Co-Brokering: Is it Worth It?Anthony M. Gramzacommercial mortgage brokering, co-brokering, AMG Commercial Mortgage Group Inc., commission
You have just received a package from a client who wishes to
secure a loan between $750,000 and $950,000. The project is an
existing multi-family dwelling in a reasonably-located
neighborhood. However, you know little or nothing about commercial
real estate or loan brokering. What do you do?
The first option of course, would be to return the package and
inform the client that commercial mortgages are not your cup of
tea. Option two would be informing them that the deal looks good,
but your office does not handle commercial mortgage loan requests,
and the third would require picking up the phone, calling a
commercial Mortgage Broker and asking for help. Which of the three
would you choose?
Interest rates are at a historically low level, there is an
abundance of commercial mortgage funds, lenders are seeking good
qualified deals, and the soothsayers predict a "further cooling" in
the residential housing market for 2003. If this slowdown does
occur, how well are you prepared to supplement your income in order
to remain in an industry that, thus far, has provided you with a
comfortable living?
Over the past two years, through various articles written for
various trade magazines including The Mortgage Press, I have
stressed the importance of educating oneself in the field of
commercial loan brokering. The field is wide open, so you don't
have to worry about competition, and the end results can be very
rewarding financially. However, becoming a commercial broker will
not happen overnightit takes time, education and on-the-job
training. The amount of time you must invest will depend upon your
own ability and desire to succeedeven if, after examining all
angles, you decide not to enter commercial brokering, then do the
next best thing. Get to know a qualified and reputable commercial
loan broker, and "co-broker."
As you proceed, you need to realize that no matter how well you
and your co-broker are prepared, only a percentage of your
transactions will closeeither the client will not be completely
truthful, their expectations will be unrealistic, a third-party
supplier will leave you out of control, or an unforeseen event will
occur that places that fantastic deal on the back burner. Be
prepared, for it will happen, but whatever you do, don't let these
snags discourage you from charging forward with co-brokering.
The first question that always comes up is, "What and when will
I get paid?" Being realistic in this industry is as important as
making the deal happen. Realize that you are compensated based upon
your contribution to this transaction. For simply providing a name
and phone number, most brokers will offer 10 percent of the
commission received. As the amount of work youre willing to
shoulder increases, so will your commission. If it is a case of
providing your co-broker with the entire package, and asking them
for their review and submission to their lender, the commission may
be on a 50/50 split. Your choice ... your decision ... your
commission. But remember, negotiate the commission structure
regardless of the up-front percentage, and make sure that you get
everything in writing. Let me share the wise words of my guru,
Robert J. Ringer, from his book, Winning Through
Intimidation:
With a written agreement, you have a prayer,
With a verbal agreement, you have nothing but air.
Closing deals is so much like trash,
If you my friend, do not get the cash!
You need to stay in touch with your co-broker as much as they
must stay in touch with their client. Communication is a necessity,
so make sure that you know and play your role well. Some commercial
Mortgage Brokers will make an agreement with you as to commission,
but at the same time, will ask you to step aside, so that they can
ask the right questions of the client, analyze the property, and
have a good understanding of the deal, prior to their discussions
and eventual submission to their lender. It all depends on how well
you are educated in commercial loan brokering. Clients and lenders
will know from the very first discussion just how well you know
your productif the nomenclature is foreign to you, it could cost
you the deal.
What are your expectations as to the transactions time-table and
receipt of your commission? Typical commercial loan requests can
take as long as one year to complete. Does that time-frame
discourage you? Commercial loan brokering is time-intensive and
more challenging than residential brokering. It requires much more
analytical efforts on your part (or that of your co-broker), but,
in the long run, is extremely rewarding. Ladies and gentlemen ...
that's the bottom line!
At the beginning of this article, I asked, Which of the three
would you choose? My friends, I hope that your choice is now the
third option. I have been brokering commercial loans for the past
15 years, and I am not ashamed to admit that to this day, I am
still a co-broker. My decision to co-broker is based on the fact
that I do not have the ability to be in 15 places at once. My
office is in New York, but my potential clients may be located in
Ohio, Georgia, Montana, California or Hawaii. Loan requests in my
state may be down, but with co-brokers, I can conduct business
across the country.
Another great year in commercial loan brokering is predicted,
barring any unforeseen circumstances beyond our control. Whether
you start off on a $200,000 loan request or a $1 million super
deal, make it happen by co-brokering! Take it from me; it is more
than worth the time and effort.
Anthony M. Gramza is president of Rochester, N.Y.-based AMG Commercial Mortgage
Group Inc. He may be reached by phone at (585) 264-9540 or
e-mail
[email protected].
