Commercial Loans Blog

Advertising to the Public for Commercial Loans Doesn't Work

Posted by George Blackburne on Wed, Sep 28, 2011

Over the past 31 years I have invested at least $250,000 in advertising directly to the public for the commercial real estate loans. I have tried postcards, newspaper commercial loans signdisplay ads, classified ads, magazine ads, bulk mail, and individually word-processed letters.

Every such marketing campaign directed at the public for commercial loans was a complete and utter failure.

There are two reasons why.

  1. There are home loan lenders who will refinance your home with no points and no closing costs.  In stark contrast, commercial mortgages commonly require $3,000 to $4,000 appraisals and $2,000 to $3,000 toxic reports, in addition to points, closing costs, and legal fees.  The transaction costs are therefore very high.  As a result, few commercial real estate investors refinance their properties more often than once every five to ten years.  If you try to advertise directly to the public for commercial real estate loans, the chances that your mailer or advertisement will reach a commercial property owner at the exact moment he is in the mood to borrow, in real life, is very slim. 

  2. Commercial property owners almost always call their own bank first before looking elsewhere for a commercial real estate loan.  Rather than respond to your ad in some magazine or newspaper, they will call their buddy at the bank first.

It really doesn't matter why advertising directly to the public for commercial real estate loans doesn't work, as long as you don't waste your precious marketing dollars trying.  Been there.  Done that.  My T-shirt says, "Wasted a Quarter Million Dollars."

So what does work?  Order our 90-minute video training course, "How to Market for Commercial Real Estate Loans."

Did you get some value out of this blog article?  Why not make the Commercial Real Estate Loan Tips blog one of your home pages?  I try to post a new training article every other day.

 

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Topics: advertising for commercial loans

Solicit Commercial Real Estate Brokers For Commercial Loans

Posted by George Blackburne on Mon, Sep 12, 2011

Commercial real estate brokers are a great source of leads for commercial loans. They call themselves "commercial brokers", even though a particular commercial broker may only have a real estate salesman's license, as opposed to an actual broker's license.

The typical commercial broker will have a dozen or so core clients.  These are wealthy real estate investors who each might own three to six commercial kellerwilliamsproperties.  Since most commercial real estate loans have a balloon payment every five to ten years, these 12 core real estate investors will have balloon payments coming due on a regular basis.

The typical commercial broker handles many duties for his core clients, often including helping them refinance their ballooning commercial loans.  Since he seldom earns a fee for helping his clients place their commercial loans, the typical commercial broker is very receptive to solicitations from commercial mortgage brokers.  He views a commercial mortgage broker as someone who is going to reduce his work load.

While many residential brokers treat mortgage brokers like dog poop, commercial brokers treat mortgage brokers like dear friends.  This courtesy extends all the way to the receptionist.  If you call the receptionist of a commercial brokerage company, she will often and cheerfully provide you with a list of all of the brokers in the office and their email addresses!

It's therefore easy to build as huge email list of commercial brokers in your city.  Simply look for realty signs on commercial buildings that read, "For Lease" or "For Sale".  Dictate the phone number of these commercial realty offices into the tape recorder application on your smart phone.  Then, when you get back to the office, simply call the receptionist and ask her to please email you a list of the brokers in the office.

 

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Topics: commercial brokers

Banks Prefer to Make Commercial Loans Close to Home

Posted by George Blackburne on Fri, Sep 9, 2011

If you need a commercial real estate loan, and the deal is slightly flawed, you should take it to a bank located close to the property.  Most commercial real estate lenders greatly prefer to lend close to one of their offices.

Let's suppose that the commercial property that you are trying to finance is a very restaurantsuccessful restaurant in the very best location in town.  Now banks normally do not like to make loans on restaurants because of the high failure rate.  If a local banker, however, dines regularly at the restaurant and appreciates the fact that this particular restaurant business is thriving, there is an excellent chance that he'll still make this commercial real estate loan.

Here's another example.  Suppose your borrower has credit that is slightly dinged, and most of the big banks have already turned down his commercial real estate loan request.  This is another example of where you should take his commercial real estate loan to the small bank located just down the street.

This small, local bank will probably demand a higher interest rate than Wells Fargo Bank or PNC Bank, but their rate will, almost certainly, be a whole lot better than even the cheapest commercial hard money lender, like Blackburne & Sons.

Banks will ocassionally make a near-hard-money quality commercial real estate loan simply because the commercial property is located close to their bank, and they are very comfortable with its value.

Using maps.yahoo.com you can easily pinpoint nearby banks to any property in America.  Simply type in the address of the commercial property that you are trying to finance, and then ask the software to plot all of the nearby banks.  (Use the "Find a Business" field and type in "bank".)  Or you can simply go to C-Loans.com and choose six banks located close to the property.

 

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Topics: Local lenders

Commercial Real Estate Loan Expert for Hire - Cool Story!

Posted by George Blackburne on Thu, Sep 8, 2011

This is a fascinating story of a $160,000 commercial loan fee collection case that I originally wrote about in 2009 in my old blog.  It's worth retelling.

About two years ago one of my former commercial loan brokerage students came to me and asked me to serve as an expert witness in a commercial real estate loan fee collection case.

My student had arranged for the delivery of an $8 million SBA loan commitment at a very favorable rate on a hotel near the Newark Airport.  The hotel had been shut down by the city a year earlier for regularly renting rooms by the hour (yup, you guessed it), and the prior owner had lost the property in foreclosure.  My student's client was buying the hotel from the bank.

Fortunately my student had used our commercial loan brokerage fee agreement that provided for arbitration.  He was based in Florida, the borrower lived in New York, and the property was located in New Jersey.  Per the terms of our agreement, the mortgage broker (my student) was allowed to file his Demand for Arbitration in Florida.  He did not have to travel to New York to sue this borrower.

This was a Florida action, and I am not licensed to practice law in Florida.  Therefore the mortgage broker hired local Florida counsel, who in my opinion did a terrific job.

I was called upon to testify as an expert witness on matters pertaining to the practice of commercial real estate finance.  Even though I live in Indiana, I was able to provide testimony through a deposition that was taken telephonically at the office of a court recorder in South Bend.  It was not necessary for me to testify at the actual arbitration hearing.

The borrower did not really dispute the mortgage broker on the facts.  Instead, the borrower defended on the basis that  the mortgage broker lacked a real estate broker's license in the State of New York.

Licensing for commercial real estate loan brokers in the State of New York is quite confusing.  The Department of Financial Institutions has adopted the position that out-of-state mortgage brokers do not need a New York real estate broker's license to broker fewer than five commercial loans per year in the state.  The law, however, appears to require just such a license.

The mortgage broker argued that he had never entered the State of New York, and that therefore the licensing laws of the state of Florida should apply.  Since the commercial lender was an institution and the borrower was technically a limited liability company, Florida did not require a mortgage broker's license.

The borrower's attorney argued that the contract was silent on the subject of choice of law.  Since there was an ambiguity and since the mortgage broker had prepared the contract, the ambiguity should favor the borrower.

The mortgage broker's fine attorney's argued that the borrower had already made a formal appearance in state court in Florida in connection with the case.  By doing so that they had subjected themselves to the jurisdiction of Florida laws and had therefore waived this defense.

The arbitrator agreed.  Four days ago the arbitrator granted the mortgage broker an award of $160,0000 - plus $5,000 in arbitration costs.  Hooray for the good guys!

Now the mortgage broker will need to get the award of the arbitrator confirmed by a Florida state court.  The borrower may choose to fight the licensing and choice of law issue again at this stage.  Later, the mortgage broker will need to take his Florida judgment (assuming he prevails) and get it domesticated in New York.  At this stage the borrower may choose to bring up the licensing and choice of law issues again.

Collecting unpaid loan fees can sometimes be a long battle, but with $160,000 at stake, the mortgage broker was right not to give up.  Fortunately the borrower is worth millions of dollars, so the mortgage broker should eventually collect every penny he was due.

Do you need an expert witness in the field of commercial real estate lending, commercial financing, commercial loans, or commercial mortgage loans, please click here for my expert witness qualifications and my expert witness fee schedule.

 

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Topics: Expert Witness