In 2011 banks and special servicers continue to see growth in the number of foreclosed commercial properties.  This despite a dramatic shift of money center banks to sell notes on distressed debt as opposed to directly foreclosing and dealing with the legal mess, the cost and the time requirements to take possession of defaulted real estate.  In 2010, one of our special servicer clients sold about $ 3 billion in commercial property in the U.S.  Problem was $9 billion of new REO came in the door during the same time period.  All these assets came from banks.  How can those responsible to sell these assets accelerate the rate at which property can be sold at the best price? 

One idea is for banks and others to invest in “Pre-Diligence,” a term coined by the NAI Global Special Asset Solutions team.  Today the commercial distressed debt industry is attempting to use tools developed in the RTC days such as auctions, sealed-bid programs and direct offerings to move product in a market overwhelmed by volumes of foreclosed properties not experienced heretofore.   To a significant extent the problem of offering such massive numbers of commercial assets to the market is a problem not of real estate as much as it is a problem of information, or more accurately the lack of information.

Pre-Diligence is a process that first collects all available information on foreclosed assets in the lenders files; including title reports, subdivision plans, environmental reports, photographs and as much information as the bank has and then places that information is a searchable and digestible form so potential buyers can find, study and consider the potential value of each asset. In short, Pre-Diligence is a form of MARKETING that is more attuned to the needs of buyers.  Ironically, in a market flooded with “opportunities” the need to present opportunities to those with equity to invest is more important that in markets that are in a more normal equilibrium. To see NAI Global’s approach to Pre-Diligence take a look at www.assetresolutiongroup.com. For those interested in this program please contact Rhyne Brown at rbrown@naiglobal.com for details.