In a recent real estate update, I discussed approaches to
working with lenders when a property has gone bad. In this update,
I will set out an approach for borrowers who own troubled
properties to consider even before discussions with the lender
occur. Even though it is very important to maintain good
communication with the lender and let the lender know as soon as
possible if trouble is on the horizon, the borrower should first
investigate certain issues and work on devising an approach to the
problem.
The following are the steps a borrower should take upon
determining that a property is in trouble:
1. Review your loan documents. Did you enter into the loan
personally or as a member of a general partnership? In either case,
and unless the loan is nonrecourse (which is unlikely in this
situation), you are liable for any deficiency judgment.
