Objective and Thorough Property Valuation Analysis Is Key To Successfully Negotiating With Commercial Mortgage Lenders According to Kevin M. Levine

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According to Kevin M. Levine, Executive Vice President of Strategic Asset Solutions/Peak Asset Solutions of Woodland Hills, California, "An objective and thorough property valuation analysis is the key to a successful negotiation with commercial real estate mortgage lenders. "Many distressed loan borrowers believe that they can submit just any proposal to modify the loan or conduct a short sale of the property, Levine said. "And many prospective real estate investors submit offers to purchase mortgaged properties or buy mortgage loan notes from lenders at very low prices. Sometimes those proposals are successful; but usually they are summarily rejected by the lender.”

An objective and thorough property valuation analysis is the key to a successful negotiation with commercial real estate mortgage lenders

“An objective and thorough property valuation analysis is the key to a successful negotiation with commercial real estate mortgage lenders,” stated Kevin Levine, Executive Vice President of Strategic Asset Solutions/Peak Asset Solutions of Woodland Hills, California. “Many distressed loan borrowers believe that they can submit just any proposal to modify the loan or conduct a short sale of the property,” Levine said. “And many prospective real estate investors submit offers to purchase mortgaged properties or buy mortgage loan notes from lenders at very low prices. Sometimes those proposals are successful; but usually they are summarily rejected by the lender.”

Levine explained that borrowers or prospective purchasers often submit a very low figure proposal, believing that will “smoke out” the lender and stimulate a counter offer. “That response doesn’t occur very often,” he said. “A lender usually avoids, in effect, ‘bidding against itself.’” Levine explained that the lender must be convinced the proposed loan modification, short sale or note purchase will produce an end result at least equal to what the lender will realize upon foreclosure. “This can only be done by providing the lender with a very thorough property valuation analysis,” Levine stated.

“We spend considerable time and effort gathering current market data and operating information about the property. If there are tenants, we analyze their rental rates in comparison with market rates,” he said. “Important factors regarding tenants are the remaining terms of their leases, the likelihood of renewal, and their expected rental renewal rates which may well fall below the current rates. So even if the occupancy is relatively high now and the property is generating adequate income to service the debt, taxes and maintenance, that may not be the case in a few months.”

Levine commented that properties occupied by the borrower’s operating business require an examination of the business’ financial performance. “The property owner’s business may be declining rapidly in this economy,” Levine added. “In such a non-‘arms length’ situation, the business will not be able to pay the contracted rent. An alternative and realistic rental rate likely will be significantly lower, diminishing the value of the property.”

Levine stated that lenders usually welcome and appreciate receiving an objective and thorough valuation analysis. “They often then will have the property reappraised; but the valuation analysis we give them creates a benchmark and provides a basis for contesting the reappraised value if that becomes necessary.”

Strategic Asset Solutions/Peak Asset Solutions offers commercial loan modification and short sale services in California and throughout the country. The company’s personnel bring extensive commercial real estate expertise to each assignment, including market analysis, valuation, legal, and negotiation experience. Each borrower’s unique lending situation is fully analyzed, and the borrower is assisted in preparing current operating reports and projections. Then Strategic Asset Solutions/Peak Asset Solutions drafts and submits to the lender a loan modification proposal. That proposal may include a principal reduction, interest rate reduction, and waiver of penalty charges. In those instances where a loan modification will not work to the mutual benefit of the borrower and lender, Strategic Asset Solutions/Peak Asset Solutions will attempt to broker a short sale of the commercial real estate at a significant discount from the loan balance, or will seek to negotiate a sale of the note to a third-party.

Strategic Asset Solutions/Peak Asset Solutions is a member of the Peak Corporate Network headquartered in Woodland Hills, California. In addition to commercial loan modifications, the Peak Corporate Network offers mortgage lending, loan servicing, residential short sale, 1031 exchange, trustee work, foreclosure services, and real estate sale brokerage services. These services are available primarily throughout the Western United States for both residential and commercial real estate properties and loans.

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Evon Rosen

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