My husband and I bought a piece of commercial property 3 yrs. ago. The building is very large, approx. 22,000 sq.ft. This we purchased as and LLC. My husband restores antique cars and his business is a separate LLC. We have been trying to sell for the past 6 months. This endeavor has become way more expensive than we anticipated. When we purchased the building we had no money down, which seemed like a great idea at the time. Little did we know that our house was used as collateral. We weren't aware of this until the day of closing. Being young, (he was 27, I was24) we went ahead with everything. Now we find ourselves in enormous debt. Our mortgage at the business is $3800 / month, not including insurance. utilities & repairs. We have about $2200 income from tenants, which is not nearly enough. All of our personal income is tied up with mortgages and personal expenses. We have borrowed money from family and used all available credit we have. Now the bank is looking to foreclose within the next 3 months if we can't find a buyer. We also owe $8000 in back taxes. We are concerned for several reasons, #1 being that we could lose our house. Our question is "Should we consider bancruptcy, and what are the pros and cons" We still have the property listed with a realtor and pray every night it will sell. We have decided we need to start looking at other options in case it doesn't sell. We paid $440,000 3 yrs. ago and are asking $800,000, but $625,000 would give us close to the $100,000 we need to pay off our personal debt that has come as a result of the business. This is so much more complicated than what we anticipated 3 yrs. ago when we purchased the property. Help!

The good news is that there seems to be some equity on the building. Although, the $800M price translates into a 22% annual price growth that might be too high. Worst case scenario would be selling it for a higher amount than the $440M loan balance, which would remove the lien placed in your home.

Here are my thoughts:

- I can not tell you anything about bankruptcy. First, I am not an attorney. Second, I do not know your complete financial situation. Finally, Even the laws are changing.

- If you are thinking of corporate bankruptcy, chances are that you are still on the hook for the loan on a personal basis as guarantors.

- You might want to take a look at what market rents are for the space that is being occupied by your husband’s business. That way you can get a better sense of what the building should be going for using the “income approach” {an appraisal technique, there are a couple of samples in this site}.

- Your situation is dire and will attract sharks looking for a quick buck. Be careful who you deal with. If the market value of the property is close to $625M and your loan balance is $440M, your goal should be to get out without giving up all of the equity.

Good luck

So the best thing to do is wait and hope for a buyer? I am a little confused as to what you mean by The good news is that there seems to be some equity on the building. Although, the $800M price translates into a 22% annual price growth that might be too high. Worst case scenario would be selling it for a higher amount than the $440M loan balance, which would remove the lien placed in your home. Thanks for your time and info.

The best thing would be for you to find a buyer rather than having the bank foreclose.

Regarding my comment about the 22% appreciation, I just calculated what the price increase needed to be every year to get to $800,000 from $440,000.

Year bought -> 1 -> 2 -> 3
$440,000 -> $536,800 -> $654,896 -> $798,973

I was trying to make a point that your asking price might be a little too high. Since most of the double digit increases in real estate have occurred in the residential market.

I also understood that the lender that gave you the commercial mortgage also put a lien on your house. The way I see it, paying off the commercial mortgage will remove that lien so that would be my goal.

On the other hand, it might be best for you to consider bankruptcy. But, there is no way someone a couple of thousand miles away can’t tell you what the best course of action is without knowing your full financial condition or being versed in bankruptcy law.

THis is definatley our goal. I see what you are saying about lowering our price. That seems like a good idea. I had posted earlier that $625k would put us where we need to be. We were just trying to look at our options. I was wondering what happens when you declare bankruptcy, do they take your house, car, everything? I am not familiar with the specifics, just looking at our options before we talk to our lawyer and waste his time & our money. Thanks for taking the time to answer my questions.

Do not claim bankrupty? Do not enter foreclosure? Please your recovery will be tuff. Sell the Commerical Property for whatever will make you even. Refinance the home to pay off credit card bills. Lick your wounds and hope your next buisness venture will be better. Best of Luck

where is this property located?