On this page
What you're buying
Lenders sell commercial real estate loans, performing or not: the FDIC, for one, sells loans regardless of performance status or quality, including loans secured by commercial real estate (FDIC). A troubled loan may have been split into two notes, an A note and a B note, as part of a workout (federal banking agencies' policy statement). Know which one is for sale, and what stands ahead of it.
Why the price sits below the building's value
- Time to title. Foreclosure through the courts is judicial foreclosure (CFPB). In California, judicial foreclosures usually take many months, even years, against about four to six months for the non-judicial route (California Courts). Every month is interest you aren't earning.
- A receiver in the meantime. A court can appoint a receiver to protect the property and its rent until the case ends (AllLaw), with powers to collect, manage and protect it (The Florida Bar Journal). That helps, and it costs.
- Capital the building needs. Expect deferred repairs on a building whose owner stopped paying.
- Stale information. A defaulted borrower rarely sends a fresh rent roll. Price the uncertainty.
- Taxes that step up. An abatement ending or a new assessment raises the cost of owning the building after you take it.
Setting the three levels
Negotiators call the price you walk away at your reservation price (Harvard Program on Negotiation). It comes from your best alternative if this deal doesn't happen: in plain terms, what you will do if you don't reach a deal (Harvard Program on Negotiation). With other deals in your inbox, that alternative is real, and it should set the walk-away, not the broker's guidance.
- 01
Start from the building, stabilized
The net operating income you believe once the repairs are done and the units are leased. - 02
Add everything it costs to get there
Repairs, closing, legal and title, and the carry until you own it. - 03
Pick the yield each level needs
The walk-away is the lowest yield you'd accept on all of it. The stretch and the bid ask for more. - 04
Work back to a price
All-in cost at that yield, minus the costs above, is the price for the note.
A worked example
Round numbers, not a real deal
Telling the broker why you're below
A number far under guidance lands better with its reasons, briefly: the income in place today, the repairs, the time and cost to title, and the information you don't have yet. Decide before you write how much of your own math to show. Naming your cap rate tells the other side exactly how you priced it.
Where Parcel fits
Parcel is a deal inbox that runs on your own Gmail. Each deal shows a bid, a stretch and a walk-away with the cap rate at each, kept with the broker's emails and files, and the reply explaining your number is drafted for you to send or change.
Questions
Sources
- 1.Loan sales · FDIC · read November 9, 2026
- 2.Policy statement on prudent commercial real estate loan accommodations and workouts, 88 FR 43115 (2023) · Federal Register · read November 9, 2026
- 3.How does foreclosure work? · Consumer Financial Protection Bureau · read November 9, 2026
- 4.Guide to foreclosures · California Courts · read November 9, 2026
- 5.Overview of the commercial foreclosure process · AllLaw (Nolo) · read November 9, 2026
- 6.Florida's commercial real estate receivership act: a roadmap · The Florida Bar Journal · read November 9, 2026
- 7.Negotiation preparation strategies · Program on Negotiation, Harvard Law School · read November 9, 2026
- 8.What is BATNA? How to find your best alternative to a negotiated agreement · Program on Negotiation, Harvard Law School · read November 9, 2026
Changes
- : First published.