Should I Use a Commercial Mortgage Broker?
Purchasing a commercial property can be a daunting task. Not only do you need to identify a quality property that makes sense for an investment, but then you need to come up with the cash in a timely fashion so you can close the deal. Bringing your own equity to the table makes the task easier, but arranging debt for a deal can be a challenging task. Who will be the lender? A traditional bank, alternative lender, bridge lender, agency lender, CMBS, life insurance company? What type of loan do I need? A construction loan, acquisition or bridge loan, short term or long term? What’s an acceptable rate? How long will it take to fund? What lender can move the fastest? You get the point. This is where having an experienced commercial mortgage broker comes into play. Most commercial real estate investors understand the value of engaging a commercial mortgage broker to source the debt for their deal. Here are the top five reasons for having a commercial mortgage broker arrange financing for your deal.
Finding the Right Lender:
There are literally thousands of commercial real estate lenders. To complicate things further, each lender has different loan criteria depending on the property or loan type. A good commercial mortgage broker will be able to access your deal quickly and determine what type of loan you need for your situation. For instance, if you want to make a quick purchase and re position the property, a long-term lender is not right for the deal. A commercial mortgage broker will know several bridge lenders to get the correct loan for your deal.
Saving Time:
Good commercial mortgage brokers are constantly in the market for new loans and have an extensive network of lenders. Since commercial mortgage brokers are constantly talking to lenders, they will be able to place your loan much faster and efficiently than someone that only contacts lenders once or twice a year. Furthermore, lenders will generally prioritize the brokers that constantly feed them deals. Using a commercial mortgage broker will ensure your loan gets to the front of the pile.
Lower Rates:
A good commercial mortgage broker will understand the current lending environment and how loans are priced (interest rate). They will also know which lenders are the most competitive for given loans. Some borrowers who don’t understand the market as well as a commercial mortgage broker might not bring the loan to the most competitive lender. For instance, most bridge lenders will provide construction financing; however, there are much cheaper options for qualified borrowers. A good commercial mortgage broker will know who is the best lender to meet your goals, whether a fast closing or a cheaper rate. Additionally, an active commercial mortgage broker will often times be able to get discounted rates due to the volume of business they bring a particular lender.
Negotiating:
Every loan is negotiated at some level. Since commercial mortgage brokers are in the market and constantly talking to lenders, they will know what conditions of the loan are standard and what are not. For instance, some bridge loans have a yield maintenance clause. A good broker will know to push back on an excess yield maintenance term. A broker’s knowledge would also be helpful in structuring of Replacement Reserves and Tenant Improvement/Leasing Commission (TI/LC).
Ensuring the Loan Closes:
Finding a lender to agree to do your deal is one thing, getting the lender to actually close the transaction is a completely different animal. Commercial mortgage brokers only get paid when your closes (don’t do business with brokers looking for upfront fees!). Lenders require a substantial amount of documentation to fund your loan. You can be sure that a commercial mortgage broker will work to get your deal funded and not let anything slip through the cracks.
While commercial mortgage brokers do charge a fee for their services, the majority of real estate investors will use brokers to source and close the debt for their deals. Whether you need a bridge loan, construction loan or mezzanine loan, us樂威壯 ing a commercial mortgage broker with an extensive network of lenders will save time, frustration and potentially a fair amount of money.
John Femenia