By Miguel de Arcos
Originally at: http://svnfloridablog.com/

In the not too distant past, a commercial real estate short sale was unheard of. It was an exception to a long-standing trend that almost all commercial real estate was sold for more than it was purchased for or at least for more than the current note on the property. A short sale is very simple concept to understand, yet prior to 2007, not many had ever heard of one. A short sale is when the lender allows a property to be sold for less than the amount owed on a mortgage and takes a loss while a deficiency agreement may or may not be in place with the borrower. Today 80% of my office’s sale transactions involve distressed commercial assets such as a short sale or a bank owned property.

Why Is This Happening?:
The Great Recession has put considerable pressure on property owners and their businesses. One of the biggest expenses in any company’s budget is the real estate, so naturally that becomes a heavy anchor on a ship already taking on water. Downsizing existing space and relocating to less expensive space are typically the first options. When those options do not present themselves or are not taken advantage of for one reason or another, the only choice left is to sell the asset. But how can you sell the asset if it is not only worth less than what you paid on it, but worth less than what you owe the bank on it? We have entered a time when the question is not “How much profit can I get out of this sale?” The question “How can I best limit my losses?” It’s time to consider a short sale—
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