Investment Real Estate by Fred W. Prassas

Author:Fred W. Prassas
Language: eng
Format: epub
ISBN: 978-1-57203-174-6
Publisher: Institute for Real Estate Management IRE
Published: 2013-04-13T04:00:00+00:00

Foreclosure and Receivership

The first step a lender is likely to take in a foreclosure action is to accelerate the loan balance by calling the entire amount due and payable immediately. The amount due will include the delinquent mortgage payments, taxes if delinquent, and severe penalties on top of the late fees. In most states foreclosure actions take several months, and sometimes years, to complete. Bankruptcy on the part of the borrower can complicate matters further. During this period, the lender may have several remedies, including enforcing its security interest in the rents that are being collected. The matter will likely become a complicated legal proceeding.

Also during this time, lenders want to prevent the property owner from committing waste on the property, meaning they want the property kept in a reasonable state of repair and do not want the owner to take any money or property while the action is proceeding. In these circumstances the court will typically appoint a receiver to manage the property until the foreclosure is completed. The receiver, often an attorney appointed by the court, may hire a property management company to handle day-to-day operations. Some courts appoint a property management company as a receiver. Either way, opportunities exist for property management companies to take on these responsibilities. While they provide short-term relationships, receiverships can be profitable and place a company in a good position to be chosen to manage a property for the lender or new owner after a foreclosure is completed.

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