Whom Should I Call ... For That Commercial Loan?Bill Pape, CMCcommerical mortgages, referrals, residential mortgages,
One day you get the call. One of your satisfied residential
clients has referred you to a friend who wishes to buy or develop a
larger commercial property, and your client has told him that you
do a great job. The potential commercial client tells you that they
have a new apartment complex that they wish to finance and asks
what you can do. You tell them that you will look into it and call
them back the next day. Now what do you do?
You do not know a thing about doing a commercial transaction!
You have several options, which may or may not be ideal for you and
your client. So, whom should you call?
First
The best person to contact would probably be your
broker/owner/manager, then tell them your story. Hopefully, you
have taken some good notes and written-up an initial summary of
what the client has and wants. Your supervisor may be able to give
you some guidance regarding the initial response to your potential
client's needs.
Second
If you have some limited commercial experience with smaller
transactions and know some local commercial banking officers
through those previous transactions, you may wish to give them a
call regarding the larger transaction. After you have explained
your story, just ask them what information they would like to see,
and what sort of range of interest rates and terms you might
expect, if the project is as good as you expect it to be. Most
local banks are primarily interested in transactions that have a
term of five- to seven-years and do require full personal recourse
as a matter of policy. However, this telephone call will give you
some general ideas so that you can return the call to your
potential client the following day. However, the local banker may
not be able to meet your potential client's needs, and you may need
to investigate using some national lendersadvance to step
three.
Third
If the local bank cannot meet your needs, you may need to talk to a
commercial broker associate, which will require you to co-broker
your transaction and share your fees. Of course, its natural for
you to initially feel that you can do the transaction alone and
determine which direct lender to call. If you have the time and
desire to essentially learn a completely new aspect of the
business, that avenue may work for you; however, the commercial
Mortgage Broker will have access to lenders throughout the U.S. and
know what to say and to whom they should speak with. Let us
carefully consider this option, since it may be the best avenue to
take to a successful commercial closing. When you take this step, I
believe that you need to follow certain procedures, such as:
1. Preferably know the commercial broker who does business in
your geographic area. I do business primarily in the midwest and
the west, if you are in the New York area, you should call someone
like my friend Tony Gramza of AMG Commercial Mortgage
Group in Rochester, N.Y.
2. Be sure that the commercial broker is a member of the
National Association of Mortgage Brokers. Do they have a CMC
designation or other industry related education? Ask them for a
personal resume or profile. You need to know with whom you are
doing business with. Carefully read, evaluate and check the
information you receive. You do have a duty to your client to know
your co-broker.
3. Be sure that the commercial broker: (a) preferably does only
commercial transactions and (b) does so on a full-time basis. You
certainly do not want a "part-time" person co-brokering your large
commercial transaction. Unfortunately, you need to be very careful
regarding this point.
4. Make sure that you obtain references of other "residential
brokers" whom have completed successful co-brokerage transactions
with the commercial broker and call them to check on the reference.
Do not expect the commercial broker to give you a list of lenders
to call.
5. Ask the commercial broker to describe what types of deals
(credit transactions, hard money, USDA, SBA, non-recourse, etc.)
that they do and with whom. You also need to know the geographic
area that the commercial broker covers, [i.e. I do not do loans in
Europe, but I can refer you to a friend who does] and the types of
property with which they deal with. For example, someone may know a
great deal about credit transactions, but nothing about large
agricultural loans. You also need to ask about the size of deals
completed by the co-broker. Some commercial brokers do primarily
smaller transactions and some larger. The broker who works on only
larger transactions cannot be an expert in the smaller dealsthe
lenders are just not the same.
6. Make sure that you have a clear understanding regarding the
fee split. There should be a co-brokerage contract between you and
your co-broker that should protect both of you. Even if you know
the co-broker very well, accidents do happen, and its just a good,
smart business tactic to "have it in writing.
7. Do not enter into a "referral chain, whereby one broker
refers to another broker who refers to another broker, etc., and
everyone wants a point just for making a phone call. There are two
sides to the co-brokering arrangementthe side that has the
potential client and the side that has the lender. The fee is split
between those two sides of the transaction on whatever basis is
agreed. If three brokers are providing the client, they should
divide the client side of the split fee.
8. Your commercial co-broker should have things available to you
like, client fee agreements, checklists, questionnaires, formal
commercial applications (if required), etc. that can be used with
your potential client. It is definitely best to use the documents
of your experienced co-broker.
So, the next time that large commercial client comes knocking on
your door, dont send him away. Just decide to whom and where you
going to place that call. Commercial loan brokerage can be both
challenging and rewarding. How challenging and ultimately how
rewarding may depend upon just whom you call.
Bill Pape, CMC of Commercial Mortgage Brokers has 17 years of
commercial loan experience and works with life insurance companies,
conduits and other national lenders. He has held national offices
in the National Association of Mortgage Brokers, directed six
national commercial conferences and designed two NAMB commercial
educational courses. He may be reached by phone at (480) 836-8681
or e-mail
[email protected].
