subject: Commercial Broker Opinion Of Value Form - Due Diligence List [print this page] Commercial Broker Opinion Of Value Form Commercial Broker Opinion Of Value Form
Introduction:
With today's distressed loan market and the FDIC selling distressed commercial loans it is important that potential investors/buyers have a due diligence list specific to distressed loans. There is an opportunity for investors to purchase commercial loans individually or as a part of a larger portfolio at a significant discount from the face value. However, the buyer/investor must beware and carefully perform due diligence to ensure this distressed investment will eventually yield a financial return. Commercial Broker Opinion Of Value Form
Due diligence is the verification process of information and its associated documentation to ensure a reasonable individual "that they get what they are paying for". If your company has a team of professionals who have experience in distressed loan transactions and a detailed checklist to follow that is probably an exception to the rule, most companies due these type of transaction infrequently. Therefore, it is recommended that due diligence be a coordinated effort with members of the company and an outside firm who has experience with the distressed loan portfolio acquisition and the due diligence process.
The following is a recommended due diligence listing of the key elements to be considered and reviewed as part of a distressed commercial loan purchase:
Commercial Loan
Loan Documents Loan Agreement
Guarantees
Spousal Consent
Note
Security Agreement
Forbearance Agreement
Control Agreement (with third party financial institution)
Inter-creditor Agreements
Subordination Agreements
Interest Rate Swap Agreements
Landlord Subordination
Licensing Agreements
Bank payoff letter
Closing certificate (borrower represents no material change, lien position and how funds will be applied)
Opinion letter from borrower's attorney if transaction is complex
Default Letter(s) if applicable
Corporate Resolutions
Articles of Incorporation
Evidence of Good Standing
Evidence of Insurance (lender should be loss payee) General Liability
Property
Workman's Compensation
UCC Search
Patent/Licenses/Trademark Searches
Tax lien Search
Judgment Search
Litigation Search
Lexis - Nexis Search
Reuters / Google Search
UCC terminations from prior lender
Credit check/background search on guarantors
Personal property tax search Usually assessed at county level, but could be assessed by city, township or state (never federal).
Contact the County Board of Equalization and/or County Treasurer's Office.
Tax clearance certificate.
Tax lien primes senior lender and follows equipment.
Assessed value is based on cost of equipment less some depreciation factor.
4506 IRS form
Evidence of ownership of collateral (invoice/bill of sale)
Website - URL ownership transfer
D&B on borrower(s) and on key customers of borrower
Check equipment vendor website for information and compare to appraiser
Real Estate
Appraisal
Assessed value County Assessors Office
Mortgage/Deed of Trust documents
Down-date title insurance
Title Exceptions
Updated survey
EPA studies - Phase I, II
Flood Insurance
BPO - Broker Opinion of current value
O&E (not a Title Search, Title Insurance or other form of Title Guarantee)
Tax Assessments
Deeds
Mortgages
Judgments
Status of RE Taxes
Legal Description
Real Estate Tax search (total and unpaid) County Assessors Office
Leases to tenants on owned property or sub-lessees
Easements
Assignment of Rent and Leases
Conclusion:
When an investor considers bidding on distressed commercial loans and has the opportunity to perform due diligence, it is strongly recommended that they follow a disciplined approach and use the due diligence list outlined about as part of their process. Commercial Broker Opinion Of Value Form
Commercial Broker Opinion Of Value Form - Due Diligence List
