Foreclosure proceedings on a commercial property tend to work in the same way as residential properties, but the stakes are often much higher. Losing a commercial investment to foreclosure could have a detrimental impact on your entire business, therefore you must take early action to gain a comprehensive understanding of your options.
Foreclosure can often be avoided because it's not an ideal scenario for anyone. Therefore lenders will usually be open to other solutions. The following are some of the most common ways to avoid foreclosure as a commercial real estate investor.
Modify your loan
If you are struggling to keep up with your loans, you may be able to modify it by lengthening the period of amortization or asking for a reduction in the interest rate.
Go through a short sale
If you want to sell the home quickly, you have the option to ask your lender for permission to go through a short sale. This involves selling the property for less than the mortgage, with the borrower agreeing to accept these proceeds as payment for the debt owed.
Ask for forbearance
At a time of financial hardship, you may struggle to afford mortgage repayments for a specific amount of time. In this situation, you could also ask to take a holiday from making repayments for a certain amount of months. This is known as forbearance.
If you are facing difficulties in affording mortgage repayments on real estate investments, it is important to proactively research your options. There are many ways that you can navigate your financial challenges in a way that minimizes the negative impact.