The economic turmoil of 2008 and 2009 is behind us. 2010 left us with a new market and new rules. Gone are the days of 80 percent loan-to-value (LTV) ratios and other borrower friendly terms. Purchasers of hotels are now in a position to take advantage of a newly set market with new and evolving rules. Many argue that with the depressed real estate market, buying the property outright makes the most sense. Others believe that buying the paper of distressed properties and then exercising the remedy of foreclosure offers the best bargain in the end. With this new market come new rules.
We have watched many traditional purchasers of real estate turn to buying the paper of a fully operating property with the intent of foreclosing, stabilizing and rebranding — their sole intent to flip a once distressed property. Purchasers are faced with a myriad of state and federal laws that can present unforeseen complications. Many lenders are seeing the benefit of selling their paper, cleansing their balance sheets of distressed properties, and passing on the complications of foreclosing and operating to those better situated. For lenders, its cleaner, neater and faster.
While the market in 2011 resets and purchasers and lenders realign, we are sure to see the emergence of yet another trend within the distressed property arena.