Using the Web and social media to sell real estate

Banks today aren’t lending based on the value of the real estate any more, but they base their decision on the “existing relationship2 which means the potential global income of the sponsor asking the loan. If you want a loan from a bank, it’s relationship driven, that means they want you to be local and to have all of your checking accounts with them. Basically, they want to have your money at hand before they lend any of theirs.

Restructuring commercial loans often now requires that the bank fails in the first place.

The majority of the commercial real estate developers are in dire straights, trying to hang on with their nails, to restructure their debt on anything they built from 2005 and 2007, but many local banks won’t even talk to them. So how does the relationship play in this case? Many banks know very well that the minute they begin a short sale or loan restructuring process, which means discounting the amount owed and negotiating new terms, their own balance sheet will start to suffer greatly and they will see a domino effect of a number of their commercial borrowers doing the same. They don’t want to foreclose because they can’t take the capital hit.
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Therefore they sit tight, insisting that developers and owners in general continue paying a loan that they can’t pay and hoping the problem will go away without actively tackling it. When this happens, the best thing that the developer or the owner of commercial real estate can hope for is that their bank goes under. Once the bank fails, it goes to the FDIC (Federal Deposit Insurance Corporation) and then the FDIC reduces the value of the asset and brokers it off to another bank which will be in the position now to negotiate.

Listen from an expert in the field about some real life stories that are happening right now.

Roberto Mazzoni