Any way to jump in right before foreclosure and take over interest in building?
I'm located in Oregon, looking to purchase a commercial building (restaurant space) that is very close to foreclosure, according to my agent. From what I understand, there is a mortgage on the building for about 300k, a second loan of 11k, and a couple thousand dollars in unpaid taxes. I'm in a position where I could scrape enough cash together (by selling another property, which would be easy in current market) to cover all that debt and take over the building free and clear. I'd also be glad to work with the lender and take over payments, plus settle the other debts. Or anything in between.

The agent I'm talking to tells me she is going to reach out to the lender and see if they have any flexibility. I'd still work with her if I pursued the purchase, but is there any value to me reaching out directly to the lender and suggesting any of these ideas? Is there any precedent for acquiring a property like this, right before foreclosure, or particular language I should use that would make sense to a bank?

Also I should mention that I don't know the current owner directly. I realize it would probably be in his interest to sell it to me for anything that covers current debt, but from what I understand he's very stubborn and angry and doesn't want to cooperate with anything. He'd rather just make the cash he can this summer and accept bankruptcy...
[{"id": "gzla585", "text": "There's a couple angles: buy it \"subject to\" the loan; or partner w the owner, bring loan whole, sell and split proceeds.\n\nThere are some owners in denial who will unfortunately just go down with the ship. In that case, you'll be buying at trustee sale....", "replies": [{"id": "gzlg02c", "text": "I'm just learning about this now, thanks for the comment. If I pursued \"subject to\" arrangements, I could loose the building if the current owner went ahead with BK, correct? Seems like a lot of risk.", "replies": [{"id": "gzlksa7", "text": "Why not just bid at the foreclosure sale and forget the current owner?", "replies": [{"id": "gzllewk", "text": "My understanding is that it's a really slow process in Oregon, and could potentially take years. I'm not just looking for the building as an asset, I'm looking for a place to open a business, but I want to own the property, so I have both an income and an investment.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gzlbj74", "text": "If you purchase the note from the lender, then you'll need to pursue the foreclosure and the costs associated with that. Unless you are experienced that could be a headache with a litigious owner.\n\nIf you believe it's close to foreclosure, buy the asset from the bank after they foreclose. Or offer owner 5%-10% over outstanding debt.", "replies": [{"id": "gzlix37", "text": "Or another angle is to purchase the NPN like you said from bank or lender, and either work with the owner and get a Deed in Lieu, or push it through trustee sale and get the trustees Deed that way.", "replies": [], "depth": 2}], "depth": 1}, {"id": "gzlbrij", "text": "Given the loan balance the lender probably won\u2019t want to work out the loan, the exposure costs and fees are probably greater than what they\u2019d recover. Sit and wait for lender to take title and buy it at the courthouse steps. Even if you\u2019ve done a foreclosure before the headache of buying the loan to take title on your own isn\u2019t worth the opportunity cost or expense for a deal that small. \n\nSeparately if there is any value in the deal above the loan balance the borrower should (but who knows...) go BK to restructure the note. If they\u2019re underwater they won\u2019t do shit and the bank has no incentive to workout a small balance loan, actual cost and opportunity cost is likely greater than potential recovery.\n\nETA small deal but the second lien holder might be able to bypass the process and ucc foreclose depending on your states laws about it. I\u2019ve never foreclosed in Oregon so can\u2019t opine but they might also have a path to title if there\u2019s value, but I guess it goes back to the Bk thing if the borrower thinks there is value and needs time the second lien holder isn\u2019t going to take out the senior secured thru ucc process", "replies": [{"id": "gzlgff5", "text": "&gt; Separately if there is any value in the deal above the loan balance the borrower should (but who knows...) go BK to restructure the note.\n\nI think there's a bit of value--hard to say because there's not a lot of comps, but I'd think it would appraise ~400k, based on a few other recent sales. But if the owner has equity, they'd be able to keep it through BK? I thought that was only for primary houses. I assumed the bank would foreclose, eventually sell it, and pay the owner out if there was any excess balance. Is it just cheaper/easier for banks to keep working with the existing owner, and restructure, even if they've demonstrated a failure to run the business and pay the mortgage?", "replies": [], "depth": 2}], "depth": 1}, {"id": "gzlc36d", "text": "I'm pretty sure you can't go around the owner and work directly with the lender on this. You need the owner's cooperation/approval to even contact the lender and work out a short sale or loss mit deal on this. If  the owner is not cooperative, tough deal. Bankruptcy is going to delay the foreclosure. You have to find a way to buy from the owner before he goes into bankruptcy.", "replies": [{"id": "gzlci9x", "text": "Well you could always buy the loan... in all honesty though if the value is reasonably close to the loan amount and the owner is ok selling to avoid foreclosure the bank might just take the DPO and call it a day, foreclosing or working out a loan that small is just a headache for not much loss mitigation...", "replies": [{"id": "gzllif5", "text": "DPO=debt pay off?", "replies": [{"id": "gzmhizc", "text": "Discounted payoff", "replies": [], "depth": 4}], "depth": 3}, {"id": "gzlxkx2", "text": "But you can't always just \"buy the loan\". What bank have you ever heard of that sells individual notes? They are securitized and sold off in packages.\n\nThis is just not how banking has worked for the past 40 yrs", "replies": [{"id": "gzmhtg6", "text": "I\u2019ve never seen a loan with a balance that small in a securitization. I\u2019ve seen them in balance sheet loan pool packages sure. Depends on bank if lender is a local they might have someone to sell it.\n\nEither way I don\u2019t think it\u2019s likely they\u2019d sell the loan nor would it be worth the headache of buying it then trying to foreclose. Work with owner on dpo or buy it at courthouse", "replies": [{"id": "gzmz1vo", "text": "300k is not a small loan. But the whole point of securitization is to bundle small loans into investable packages.", "replies": [{"id": "gznhje4", "text": "It\u2019s tiny. I\u2019ve never seen a loan that small outside of bank balance sheet loan pool sales. It\u2019s way way too small to put into a CLO or cmbs.", "replies": [{"id": "gzof3nc", "text": "Fine, it is tiny if you say so. How in the world does that make it more likely that the OP is going to be able to buy it individually from the bank?\n\nTHAT was the point of my posts. Not to argue about whether 300k is big or small.\n\nThe fact that it is tiny only reinforces my point that the bank is not concerned about the default and is not going to sell him this note. Period.", "replies": [{"id": "gzorqpc", "text": "I don\u2019t disagree. It\u2019s a waste of ops time to pursue that Avenue, if it gets foreclosed buy it on courthouse steps or from broker we once it goeS REO", "replies": [], "depth": 8}], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}, {"id": "gznfo0q", "text": "You're mistaken on this point, unfortunately.  I know three banks/lenders that underwrite and keep individual loans and I could definitely buy a troubled loan from them.  With one of them, I'm friends with the CEO, and have been offered to look at buying non-performing loans.  So, with small banks, it can happen.\n\nHaving said that, the rest of the thread is accurate - it makes little sense to buy the loan and then deal with the process of foreclosure on this stubborn owner.  If you like the building and the fundamentals look okay, then negotiate a price directly with the owner.  Or just buy a different building nearby - life's too short to get involved with this BS - with all the hassle and legal fees, etc, you're not likely to come out ahead.  As someone else mentioned, if the loan-to-value (LTV) ratio is low on the loan, then the owner will just sell the building at the last minute.  If it's too high, then the owner of the note will end up losing a bunch of money on it due to foreclosure costs.  The only way to make money on a deal like this is to carefully navigate down the center between these two outcomes - but on a deal this small, the costs will quickly outweigh the potential benefits.\n\nBottom line, it's risky to play in this space if one is not experienced.  Still, one has got to start somewhere I suppose...", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gzlx6ut", "text": "So you have a 300k debt covered by a 400k asset. Why would the bank be worried? They don't care. They will get their money and fees.\n\nAbout to go into foreclosure means very little. Its a long process made longer by covid. It's just the very beginning of a long legal process.\n\nThe owner owns the property. You can't just go to the lender, make a deal and take over the property. The lender can't even just take control of the property. That is the point of the long fc process. Yes maybe he should sell it for 400k...but why would he give it to you for 300k? He is stubborn, wants to stay in business as long as possible and is in no hurry.\n\nMaybe you can buy the note for full price in theory but unless its a tiny local bank, that's not going to happen. They are most likely going to refuse to even speak to you about someone else's loan. Banks sell their lians in packages and hire someone to service them. They don't sell off individual notes.\n\nIf the guy is stubborn and going broke he can likely stay in the building for a year or 2 or more without making payments. Why would he leave?\n\nI just don't see an angle here.", "replies": [{"id": "gzmdhro", "text": "So much wrong with your comment.\n\n1) not all loans are securitized, you\u2019d be surprised how many balance sheet loans are out there, even with the big banks.\n\n2) you can absolutely engage the lender and buy the note. If the property is heading for foreclosure, that likely means the current owner is in default. If current owner can\u2019t cure, then most commercial loans allow the lender to take control of the property.", "replies": [{"id": "gzn0dm2", "text": "No I wouldn't be surprised. I have bought and sold over 200 notes. Some from banks. I never said ALL loans were securitized. So that's a straw man.\n\nBut i have never even heard of someone approaching a lender about an individual note like the one described and buying it. Never. And we have not even mentioned how Covid has changed the way lenders can deal with defaults.\n\nBanks which have portfolio loans and which sell individual notes choose which ones to offer and make them available. Investors then choose from those lists. Even in those cases it is not easy to buy a particular single note . Sounds like something a note buying guru taught you in a $97 get rich quick seminar...... Just call the bank and buy a note...at a huge discount too!  Lol\n\nGo ahead. Have fun wasting your time trying to even find the right person to talk to about some random individual loan that is not yours. Knock yourself out proving me wrong. LoL", "replies": [{"id": "gznd85i", "text": "This is a $300k note, not a pooled CMBS multi-million dollar note. It\u2019s likely not that difficult to identify the loan officer for this, a simple phone call to see if they\u2019d be open to transacting. That\u2019s what commercial real estate is all about, spending a few minutes to reach out to someone to lead to opportunities.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gznk86l", "text": "&gt;&gt; He'd rather just make the cash he can this summer and accept bankruptcy...\n\nSo offer him 6 months of free rent after closing or something?  The first thing you need to do is talk to this person before trying all these weird angles around them.", "replies": [], "depth": 1}]