The following Q&A was completed as part of our conversational Commercial Real Estate FAQ Interview Series, we hope you find it helpful:
Investors can work with special servicers, but it’s important to look at these distressed properties honestly. In some instances, properties will only be sold at higher than the appraised value, or bidders can be manipulated into bidding higher than they’d like at auction. Great deals do exist, but just because it’s distressed doesn’t always make it a good deal.
Richard Wilson: How can investors, commercial real estate professionals, work with special servicers or source deals from a special servicer to access a distressed investment opportunity?
S.L. Van Der Zanden: Personally, because our firm does foreclosure receivership work, we’re talking to the asset managers on a regular basis. There’s times that a loan comes in to them that’s troubled, they haven’t made a decision what to do with it and we see opportunity there and we say “Hey, if we bring a buyer, would you sell it?” and the rule for them is it has to sell for more than the appraised value for them not to go to market and market it widely. Most of the special servicers now have their own sales platform or they share ownership with other special servicers, they’re typically fairly auction-y and they have a mixed record with buyers. There’s always tales of bidders being manipulated into bidding higher than they wanted to. Definitely, you hang around the hoop, things come through and just remember just because it’s distressed doesn’t mean it’s a good deal. There’s a lot of distressed real estate.