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Foreclosing Lender’s Duty to Determine Property’s Potential Development Value

The Massachusetts Court of Appeals recently held that a foreclosing lender must use reasonable efforts to get the best price and, when those efforts reveal the potential to develop the property to increase the sale price, the lender should take such potential into account and share it with prospective bidders.

Don’t get nervous lenders. The decision does not mean the minimum value at a foreclosure is the value that could be achieved through developing the property. The decision in Property Acquisition Group v. Ivester, of course, is more nuanced because it’s driven by the facts of the case. The Court did not decide whether the lender violated its duty of good faith and reasonable diligence in conducting the foreclosure, so the case is ongoing.

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