4 benefits to buying real estate in receivership
Lenders see foreclosure alternative as win-win
By Tom Kelly
In a nutshell, a receivership is an alternative to a foreclosure proceeding (where a lender takes ownership of the project) or a bankruptcy proceeding (a trustee takes control of the project).
Receivers are court-appointed individuals given custodial responsibility of a property that serves as collateral for a loan in default. Receivers displace the property owner as the active property manager and make all decisions regarding management and operations.
These often include making improvements, completing construction and getting the property ready for sale. The court order appointing the receiver spells out the receiver’s authority.
“A property in receivership can present a more appealing situation for several reasons,” said Kevin Hanchett, an attorney and principal in Edmonds, Wash.-based Resource Transition Consultants LLC, a company specializing in real estate and small-business receiverships. “There’s more control than in a short sale or a foreclosure, and purchasers can use standard financing.”
(unbroken quote above, selected sentences given numbers below)
- A primary benefit of buying through a receivership often is value. The reset pricing is often substantially lower than the original asking price.
- Generally a receiver sale is far more direct and expedient than a short sale. A receiver sale typically has a set price and legitimate offers accepted by the receiver usually are approved by the court.
- Mortgage lenders may choose to use receiverships on larger tracts and projects instead of foreclosures for several reasons. A major one is that the costs and liabilities associated with foreclosure can be long, drawn out and expensive.
- Lenders are allowing borrowers additional time to raise capital or sell assets, so long as the collateral is being overseen by a receiver. Defaulting borrowers and their lenders are agreeing to receiverships so that feasibility studies and appraisals can be conducted and, when appropriate, stalled projects can be financed and completed.
Copyright 2011 Tom Kelly
DISCLAIMER: I am not an attorney and do not encourage or discourage any specific legal actions. Seek advice from an attorney if you want to consider Receivership or any other legal actions.