In fact, Wanderer says there’s a growing market of people who are offering cash for discounted payoffs. Sometimes the buyer will find cash to close with and then look for debt later. “There are a lot of different groups working to provide finance solutions for discounted payoffs,” he says. “We have received dozens of solicitations from groups focused on distressed debt recapitalization.”

2. Recognize the servicers’ motives.

There could be many factors leading servicers to accept a payoff. And those motivations could be very important for the borrower. “It’s important for a borrower to understand what is driving the decisions so they can put an appropriate offer in front of them,” Andrus says.

Andrus says one common scenario is that the servicer just wants to liquidate assets. “If the borrower will present a DPO that will drive higher liquidation, then that’s the solution,” he says.

With assets piling up on the servicers’ balance sheets, closure is an incentive. “The issue goes away,” says David Lynd, COO of San Antonio, Texas-based apartment manager and owner The Lynd Co. “There’s no cost for them managing a screwed-up asset going forward. From a net perspective, it makes sense to take a discount. They don’t have to deal with this issue anymore.”

And maybe the servicers are just seeing a way to cut their losses. “If you’re a CMBS investor and you know that your current loan values are 60 percent of what you lent, you are taking a hit and maybe at this point you just want to get your 60 percent back,” Wanderer says.

And it saves costs in other areas, as well. “In a foreclosure proceeding, some owners will abandon property all together if they have no further incentive to own and operate the project,” Wanderer adds. “By the time a receiver gets comfortable with the property management, the value could have fallen an additional 20 percent, then the lender can get hit with an additional 5 percent in legal costs plus 5 percent in transaction costs, leaving the lender with 30 cents on the dollar. With a reasonable DPO, the lender may get 60 cents on the dollar in a quick, cost-efficient transaction, while the buyer is again incentivized to own and manage the asset.”

3. Expect more to come.

Despite what the numbers say and the rationale behind doing DPOs, a lot of industry observers say they haven’t seen an increase in DPOs for servicers in the multifamily arena. Some people say a lot more is happening in the hotel and office sector—where there’s less liquidity.

Others say that banks are offering more DPO options than servicers are. “We’ve seen it as well, especially with the banks. In the Texas market, we’ve seen several larger, regional banks that have elected to go that route,” says William Ross, executive vice president and regional manager for Minneapolis-based Northmarq Capital. “They don’t have to worry about bankruptcy. They can sell the note. It’s gone.”

CBRE’s Levy also adds that banks have more flexibility than servicers. “We’re certainly seeing less DPO activity from the servicers than the banks, largely because the banks have somewhat more flexibility to deal with notes on their own balance sheet, while the servicers have to report to a wider constituency,” he says.

But regardless of who’s doing the payoffs, ultimately it has great potential to cleanse the market. “If it becomes a nationwide trend, it will change values almost overnight,” Wanderer says. “Everyone who is holding CMBS paper will assume that they need to discount. And everyone who is a CMBS borrower will assume that they can get a discounted payoff. It may be the shift that you need in order to get to real pricing.”