What are the consequences of defaulting on a commercial real estate loan?

Defaulting on a commercial real estate loan in Arizona can have serious consequences. Generally, when a borrower defaults on a loan, the lender may take legal action to recoup the amount owed. A lender may choose to foreclose on the property or pursue a deficiency judgment. In foreclosure, the lender sells the property to recover the principal amount of the loan plus any additional costs such as legal fees. If there is a deficiency between the amount of the loan and the sale price of the property, the lender may sue the borrower to recover the difference. This is known as a deficiency judgment. The lender generally has the right to garnish the borrower’s wages and/or place a lien on another property owned by the borrower. In addition to the financial consequences, a default on a commercial real estate loan may also have a damaging effect on the borrower’s credit. Defaulting on a loan can stay on the borrower’s credit report for up to seven years and may have a negative impact on the borrower’s ability to access future credit. Defaulting on a commercial real estate loan can have serious financial and legal consequences in Arizona. It is important that borrowers understand the terms of the loan and make every effort to remain in compliance. If a borrower is having difficulty making payments, they may be able to modify or restructure the loan to avoid default.

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What are the consequences of defaulting on a commercial real estate loan?

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