Facing Foreclosures:Add Value or Sell Today?

Lenders who foreclose on commercial real estate these days face a series of decisions that, arguably, are tougher than those same choices might have been right after the capital markets crashed. At the start of the recession, when real estate was heading south, those who foreclosed might well have wanted to sell the foreclosed REO and move on. There really was no telling how long the markets would take to recover enough for the lender to add value and sell the asset for a higher price.

Nowadays, however, with top markets recovering and signs of improvement even in some secondary markets, deciding whether to sell or hold is a tougher call. Obviously, the choice to hold on and add value is a question mainly for lenders when they foreclose. That’s because the other primary group that is foreclosing, those who buy notes with the express intent of gaining title to the property, typically already have a plan for adding value to the asset when they buy the note.