Plan for the Worst and Hope for the Best…but be proactive about it!

Mortgage delinquency rates hit their highest point since 1985 last month and while the data we watch is based primarily on home mortgages, it is a good metric by which to compare other real estate related debts.  In three different studies, we found that credit losses are likely to be around $400B.  Most of these losses will be carried by leveraged financial institutions, but a portion will be shouldered by seller’s who sold via a land contract, which is sometimes called an Installment Sale, Land Contract or Contract for Deed.

At Scythe & Spade we are particularly concerned about farm properties on the fringe of metropolitan areas, where increased demand from speculators and developers drove prices to irrational levels.  Many of these previously farmed parcels, in the hands of non–farmers, have sat idle, grown a crop or two of weeds, had irrigation and other farming resources and assets lost, removed or otherwise compromised due to a lack of maintenance and have lost their ag exemptions.  The result;  increased expenses, decreased revenues and numerous issues to be resolved.

Sometimes the lender, whether it be a financial institution or individual, is able to gain control of the property amicably through a Deed in Lieu of foreclosure.  But more often than not,  the process involves foreclosures, bankruptcies and litigation.  In such a situation,  the Trustee, Trustor and Beneficiary should mutually agree that, regardless of the outcome,  it is in everyone’s best interests to protect and then maximize the value of the asset, with any liabilities mitigated, until an agreement is reached.  Quite often however,  these parties can not or do not agree for a variety of reasons. 

Scythe & Spade can offer assistance by acting as either an operating or liquidating  receiver and take charge of the farm and facilities, protect resources and generate revenues, manage liabilities until either potential investors are identified and the assets are sold to a new investor or some other resolution is reached.  We have the financial and management expertise necessary to direct the operations and affairs of the asset and, if necessary, to liquidate the Property.

It’s not all bad news though,  there is a bright side to all of this too.  As a result of the weak dollar,  foreign demand has increased for everything from technology to tractors.  Soaring exports, ethanol subsidies, low interest rates (thanks to the Feds efforts to ease the effects of the .Com and now Housing bubbles) and record high commodity prices (agflation) have boosted farm income and stability and Lenders should not, as a result see many Farm defaults or foreclosures.

-BM