We have all heard the phrase that lenders are using. It's kind of like the ostrich that buries his head hoping that the lion doesn't see the rest of their body standing in the open. But, what can lenders do? What is working out there?
Well, it depends. Every lender is different and the more you can find out about that lender will help you figure out what can and cannot be done.
For instance, one of my assignments recently involved a local community bank. They can only write-down assets to a certain percentage of an appraised price. Beyond that, they must wait until the property is re-appraised (typically every 6 months to a year). If the appraisal is not close to the market, the asset is going to sit.
An assignment that I am currently working on involves a national bank. My team and I are attempting to do a short-sale. We had numerous conversations with this lender about the market and that the only option, besides a foreclosure was to do a short-sale. The lender's first reaction was very standoffish. However, we have a buyer that we have negotiated a fair market price and are starting the process.
What about the CMBS and Life Company lenders? My experience still has them moving very slowly and trying everything to keep the current borrowers in place vs foreclosing. Some sold notes at discounts. The note buyers that I have spoken to that have done this have expressed some buyer's remorse. It's not as clean of an opportunity that they thought they were getting into. I expect that at some point, this group of lenders will become more active and pursue the short-sale opportunity.
So, have we moved past "extend & pretend?" Not yet. Be patient. Once the residential market is on more solid footing, which will allow the servicers to switch gears and focus on the commercial properties.
I would like to hear if you are experiencing the same in your market. Please leave a comment!