Find it! Fill it! – Find Commercial Real Estate Office Space, Buildings, Condos for Lease or Sale in Orange County

What if you were told that you can take advantage of the current commercial real estate market and purchase a piece of property for cheaper than what it’s valued for, without having to compete with other buyers? Would you pounce on the opportunity?

You don’t have to compete with other buyers fighting for short sales and foreclosures, that you can actually bypass them and get the property, way ahead of them, before it even hits foreclosure. Well, instead of purchasing the property, all you have to do is purchase the “note” on the property.

Often in commercial real estate a bank does not want to foreclose on a property…it takes time, legal fees, energy and the bank does not want to take-back the property, they don’t want to be in the real estate sales business, they just want to get their money back, so often, they would rather sell the “note” a.k.a “the loan”, to someone else, at a discounted price, and have the buyer deal with the “real estate” aspect of the property.

What is a note? Well, it is the “outstanding loan amount on a piece of property” and when you buy these “notes, you want to make sure it is a First Trust Deed. So, you want to purchase the loan note that controls the First Trust Deed: The Promissory Note, and the Trust Deed. The reason for this is that the note is the buyer’s promise to pay and the First Trust Deed not only secures the note, but also describes certain features of it. Banks would rather sell the note to someone else than foreclose the property. When note payments are not made, and the borrower is in default of repayment, the owner of the note, “lender”, may have to foreclose. However, this is a time-consuming and painful process.

So, to take advantage of this opportunity, let’s paint this picture:

There’s a property that is on the verge of being foreclosed with a loan balance is $1,000,000.00. If you are a prospective buyer who likes the property, you could instead approach the bank (which is motivated to get rid of the non-performing note) and buy that $1 million note for a discounted price, say $800k..and the bank would consider doing this, because the buyer of the note is running the risk that the borrower will incur with a no-paying borrower. The benefit for the buyer of the note is that if the borrower does not cure his defaults in loan payments, the buyer of the note can foreclose on the property and have a $1 million property, that he/she bought for $800k. This is a great strategy.

One of the major risks for the buyer of the note is that the borrower may not pay you. This can be very bad if the borrower isn’t able to catch up on their payments, because then you have a note that does not bring-in any income. However, the risks are not too bad for some, because you have a couple of options:

1) Foreclose and Keep the property, then Occupy it yourself or

2) Foreclose and sell the property to someone else for $1 million

In the end, you can purchase a note at a discounted price, and end up with an asset that is far worth more than you paid for it. It’s a great way to pick up property at a cheaper price and have to compete against all those bottom-feeding buyers that are trying to buy short-sales and foreclosures in this market. Buying a note from a bank on a property that is on the brink of foreclosure, means that you´re solving that problem for the bank, and for that you receive a great deal from them in the process. If you have any questions about this process don’t hesitate to ask us anytime We’re experts in this field.