Commercial Mortgage Training

by : jeff rauth

It often comes as a surprise to many residential brokers and loan officers how vulnerable your fee can be as a commercial loan broker.? Unlike residential lenders that provide fee or ysp statements 95% of commercial lenders do nothing to protect the broker.? ?Instead you are often expected to provide the title company a signed fee agreement so that they add your fee to the settlement statement.? If you don't have a formal fee agreement signed by your borrower you are putting yourself in a very vulnerable position.?

?The scenario of running around for months, collecting documents after documents per the lenders request, finally winning the deal and having it close all to not get paid is a very real possibility.? If you don't set this up right from the beginning you are basically asking to get screwed.?

So, when and how do you ask the borrower to sign your ?? There are two basic different strategies on this as it can be complicated.? ?First is getting the agreement signed in the very beginning be3fore you even look at a single documentation.? The second is to get the borrower to sign after you have had a chance to review the file and determine if it's worth working on.? ?This may seem a small detail, but it is important.?

What you d on't want to do is have the borrower sign the agreement after they've seen a term sheet from a lender.? If you've ever heard a borrower say, after reviewing a LOI you delivered, 'oh, I know this Bank.? I've talked to them.? Well, why do I need you?'? than you know what I'm talking about.? If you haven't, than keep brokering commercial loans and you will.?

So, which is the better strategy?? Getting it signed up front or after you've got some momentum and trust with the borrower?? It really depends on your style, the deal, and the relationship you have with the borrower.??

Some commercial mortgage brokers act as a combination of a broker and an hourly consultant.? This is more of a traditional approach and will require additional steps and a more thorough sales process to get borrowers to agree.? Often commercial brokers that conduct business this way will only work on an exclusive basis and essentially demand that they will organize and conduct the whole shopping process and no matter what, will get paid.? This strategy does have its draw backs though, like being 'stuck' on working on deals that turn out to have little chance of funding.? And, it can be a very difficult arrangement to sell to the borrower to give up that much control.? Brokers with this set up will normally ask to get their fee agreement signed immediately.

The other strategy is really all about building some momentum with the borrower and getting them committed to the process and working with the you the commercial loan broker.? Some brokers prefer this method as they get more of a chance to qualify the deal before they bother to get the agreement signed.

Whatever you decide on how to approach your borrowers, don't depend on mere words or a few emails to protect you fee.? Get your agreement signed or don't be surprised if you have problems collecting your fee.?