Houston Multifamily Foreclosure Auction Having Busy Month

6 November 2024

Houston’s multifamily market is showing signs of deepening distress.

Twelve multifamily properties with $340 million in loans were scheduled to appear at the Harris County foreclosure auction this week, marking an increase from only a few properties filed last month, Bisnow reported.

Two properties owned by Falls Apartment Group — the 468-unit Falls of Las Villas and its 514-unit Falls of Alta Vista — were among those scheduled for November’s action.

Fewer than half of those on the calendar were likely to be auctioned, said Terri Clifton, president of Better World Properties. About a third are likely to reach the auction block, as most of the lenders are likely to negotiate new terms or extensions to prevent outright foreclosure, she said.

“You’re starting to see the lenders that are to the point where they’ve tried to work with the individuals that have gotten themselves in trouble, and they’re taking it to foreclosure with the possibility that they’ll come up with something,” Clifton said.

Houston placed fifth nationally for commercial foreclosure starts in the third quarter, with 1,791 filings recorded by Attom Data Solutions. Rising interest rates and a tightening financial market limited lenders’ and borrowers’ options for refinancing or debt restructuring.

“Extending and pretending” no longer seemed viable for many, said Cole Kellogg of FCP, who is vice president of multifamily acquisitions

Overvaluation during low-interest years contributed to the market’s current conditions. Multifamily properties have dropped about 20 percent in value, creating a gap between what properties are worth and their loan amounts, Clifton said.

Lenders sometimes file for foreclosure as leverage for further negotiation without an immediate intent to seize the property.

Behind the scenes, some lenders are quietly pursuing deals to pass existing loans to buyers of struggling properties, sidestepping the expenses tied to foreclosure.

“Sometimes that lender would love for one of these key players to take over and take the loan over,” Clifton said. However, many deals still fall through as potential buyers assess financial risks.

Below is a list of multifamily properties that were scheduled for foreclosure action this week:

Village at Piney Point