Commercial loan defaults skyrocket

by | Aug 9, 2010 | How to Guides, Uncategorized

Many sources are reporting this so I wanted to talk about what’s happening in the commercial loan world. In a word the news is bad for owners and sellers. In the last year the default rate has more than doubled with many predicting it will triple by the end of the year!

There are many factors taken into account when a bank makes a loan but these factors are all moving in the wrong direction.
Asset Value: What the building is worth has declined
Vacancy: Up accross the board
Down Payment: More money is required by banks
Debt Coverage Ratio [DCR]: The ratio of income to debt cost has increased which means loan payments must be much less the buildings income
Rents: Down accross the board

These factors affect the ability of owners to buy and refinance; with many projects losing money and/or underwater I expect this trend will get worse before it gets better.

If you’re an owner then I recommend aggresively pricing, carrying a contract if possible, or holding for the next 5-7 years.
If you’re a cash buyer look at bank owned properties or short sales.
If you’re a buyer that needs debt then look at owner carried contracts or SBA loans if you’re an established business looking for a building to use.

Details on the default rates of various property types

0 Comments

Learning Center:

Advice, Opinions, and Market Reports about the Oregon and Washington Real Estate Market

Portland Luxury Condo Market Analysis

  2020 was a rough year with the pandemic, social unrest, and the closure of many restaurants and retail businesses. Nowhere was the impact more acute than in downtown urban areas across the country. Read the full  luxury condo report here to view the pre and post...

How To Buy & Sell at the Same Time

  How to buy a home when you already own a home: Have you been dreaming of your next home, but you’re not sure what to do with your current home? You’ve heard that it’s a sellers market, but what does that mean if you also need to buy?  There are three options to...

How To Retire for Real Estate Agents

Our CEO and Best Selling Author of The Golden Handoff, Nick Krautter, talks with Justin Stoddart on the Think Bigger Real Estate Show to review his revolutionary model that helps real estate agents grow their business while simultaneously helping other agents rapidly...

Start Your Search Today

For a Confidential Meeting contact:

Nick Krautter, CCIM

Principal Broker in Oregon/President

Managing Broker in Washington