The Mortgage Bankers Association (MBA) has agreed to sell its Washington, D.C. headquarters for a loss, after property values in the area took a tumble and the industry’s largest trade group found itself underwater on the mortgage.

The commercial real estate research firm CoStar Group, Inc. has purchased the office building, located at 1331 L Street, for $41.25 million. MBA bought the property for $79 million in 2007.

According to the Wall Street Journal, even after the proceeds from the sale, the association will still owe about $30 million on the $75 million complex financing package funded by a group of banks led by PNC Financial Services Group Inc.

MBA has not disclosed the terms of a deal with its creditors, but a spokesperson told the Journal, the association has reached “an agreement with all the relevant parties,” and the publication cited two people familiar with the matter who said they believed the trade group would pay off part of the remaining debt outstanding.

The Washington Post, citing “experts,” said that at least 20 percent of commercial properties in the Washington area are worth less than their mortgages, compared with less than 1 percent before the recession.

Andrew Florance, CoStar Group’s CEO, said the company was “fortunate to be able to take advantage of what we see as a historic opportunity to secure an exceptional asset at a greatly reduced price.”

CoStar acquired the 50 percent vacant building for $243 per square foot, less than half the current market rate median of $518 per square foot. The Bethesda, Maryland-based company says it plans to move its headquarters to the newly acquired space in the nation’s Capitol.

The city also threw in a few incentives to entice CoStar to take the deal. The council of the District of Columbia approved $6.1 million in property tax abatements over a 10-year period, provided CoStar hires 100 District residents. In addition, CoStar Group may be eligible for additional incentives such as a five-year elimination of District corporate income tax and other tax exemptions.

The company said it expects to save $1 million a year in occupancy costs versus leasing office space. According to the Washington Post, CoStar plans to house about 900 people in the new building, filling 80 percent of the space and will rent out the rest to outside tenants.

Florance told the Post that MBA will remain in the building for about six months and then find a new home.

In the midst of the sale that many are saying unmistakably epitomizes just how far the real estate sector has deteriorated, the Washington Business Journal also reported that MBA is in a court battle with its former landlord, Tishman Speyer Properties.

According to court documents, the trade group owes over $1 million for terminating its lease early on space in a Pennsylvania Avenue office building when it moved into the L Street headquarters. MBA says it plans to pay the penalty and that the dispute is over timing. But to throw another kink in the chain, the local Business Journal says last August, Tishman defaulted on the loan that was used to purchase the building in question.