Property Triage: What to Do When Your Property is Drowning

Over the past year real estate markets have fallen so fast and far that many investors now hold properties that are worth quite a bit less than their outstanding debt balances. With no clear property recovery in sight, what should you do when your property is underwater and drowning?

• Recognize that the Lender Now Owns the Property
  
• Act Quickly
  
• Be Realistic
  
• Hire Competent and Experienced Counsel
  
• Take a Close Look at Guarantees
  
• Don't Forget Tax Impacts
  
• Avoid Putting Good Money After Bad (the "Re-Margin" Request)
  

To read more on this topic, visit Reed Law Monthly - November 2009.

For more information on my law practice, please visit www.reed-lawcorp.com

What’s up with Loan Modifications?

A new service segment has emerged in force, targeting borrowers in need of loan modifications and other foreclosure avoidance solutions.

Does this sound familiar: deceptive advertising, bait-and-switch tactics, outrageous guarantees, false promises, unrealistic expectations and overly optimistic situational assessments? These are some of the concerns and complaints we heard from clients earlier this decade regarding the mortgage industry. Well, it's déjà vu. But this time these concerns and complaints are directed at the rapidly expanding "loan modification" service segment that has materialized as a result of the strain on the property markets and resulting financial distress being experienced by borrowers.

Borrower Beware

When clients are considering hiring a "loan modification service" or other consultant to represent them in avoiding a potential foreclosure, they need to do careful research on the service provider. While some may offer legitimate services, others are outright scams. First, these types of service providers cannot legally or ethically provide legal counsel. Second, in many cases, the services they purport to provide are not even allowed under California law (see Department of Real Estate Bulletin and the State Bar of California Ethics Alert regarding same). Avoiding foreclosure is a serious matter that will likely entail that the borrower addresses many legal considerations and execute new legal documents. This type of work is best accomplished by legal counsel experienced in these matters.

For more information on my law practice, please visit www.reed-lawcorp.com

Distressed Property

A recent article on GlobeSt.com highlights what the real estate sector may be in for over the next few years. Namely: distressed property. In the case of Bethany Holdings Group, a multifamily investment and management company based in Irvine, CA, the distress culminated in a recent Chapter 11 bankruptcy filing (Ch. 11 permits the debtor to undertake reorganization in order to pay off its debts). A combination of assets purchased at the peak of the cycle, frozen capital markets, and deteriorating real estate operating fundamentals, caused Bethany to seek bankruptcy protection for an entity that once commanded an apartment portfolio of over 15,000 units.

However unfortunate it may seem on the surface, the real estate markets may well need more realizations of insolvent and over-leveraged property in order to bring normalcy back to the sector. As more assets trade under "distressed" situations, buyers will be exposed to potentially lucrative opportunities in terms of distressed asset (RE0s) and debt (sub- and non-performing loans) offerings. These distressed real estate opportunities will come with a host of deal and legal challenges unique to the distressed nature of the assets and the desire of the sellers (in many cases lenders) to minimize their losses and avoid any additional liabilities.

For more information on my law practice, please visit www.reed-lawcorp.com

My first blog!

I decided it was about time to get online with some of my thoughts...hope you all find them useful!

On a fairly regular basis, I will be posting my thoughts on various real estate news, opportunities, and legal issues. On any given post, topics may include real property transactions, projects, ownership, disputes, and distress.

For more information on my real estate law practice, please visit http://www.reed-lawcorp.com/