Thursday, February 3, 2011

Sellers and Buyers Beware Deferred Maintenance if seeking a Refi or a Purchase Loan

Deferred maintenance may be an obstacle to the commercial real estate market for the next several years. I've had conversations with lenders recently about obstacles to refinancing and purchase loans. They keep mentioning the tightening of underwriting standards (nothing new) and the new focus on deferred maintenance. The older the property the greater the focus. 

As the marketplace keeps trying to find a point of stability, deferred maintenance may be an issue that makes that inflection point elusive.   

Over the past several months there have been a few articles that have highlighted the same concerns. Check out the MultiFamily Executive article here and the CCIM CIRE magazine here

Today, most buyers assume that distressed properties have some degree of deferred maintenance. However, it is critical that during the due diligence process that any and all deferred maintenance is identified and repair costs estimated to determine the true value of the asset.