|Posted by: Bessie Fewell Mar 9 2003, 03:25 PM|
|My bank does not want to accept payments on a loan and has told me that they will start foreclosure proceedings on a 12 unit apartment building that I own. The market value of the building is more than the outstanding loan balance (appraised for $500,000 and loan is for $472,000). The problem is that 4 units are vacant and a couple of other tenants are late. Last month my rental income was only $3,560 and my loan payments are about $4,000. What can I do?|
The original loan was for $480,000 and 8%
The building has 8 one bed. Apartments and 4 two bed apartments.
|Posted by: loanuniverse Mar 10 2003, 05:05 PM|
|Your situation reminds me of one of my first jobs in banking. It was in the collections department and my knowledge is a little rusty in this area. There is something to salvage from this since you are telling me that you have $28,000 in equity. However, the cushion is pretty thin and I believe that all parties in this would lose if it goes to foreclosure. Contrary to popular belief, Banks are not in the business of foreclosing on properties. Back in the day when I was helping one of my employers doing collections on past due loans, We would try to work with the customers and it would be a few months before an attorney would be contacted. The problem with your situation is that at $472,000 in outstanding and 8% interest, it will only take a couple of months of being late for the accrued interest to increase to the full value of the property. This would be even faster if the bank has demanded the loan already and started charging you default rate.|
If the bank is not accepting payment, it must be because they have demanded full payment and nothing else would satisfy them. Please remember that I am not an attorney and my advice is worth what you pay for . Once the bank has taken this position, it might be difficult to get them to change it. However, there is always room for negotiation. Your options are limited depending in the kind of resources and help you could get. Of the top of my head, you could do the following:
1 – Come to an agreement with your bank, which would probably mean that you must bring the loan up to date.
2 – Look for financing elsewhere and payoff your Bank.
3 – Sell the building.
Any of these options require either additional resources or finding a willing third party to provide financing or purchase the building. It might be difficult with the limited equity, but I would try to avoid a foreclosure at all costs. Good luck.