Sometimes a property owner simply can’t keep up with the necessary payments, and when this happens, the bank forecloses on the property and ends up becoming the property owner. The financial institution oftentimes then tries to sell the property at auction to the highest bidder. This process can provide commercial investors with an opportunity to secure a great property at an excellent price, but it’s not without potential pitfalls. In today’s blog, we share a few potential issues to watch for when buying foreclosed commercial property.
What To Watch For When Buying Foreclosed Commercial Property
Foreclosed properties offer some unique opportunities and potential pitfalls, and we want you to be aware of the possible risks associated with buying a foreclosed commercial property. Here’s what you’ll want to keep an eye out for when looking into foreclosed commercial properties.
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Updates and Maintenance - While it’s not always the case, oftentimes foreclosed properties aren’t in the best shape. Perhaps they’ve been abandoned or expected maintenance hasn’t been performed for some time. If this is the case, know that you’re going to need to invest more time and money to get the property up to your standards. Assume that you’ll need a much bigger budget for maintenance and improvements if you’re considering bidding on a foreclosed property at auction.
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Liens And Unpaid Taxes - A property may be foreclosed because the owner didn’t pay its taxes, and in these cases, these outstanding tax liens may need to be settled by the next owner. There are a few different liens that can survive a foreclosure, so consider bringing in a title service company like Commercial Partners to determine if any of the foreclosure properties you are considering have outstanding liens.
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Competitive Bidders - You may be able to get a great deal on a foreclosed commercial property, but don’t expect to be the only one that bids at the auction. The lender is going to try to invoke as much interest as possible in the property, so while it may look like a great deal when the auction starts, it can quickly turn into a more risky investment if a bidding war begins. Come in with a solid auction budget well in advance of bidding.
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Environment Issues - Depending on the type of commercial property you are purchasing, part of the land may be polluted or unsuitable for your future visions based on the actions of the previous business or owner. Do some research into whether or not the property may be polluted or affected by the previous owner’s actions.
Keep these tips in mind and consider bringing a commercial title service company into the fold to assist with your next commercial purchase. For more information, reach out to the team at Commercial Partners today at (612) 337-2470.