• 30
  • December
    2011

The South Florida Business Journal recently reported on the short sale of a Ft. Lauderdale condo development - which was completed at an $8.8 million discount to its mortgage. On the outside, it appears to be an obvious great deal, but as with all complex commercial real estate transactions, there are many factors that need to be considered when dealing with commercial property foreclosures and short sales in Florida.

With all the distressed real estate in Florida, there can be numerous problems that may erode the value of the deal. If a property has been vacant for an extended period, there can be physical issues with the structure, from integrity of the roof to issues with the mechanical and plumbing systems that can represent large, unforeseen costs.

There can also be other undisclosed claims against the property. In the frantic building boom that preceded the crash, not all transactions received the care they deserved and formalities may have been overlooked. There may be conflicting claims fed by inaccurate or incomplete documentation.

These formalities could undermine the title with potential mechanics and tax liens, which even if defective, may require expensive litigation to quash. Any of these could develop into protracted litigation that could further diminish the value of the deal.

Sloppy construction could be exacerbated by poor or nonexistent maintenance after the property fell into foreclosure. While many of these problems should come to light during the due diligence made prior to the transaction, property from this period may need a much more exacting standard of examination.

What is the True Value?

Another issue is the inflated "value" that much property carried during the bubble. A buyer needs to be clear that many properties were never worth their loan values. Many properties were falsely inflated by the bubble and a $20 million property may now only be worth $10 million - making a $10 million deal today just average.

Before signing on the dotted line, an experienced commercial foreclosure attorney can review the transaction and help to see whether the deal will meet your expectations following the closing.