Commercial Real Estate Notes: How to Buy, Sell and Borrow

In the dynamic world of commercial real estate, there are complexities that go beyond the bricks and mortar. Financing, investing, and sometimes, the unexpected need for note sales are all part of the intricate symphony that is the CRE market. In a recent podcast, I shared insights on how note buying and selling through ART CRE (www.artcrenotes.com) can be both advantageous for sellers and a strategic investment for buyers. Additionally, I addressed what a borrower should do if they receive that letter stating their note has been sold by the bank.

Who Sells Notes through ART CRE and Why?

For many lenders, selling a note can be an optimal strategy. Banks, for example, may find themselves in situations where the process of foreclosure is less than ideal. This could be due to a variety of reasons, but regardless, a smoother and less public way to divest themselves of these notes becomes a priority.

Foreclosure is a public and administratively intensive process. In today's world, larger investment firms are generally looking for packages of notes in significant distress, often at a substantial discount. However, the landscape is shifting, and waiting for the distress to manifest as it did in the past may not be the best strategy.

If you're a lender looking to either explore what your note can fetch on the market or establish a relationship with a note buyer for potential future distressed loans, I encourage you to reach out. The world of CRE is rarely free of distressed borrowers, and I'm here to help you navigate the process seamlessly.

Banks Selling Notes: The Ideal Scenario

When a bank decides to sell a note, they prefer the process to be quick and discreet. At ART CRE, we excel in delivering just that. We usually complete a deal within two weeks, including due diligence and closing. This swift transaction not only benefits the seller but also ensures a smooth transition for the buyer. Selling a note at par and closing within two weeks is, undoubtedly,the ideal scenario for many lenders.

Who Buys Notes through ART CRE and Why?

Now, let's delve into who buys notes through ART CRE and why. The buyers in the CRE note market come in various forms, but opportunistic funds often lead the way. These funds may aim to acquire the notes as a strategic move to take control of the underlying properties when borrowers default.

Here's the concept: when borrowers initially purchase a property, they generally provide a significant down payment. If property values have appreciated since that time, a gap exists between what the borrower owes and the property's current market value. By obtaining the note, opportunistic funds position themselves to gain discounted real estate by acquiring the property.

If you are a note buyer, let's talk about your goals and how ART CRE can help you reach them.

What Should Borrowers Do If Their Note Has Been Sold?

If you find yourself in a situation where your note has been sold by the bank, it's essential to approach the matter proactively. Don't ignore that letter from the new lender. Pick up the phone when they call. This initial conversation doesn't commit you to anything, but it provides an opportunity to understand the new lender's intentions and explore possibilities.

Sometimes, communication can be a game-changer. New lenders have their goals and objectives, and they might be willing to work with you if you have a reasonable plan. If you want to sell your property quickly or execute a well-thought-out strategy, many new lenders are willing to talk.

In essence, my recommendation is clear: communicate. Whether your lender seeks to work with you or recover the property, your loan documents and the court provide you with remedies and time. So, stay informed, explore your options, and work towards a resolution that aligns with your goals.

In the intricate world of commercial real estate notes, flexibility, and communication can often lead to favorable outcomes. If you're considering selling a note, buying a note, or navigating the complexities of a sold note as a borrower, feel free to reach out. I'm here to assist you in finding harmony in your CRE investments.

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