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Selling at a massive discounted value coupled with very short notice on what is being sold... doesn't this just lend itself to collusion between those that know

Selling at a massive discounted value coupled with very short notice on what is being sold... doesn't this just lend itself to collusion between those that know when properties will be put up for 'auction' to ensure that the right friends get a heads up beforehand?. This is of course a rhetorical question as I've met quite a few people whose fortune can all be traced back to having good friends in the right places. This is all sort of open secret so its not illegal but it is a form of corruption of the system.

from-nibly 2y ago
But why would the lender want to sell at such a discount? Arent they losing out on the remaining value of the loan. They had to pay someone else 137 mil and they arent getting that back. That just sounds like internal fraud.
- deleted 2y ago
  [deleted]
- bruce511 2y ago
  If the lender is the buyer (as in this case) they can then do a proper (non auction) sale as a "willing seller". This means they can reduce the risk for the next buyer - which in turn increases the sale amount. It's in the second sale where the loan will be covered. Usually there's an undisclosed reserve amount on the sale (somewhere near the loan value) - having the bank bid is just an alternative reserve mechanism (which may be illegal in some jurisdictions. )
- toast0 2y ago
  A foreclosure auction is the process by which a borrower in default is relieved of the property. Proceeds will fufill the liens in order of priority, and anything left will go to the borrower. The buyer typically owns the property free and clear of encumberances; there's some details there. In this case, and in the case of many foreclosure auctions, there were no bidders willing to get anywhere close to the outstanding loan ($83M[1]), so the lender won with probably an opening bid, or at least one above any other bidders. Depending on the foreclosure process, the lender may be able to seek further recourse from the borrower in court, or may only be able to take over the property. Regardless, the lender now owns it, and can do a willing sale as bruce511 mentions. Likely this will involve a longer marketting period and an opportunity for due dilligence. [1] https://therealdeal.com/texas/fort-worth/2024/04/05/opal-holdings-faces-1-6m-in-mechanics-liens-in-fort-worth/ https://therealdeal.com/texas/fort-worth/2024/04/05/opal-hol...
- aorloff 2y ago
  The office buildings are vacant. There is a sea of vacant office buildings as far as the eye can see.
deleted 2y ago
[deleted]
bruce511 2y ago
Foreclosure auctions are different to the open market. Not just the 'setting the price' but also the mechanics of 'knowing what you're buying' etc. In other words opportunities like even entering the building (in some cases) or doing a proper property inspection will likely not happen. For this reason it's a pretty high-risk situation, and that risk will be factored into the bids. Equally the bidders will be "professionals" - people who understand the process, risks and so on. In some cases the full purchase amount is due on the fall of the hammer, in others after a very short period (like 24 hours.) For all these reasons, you don't really need a long notice period. The buyer pool is already on the bank's mailing list, and need no more than a few hours to figure out their "best price". Make no mistake, buying foreclosed property is risky. Which is why the price is (severely) depressed. Yes you can make money. More likely there are additional significant costs. (Like outstanding property taxes.) Some of that is disclosed, most is not. While I've no doubt networking remains the root of a lot of business, and the benefits of networking are serious, there's likely no corruption here. This sort of sale us not "open market".
- hamandcheese 2y ago
  what I don't get is why is there such a big rush? It seems like most of the risk stems from "hey we have to sell this NOW". Why is the sale forced without any time to perform due diligence?
  - bruce511 2y ago
    This is the end of a very long drawn-out process. It's being driven by the lender, not the owner. Most bad debts don't end up here. The bank doesn't want to own the building, they want to be bankers not landlords. So this may "end in a flurry" (the bit you see) but it often takes many months to get here. This is the worst outcome for the lender and the owner. Neither party wants to get here. But if the owner is unwilling to cooperate then this is where it ends up.
toast0 2y ago
If you're interested in buildings at auction, you can follow court filings, default notices, and auction notices. If a lender is suing its borrower, that's a sign that the borrower may not be following the terms of the loan and the property may be heading to foreclosure. If a lender files a notice of default on a property, that's a pretty good sign that payments aren't being made timely, and the property may be heading to foreclosure. If a lender files a notice of foreclosure auction, that's an even better sign that there will be a foreclosure auction, but they can usually be called off, up until the start of bidding; sometimes only if the borrower pays the outstanding balance, sometimes if the borrower makes the late payments, sometimes at the lender's discretion.
ethagknight 2y ago
There may well be corruption in some of these processes, but these foreclosure options are generally a public courts process and occur only after vast sums of money have been lost by owner and lender. Due to construction costs, interest rates, and skyrocketing vacancy (a triple peak), the math does not work by a long shot to restore these buildings, even with new office tenants. Lease terms too short to recapture improvement costs. The deal just would have a rely on massive increases in rents and occupancy that likely never returns. Converting to a new use is far more expensive and similarly doesn’t work. High rises are very complex systems. These lender-run foreclosure auctions would LOVE to see another buyer come along to take the asset off their hands. The lender-buyback is just a risk backstop, they still have to figure out what to do with the asset after the buyback, meanwhile the building is deteriorating and costing (in any cases) millions to operate annually. My group knows how to do these conversion very well, we don’t see a path forward, even being willing to dive in on some major risk assumptions, the converted value end game is too weak to justify the risk.

from-nibly 2y ago

But why would the lender want to sell at such a discount? Arent they losing out on the remaining value of the loan. They had to pay someone else 137 mil and they arent getting that back. That just sounds like internal fraud.

deleted 2y ago
[deleted]
bruce511 2y ago
If the lender is the buyer (as in this case) they can then do a proper (non auction) sale as a "willing seller". This means they can reduce the risk for the next buyer - which in turn increases the sale amount. It's in the second sale where the loan will be covered. Usually there's an undisclosed reserve amount on the sale (somewhere near the loan value) - having the bank bid is just an alternative reserve mechanism (which may be illegal in some jurisdictions. )
toast0 2y ago
A foreclosure auction is the process by which a borrower in default is relieved of the property. Proceeds will fufill the liens in order of priority, and anything left will go to the borrower. The buyer typically owns the property free and clear of encumberances; there's some details there. In this case, and in the case of many foreclosure auctions, there were no bidders willing to get anywhere close to the outstanding loan ($83M[1]), so the lender won with probably an opening bid, or at least one above any other bidders. Depending on the foreclosure process, the lender may be able to seek further recourse from the borrower in court, or may only be able to take over the property. Regardless, the lender now owns it, and can do a willing sale as bruce511 mentions. Likely this will involve a longer marketting period and an opportunity for due dilligence. [1] https://therealdeal.com/texas/fort-worth/2024/04/05/opal-holdings-faces-1-6m-in-mechanics-liens-in-fort-worth/ https://therealdeal.com/texas/fort-worth/2024/04/05/opal-hol...
aorloff 2y ago
The office buildings are vacant. There is a sea of vacant office buildings as far as the eye can see.

deleted 2y ago

[deleted]

bruce511 2y ago

Foreclosure auctions are different to the open market. Not just the 'setting the price' but also the mechanics of 'knowing what you're buying' etc. In other words opportunities like even entering the building (in some cases) or doing a proper property inspection will likely not happen. For this reason it's a pretty high-risk situation, and that risk will be factored into the bids. Equally the bidders will be "professionals" - people who understand the process, risks and so on. In some cases the full purchase amount is due on the fall of the hammer, in others after a very short period (like 24 hours.) For all these reasons, you don't really need a long notice period. The buyer pool is already on the bank's mailing list, and need no more than a few hours to figure out their "best price". Make no mistake, buying foreclosed property is risky. Which is why the price is (severely) depressed. Yes you can make money. More likely there are additional significant costs. (Like outstanding property taxes.) Some of that is disclosed, most is not. While I've no doubt networking remains the root of a lot of business, and the benefits of networking are serious, there's likely no corruption here. This sort of sale us not "open market".

hamandcheese 2y ago
what I don't get is why is there such a big rush? It seems like most of the risk stems from "hey we have to sell this NOW". Why is the sale forced without any time to perform due diligence?
- bruce511 2y ago
  This is the end of a very long drawn-out process. It's being driven by the lender, not the owner. Most bad debts don't end up here. The bank doesn't want to own the building, they want to be bankers not landlords. So this may "end in a flurry" (the bit you see) but it often takes many months to get here. This is the worst outcome for the lender and the owner. Neither party wants to get here. But if the owner is unwilling to cooperate then this is where it ends up.

toast0 2y ago

If you're interested in buildings at auction, you can follow court filings, default notices, and auction notices. If a lender is suing its borrower, that's a sign that the borrower may not be following the terms of the loan and the property may be heading to foreclosure. If a lender files a notice of default on a property, that's a pretty good sign that payments aren't being made timely, and the property may be heading to foreclosure. If a lender files a notice of foreclosure auction, that's an even better sign that there will be a foreclosure auction, but they can usually be called off, up until the start of bidding; sometimes only if the borrower pays the outstanding balance, sometimes if the borrower makes the late payments, sometimes at the lender's discretion.

ethagknight 2y ago

There may well be corruption in some of these processes, but these foreclosure options are generally a public courts process and occur only after vast sums of money have been lost by owner and lender. Due to construction costs, interest rates, and skyrocketing vacancy (a triple peak), the math does not work by a long shot to restore these buildings, even with new office tenants. Lease terms too short to recapture improvement costs. The deal just would have a rely on massive increases in rents and occupancy that likely never returns. Converting to a new use is far more expensive and similarly doesn’t work. High rises are very complex systems. These lender-run foreclosure auctions would LOVE to see another buyer come along to take the asset off their hands. The lender-buyback is just a risk backstop, they still have to figure out what to do with the asset after the buyback, meanwhile the building is deteriorating and costing (in any cases) millions to operate annually. My group knows how to do these conversion very well, we don’t see a path forward, even being willing to dive in on some major risk assumptions, the converted value end game is too weak to justify the risk.