When a building is foreclosed, the bank providing the mortgage loan uses the property as collateral, and will take full possession of the property if the loan is defaulted on. This is common practice and usually ends up with the banks turning around and flipping the property to recoup as much of the original investment as possible.
This may appear to be a simple process, but to anyone who has never sold a home, putting a building up on the market, finding a qualified buyer, and going through with the sale is no easy task. This process can take several months, or depending on the property, even years.
This brings me to the present situation we are dealing with at CBC, LLC—due to the implications of the real estate debacle of the late 2000’s, banks are now flooded with properties. They are heavily invested in these properties, and cannot assume any further risks from buyers. Due to this predicament, it may be a couple of months, or even a year, before a bank tends to a building.
Last week when I conducted a Property Condition Assessment on a 10,000 square foot restaurant/bar, I was able to see this first-hand. Let me repeat—this property is 10,000 square feet. This is a significant size for a restaurant/bar that consists of two stories, an expansive kitchen area, and a large dining area. This property could have been absolutely beautiful if run correctly, and still has that potential. Sadly, the bank responsible for this property has been overwhelmed with the number of foreclosures, so this building has suffered the consequences.
The previous tenant left while forgetting to drain the fire suppression system. The system started to leak for six straight months. When the leak was discovered, it was quickly remedied, but no further action was taken. The pooling water was left behind locked doors in a warm and dark building.
CBC’s inspection occurred about six months after the problem was identified. The mold was incredible. It was located on every wall, floor and chair. Along with the other issues in the building, which included a leaking roof and a gazebo ready to collapse, this property went from providing a promising return to a building we are trying to salvage. If maintained properly in a timely manner, these problems would have been alleviated, and would have helped the bank’s bottom line considerably.
There appears to be a lack of understanding for just what it takes to maintain such a large property and the damage that deferring maintenance can cause. Even if this building did not spring a significant leak, the fact of the matter is that properties need constant maintenance. Without proper maintenance, the property and its value will continually decrease and with that, you are slowly ruining your own investment.