Here are some tips for making your renegotiation successful from
Edward Mermelstein, a veteran real estate attorney and founder of the
law firm Edward A. Mermelstein & Associates in New York.
1. Have the hard numbers ready. Be able to show why
the property isn’t or soon won’t be able to cover mortgage payments.
For example, if you have a major tenant that is planning not to renew
or asking for a major rent concession, the property’s current cash
flows may no longer be adequate to cover debt service.
2. Have an understanding of whom you’re negotiating with.
Find out what other loan modifications the lender has done recently.
Most modifications thus far have been in the 10 percent to 20 percent
range, says Mermelstein.
3. Have a sense of how much pressure the lender is facing from other defaults. A bank that can’t afford another default on its books may be more flexible.
4. Have a smaller loan amount. Loans under $100 million are less likely to be split too many ways, making them easier to renegotiate.
5. Have another lender on deck. A lender is much
more likely to negotiate a write down if you offer another lender
who’ll take over the reduced loan. Lenders want to be paid off rather
than turn debt into a rollover.
Mariwyn Evans is the commercial real estate editor for REALTOR® Magazine. You can reach her at firstname.lastname@example.org.