How do I buy a hotel out of receivership or foreclosure?

Which door is open depends on how far the default has gone. Early on, the owner still controls the sale and needs the lender to accept the payoff. That path, and the owner's other exits, are explained from the seller's side at /sell-a-hotel/selling-a-distressed-hotel.

Once a court appoints a receiver, the receiver runs the hotel and can be authorized to sell it. If the lender forecloses, there is an auction, and if nobody outbids the lender, the lender takes title and later sells the hotel as owned real estate. If the owner files bankruptcy, the sale runs through the bankruptcy court.

Distress is not rare in 2026. Trepp reported that the lodging CMBS special servicing rate was 8.63 percent in July 2026, down 26 basis points on the month.^[3] A loan in special servicing can end in an extension, a modification, a payoff or a sale, so the hotels that reach a court sale are a subset of that figure. We do not publish a discount to expect, because no public source measures one for hotels.

Under 28 U.S.C. 2001, real property in a federal receiver's hands is sold at public sale unless the court orders otherwise. The court may order a private sale after a hearing with notice to interested parties, if it finds the estate's best interests are served. Before confirming a private sale, the court appoints three disinterested appraisers, and no private sale is confirmed below two-thirds of the appraised value. The terms must be published in a newspaper of general circulation at least ten days before confirmation, and the sale is not confirmed if a bona fide offer guarantees at least a 10 percent increase over the price.^[1] A public sale of real estate under a federal court order requires notice published once a week for at least four weeks.^[5] Personal property, which in a hotel means furniture, fixtures and equipment, is sold under the same rules unless the court orders otherwise.^[6]

Two cautions. First, a hotel receivership can also be in state court, and each state has its own receivership law. Read the appointing order and ask local counsel what it lets the receiver do. Second, the statute lets the court direct the terms and conditions of a sale, so read the sale order in your case.

For a buyer, the 10 percent overbid rule means your signed contract is a floor price for someone else until the court confirms. Ask for a breakup fee or expense reimbursement in the contract if the court will allow one.

In a bankruptcy sale, section 363(k) of the Bankruptcy Code says that unless the court orders otherwise for cause, the holder of a lien securing an allowed claim may bid at the sale and offset its claim against the purchase price.^[2] A foreclosure auction outside bankruptcy is run under state law, which sets who may bid and on what terms. Ask local counsel how the foreclosing lender's bid works in that state.

That changes the auction math. A lender owed $10 million can bid up to $10 million without writing a check. It will stop bidding where it would prefer your cash to owning the hotel. So the useful work is done before the auction: talk to the lender or special servicer about the number at which it would rather be paid. Some lenders would rather sell the note or agree to a sale by the receiver than take title.

Bankruptcy sales add one protection that buyers value. A sale order can transfer the hotel free and clear of other interests when the statute's conditions are met, and a good-faith purchaser is protected even if the sale order is later reversed on appeal, unless the sale was stayed.^[2]

A foreclosure generally clears liens junior to the foreclosing mortgage and leaves senior ones, such as unpaid property taxes, in place. A title company will tell you which is which, and you should have its commitment before you bid, not after.

Federal liens have their own rule. When real estate is sold to satisfy a lien that is senior to a lien held by the United States, the United States has one year from the sale to redeem the property. For a federal tax lien the period is 120 days or the state redemption period, whichever is longer.^[7] Hotels that fell behind on payroll taxes can carry a federal tax lien, so ask for a lien search in the entity's name as well as the property's.

Some states also give the former owner a statutory right to redeem after foreclosure. Whether that applies is a state law question for local counsel.

On the physical side, court sales are as-is, with few or no seller warranties. Do the inspections you would do in any purchase, on a shorter clock. The full list is at /buy-a-hotel/due-diligence-checklist. A hotel that has been short of cash may have deferred maintenance, so the property condition report and the brand's PIP matter more here than in a normal deal.

Hilton's 2026 Hampton franchise disclosure document shows how one large franchisor handles it. An order appointing a receiver for the hotel is a ground for termination of the franchise agreement without an opportunity to cure (p. 71).^[4] If the receiver was appointed at the lender's request, Hilton's comfort letter form says Hilton may require the receiver to sign its receiver agreement, which is how the flag stays on during the receivership.^[4]

A buyer goes through a change of ownership. The transferee must submit a change of ownership application, pay the franchise application fee, sign Hilton's then-current franchise agreement and agree to the upgrades Hilton requests (p. 74).^[4] The listed application fee for a change of ownership is $200,000, and in 2025 franchisees paid between $25,000 and $200,000 (pp. 16-17).^[4] The PIP fee is $10,000 (p. 16).^[4] The new term is generally the remaining term of the old agreement or another term Hilton approves (p. 69).^[4]

If the lender takes title first, Hilton's comfort letter form gives the lender 15 days beyond the franchisee's cure period, plus an additional 180 days to complete its acquisition through foreclosure, and says that acquisition is not a transfer that violates the franchise agreement.^[4] Your own lender will want a new comfort letter, which Hilton currently processes for $3,500 (p. 26).^[4] Other brands have their own forms and fees. Read the brand's current FDD, and see the Franchise Comfort Letter entry.

Start the brand conversation before you bid. A hotel bought without the flag is a different asset with a different value, as /buy-a-hotel/branded-vs-independent explains.

Foreclosure auctions are cash sales on terms set by state law and the notice of sale, and a new lender is unlikely to complete an appraisal, an environmental report and a franchise approval in that window. Buyers at auction use cash or a line they already have, then put permanent debt on the hotel afterward.

A negotiated purchase from a receiver or from a lender that has taken title gives more time. The lender will underwrite trailing income that is weak by definition, so expect the loan to be sized on what the hotel earns now, not on your plan. No lender publishes the coverage or leverage it requires. For a first look at what the current income supports, use /tools/hotel-loan-sizing-calculator, and for value use /tools/hotel-value-estimator. Short-term options are compared at /hotel-financing/bridge-loans.

Some selling lenders will finance the buyer themselves. It is worth asking.

Guide

How do I buy a hotel?

Other questions in this guide

• What due diligence do I need before buying a hotel?
• How much money do I need to buy a hotel?
• Should I buy a branded or independent hotel?
• Can I get seller financing to buy a hotel?

Terms defined in the glossary

• Franchise Comfort Letter
• PIP (Property Improvement Plan)
• Hotel Franchise Agreement

Our own data

• Matthews Hotel Markets rate sheet
• Hotel value estimator
• Hotel loan sizing calculator