Friday, February 1, 2008

Today's legal term: deed in lieu

For you beginners, what is a deed in lieu? It is shorthand, and if you add the last two words of the phrase, you ought to get the picture: "in foreclosure." In other words, the borrower is giving the property to the lender because it can't make the loan payments or refinance the property. These deals are often very heavily negotiated and can get ugly.

Here's an example from Forbes, via The Real Estate Bloggers. It appears Harry Macklowe has reached a tentative deal to give back seven New York buildings he bought for $7 billion (no misprint) to his lender, Deutsche Bank, which holds the $5.8 billion mortgage. Is this deal part of the commercial credit crunch, an indicator that prices are plummeting, a sign that Macklowe overpaid, a combination of events or something else? I have an opinion but will sit on it for now.

3 comments:

Anonymous said...

Please opine. What do you think the Macklowe situation shows, other than he overpaid?

Anonymous said...

Please opine. What do you think the Macklowe situation demonstrates, other than he pd too much?

David Stejkowski said...

Oh, all right I'll bite...he probably overpaid, but this is also a credit issue as well. This deal could have been done during the "lenders throwing money at deals" stage. After all, it was! So tightening of the market is also a major factor. This is Manhattan, and scarcity is always going to be a factor there

 
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