Banks help avoid commercial foreclosures

CorrespondentMarch 25, 2013 

MANATEE -- As residential foreclosures shrink and the housing market rebounds, commercial property is quickly following the trend, experts say.

Banks are trying harder to work with property owners, they say, to get bad loans off their books and prevent future foreclosures.

"They don't want to see any more big foreclosures coming online," said Anthony Mazzucca, a Realtor with NAI Manasota in Lakewood Ranch, which handles commercial property sales.

Early in the recession there was a "extend and pretend" philosophy with banks says Mazzucca and Tramm Hudson, a former longtime banker who is now working with both commercial property owners and banks.

"A rolling loan gathers no loss," Hudson said, referring to banks continuing to carry nonperforming loans on their balance sheets.

Banks like Stearns and Bank of the Ozarks, which took over the operation of failed banks throughloss-share agreements with the FDIC, have been helped in dealing with problem commercial loans by not having to shoulder all the burden of that debt, he said.

Those agreements stipulate that the FDIC will cover 80 percent of the loan loss while the bank is responsible for 20 percent.

"This has added a whole new dynamic," Hudson said. "The bank has an advantage, it gives a cushion for them to work with the borrower."

Catherine Bonner, vice president of commercial banking for Stearns in Sarasota, agrees. Stearns has purchased nine failed banks since 2008.

"We have some flexibility," she said, although, she adds, the bank is still "charged by the FDIC to maximize returns on the portfolio that was sold."

Bonner is seeing more activity and interest in commercial property and even vacant land.

The number of commercial foreclosures has dropped significantly from just a year ago, she said.

"It's getting better. It probably started in the fourth quarter of 2011. 2012 was good. We are selling them faster than we are bringing new property in," Bonner said.

Hudson believes commercial foreclosures have hit bottom and full

recovery is right around the corner.

"We are on the cusp ofthe recovery," he said."The last four years have been traumatic but wehave worked through themost difficult properties. Banks have become morecooperative, they are willing to recognize their losses,deal with it and move on. Most have charged down their loans to their true value."

One alternative marketing vehicle being used to sell commercial property are auctions. On April 10, Auction World USA is holding an auction for 16 privately-held commercial properties in Manatee and Sarasota counties, its largest auction this year, said Mark Henderson, who is managing the event.

"We've had success with commercial property sales," said Henderson, whose company had three last year.

"A lot of buyers want to know where property values are so instead of an agent telling them, 'This is a good deal,' they are bidding against other buyers to see how much the property is bringing. It reinforces the buyer's decision and they feel good about buying it," he said.

Auctions also create a sense of urgency, said Henderson and Hudson.

"You are saying, 'We are going to sell the property today, make an offer," Hudson said. "There appears to be more and more advertising for auctions than there ever was before."

Mazzucca says auctions, sometimes, can even bring in more money than selling property the traditional way.

"It brings out more buyers," he said. When a three-acre industrial parcel in Nokomis he had listed for $200,000 didn't sell, it was auctioned off and sold for $285,000, more than the listing price.

But Henderson thinks those situations are more the exception than the rule.

"People are still coming out for a bargain," he said. "There are some great buys to be had."

The April 10 event -- aconfirmation auctionwhere sellers still have final approval over the purchase price -- will include professional offices, medicalbuildings and even vacant tracts of land. It will be held at The Frances, 1289 N. Palm Ave., in downtown Sarasota.

Potential buyers can view the property ahead of time and there is no premium or entry fee, Henderson said.

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