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Selling Mortgages Is Not Rocket Science: It Is the Thought That Counts ...

National Mortgage Professional
Jun 01, 2004

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]
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