A Deed of Trust involves three parties: the borrower (trustor), the lender (beneficiary), and a neutral third party known as the trustee. The trustee holds the legal title to the property until the debt is repaid
Need Help During a Commercial Pre-Foreclosure?
State, federal, and local laws surrounding foreclosure processing are overwhelmingly complex. Having a partner like Total Lender Solutions during the commercial pre-foreclosure stage ensures that your small-to-medium lending business stays fully compliant while protecting your assets. The Total Lender Solutions team works alongside your team so that lenders can remain focused on their customers.
For over 35 years, Total Lender Solutions has advocated for lenders looking to maximize recoveries on defaulted loans in California, Nevada, Oregon, Texas, Missouri, and Arizona. Our team of highly experienced real estate professionals and legal experts works as a vigorous extension of your team to provide comprehensive solutions and seamless communication, from commercial pre-foreclosure and notice of default to the final sale phase. Contact a Certified Trustee today by visiting our Contact Us page!
