Commercial Loans Blog

Finding Commercial Lenders Using the FDIC's Website

Posted by George Blackburne on Fri, Sep 28, 2012

Not long ago one of our loan officers had a little $400,000 apartment loan that was far too clean to go hard money.  It needed to be placed with a bank.  Alert-alert – this is the perfect size and type of commercial deal to actually close and make a commission!

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We entered the deal into C-Loans.com, but none of our C-Loans lenders wanted to do the deal.  It was too small and in a rural area.

We next went to Yahoo Maps, plotted the property on a map, and then asked for nearby banks.  Unfortunately none of the local banks wanted to do the deal.

Now what?

You can easily find banks of the perfect size that are located close to the subject property by going to the FDIC’s website.

  1. Go to http://www.fdic.gov

  2. In the middle of the FDIC’s home page, left-justified, you will see a blue and gray banner that reads, Quick Search | Top Search | About FDIC.

  3. Click on the middle link, “Top Search”.

  4. Click on the link in the second column, “Bank Find”.

  5. About two-thirds of the way down the page, on the right, click on the button that reads, “More Search Options”.

  6. Fill in the “County” and “State” where the property is located.

  7. At the bottom of the search criteria, click “Find”.

  8. You will find potential banks listed in asset size order, the largest banks being listed first.  Choose a bank of the appropriate size.  Remember, banks are uncomfortable making commercial loans that are more 2.5% of their Total Assets (25% of their legal lending limit).

  9. If you cannot find the perfect bank in that county, expand your search to nearby counties.

This is wonderful tool you can use to find banks willing to fund your commercial loan.

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Topics: finding commercial lenders

Match the Size of Your Commercial Loan to the Size of the Bank

Posted by George Blackburne on Thu, Sep 27, 2012

Here is a simple but important rule:  Big banks like to make big commercial loans.  Small banks like to make small commercial loans.  The wise commercial mortgage borrower or broker will therefore match the size of his commercial loan request to the size of the bank to which he submits his loan.

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The reason has to do with legal lending limits.  National banks cannot lend more than around 10% of their capital and reserves to a single borrower.  Therefore, if your small, local bank has just $20 million in capital, it cannot lend more than $2 million to a single commercial mortgage borrower.

In real life, banks rarely make commercial loans larger than about 25% of their legal lending limit.  In practice, therefore, this small, local bank will probably seldom make a commercial real estate loan much larger than $500,000 (25% of $2 million).

At the opposite end of the spectrum, Wells Fargo Bank, the fourth largest bank in America, loves to make $20 million commercial loans.  Instead of making 40 commercial loans of $500,000; they only have to make one commercial loan of $20 million.  It’s a lot less work and far more profitable.

So what’s a big bank?  What’s a small bank?  A small bank arguably is any bank with less than $1 billion in assets.

What are a bank’s assets anyway?  Bank assets consist mainly of outstanding loans.  Deposits are liabilities because they eventually have to be given back to the depositors.

A large bank is any bank with more than $20 billion in assets.  There are about 50 banks in America with more than $20 billion in assets.

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Topics: Commercial lender size

Commercial Mortgage Leads That Are Worth Far Less Than Nothing

Posted by George Blackburne on Wed, Sep 26, 2012

Do you know what is worse than not having a single commercial loan in process?  Having a pipeline containing any of the following commercial loan applications:

  1. International loans

  2. Enormous loans

  3. Land loans and land development loans

  4. Construction loans on residential subdivisions or residential condominiums.

  5. Commercial construction loans to weak and/or poor-credit developers

  6. Loans on any kinds of mines (gold, silver, copper, etc.)

  7. Joint ventures

  8. Loans involving certificates of deposits being deposited into the lending bank

  9. Credit-enhanced bonds

  10. Daisy chains involving even one other mortgage broker

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Each of the above types of commercial loan applications is a complete waste of time.  You could have a pipeline full of 1,000 such commercial loans, and you will not close a single loan - not one!

A lot of newbie commercial mortgage brokers say goofy stuff like,  “Well, I have nothing else to work on, so I might as well work on this international loan or this speculative residential construction loan or this enormous loan or this gold mine loan or this daisy chain deal.”

No-no-no!  That is soooo stupid.  Do not waste even one precious minute on any of the above loans.  All such loans will do is to waste your time, your gas, your postage, and your phone minutes.  You will never feed your family working on any of the above loans.

The only real asset you own is your time.  If you don’t have a single decent commercial loan going, use your precious time to build your email list of referral sources.  Drop in on some local bankers ask for their turndowns.  Write up a quick email newsletter and blast it out to your referral contacts.

Just don’t waste your precious time trying to place a pipedream deal like the ones above.

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Topics: Waste of time

Finding Commercial Lenders Using Yahoo Maps

Posted by George Blackburne on Tue, Sep 25, 2012

Commercial lenders greatly prefer to make their commercial real estate loans in their own backyard.  They know the neighborhoods – which ones are safe, which ones are affluent, and which ones are dangerous.

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Another advantage to making commercial real estate loans close to your office is that the lender knows his local markets – which sub-markets are overbuilt and which sub-markets are starving for commercial space.  For example, maybe a large state university keeps the nearby commercial vacancy rate below 3%.

In the event of a foreclosure, it is also much easier for a commercial lender to handle the renovation, the leasing, and the property management if the commercial property is located close to the commercial lender’s office.

It is MUCH easier to sell a commercial lender on a funding a commercial loan if the property is located close to his office.

But how do you find commercial lenders located close to the commercial property that you are trying to finance?  It’s easy if you use Yahoo Maps.

  1. Go to http://www.maps.yahoo.com
  2. Type in the address of the commercial property that you are trying to finance.  This will bring up a map of the area immediately surrounding your property.

  3. In the “Find a Business” field, type in the word, “bank”.

  4. Little orange icons, representing the location of nearby banks, will appear on your map.  If you hover your cursor over one of the icons, the address and phone number of the bank will appear.

  5. Simply call the bank, ask for a commercial real estate loan officer, and then run the deal by him.

  6. If none of the nearby banks wants to finance the deal, simply expand your map outwards to see even more banks located slightly further away, until you finally find a home for your deal.

 

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Topics: Yahoo Maps

Finding Commercial Lenders Using C-Loans.com

Posted by George Blackburne on Tue, Sep 25, 2012

At this point, you have gotten the commercial mortgage deal in the door, collected most of the loan package, prepared by a short PDF on the commercial loan, and now you need to find a commercial lender for your deal.

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There are a number of different ways to find commercial lenders for your commercial loan; but by far the easiest and most efficient way is to use C-Loans.com.  C-Loans.com is a commercial mortgage portal.  The user enters his commercial loan into the system just once.  It’s merely a matter of filling out a mini-app that takes about four minutes to complete.

The mini-app will ask questions, like the amount of the loan, the type of the loan (permanent loan, construction loan, bridge loan, etc.), the type of property (multifamily, motel, office, etc.), and the county and state where the property is located.

When your application is complete, you press a button and ask for commercial lenders.  C-Loans.com will then search its databank of 750 participating commercial lenders and screen out all of the unsuitable lenders.  A commercial lender may be unsuitable because the loan amount is too small, the lender doesn’t like self-storage projects, or the property is located too far away from the nearest office of the lender.

C-Loans will then produce for you a Suggested Lender List consisting of 30 or so suitable commercial lenders.  You can submit your commercial loan to six lenders at a time, simply by inserting a check mark next to the name of the lender.  If all six commercial lenders turn you down, you simply come back and choose six more commercial lenders, until your find a home for your commercial loan.

And best of all, C-Loans.com is free.

Does it work?  C-Loans.com has closed more than 1,000 different commercial loans totaling over $1 billion.

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Topics: Using C-Loans

Commercial Loans and Why Daisy Chains Never Close

Posted by George Blackburne on Mon, Sep 24, 2012

A daisy chain is when one commercial loan broker takes a commercial loan to another commercial loan broker, who then tries to take that commercial loan to a lender.

Daisy chains don’t close!

There are a number of reasons why daisy chains don’t close:

  1. The loan fees quickly get excessive.  The first broker tries to charge a point.  Then the second broker adds two more points.  (Often a third broker tries to add another point or two.)  The lender charges three points.  Pretty soon you’re trying to sell the borrower on paying six to seven points for a three to four point loan.  Folks, in real life, borrowers never sit still for packing (a loan that gets packed with excessive loan fees).  And if a borrower will sit still for packing, his loan is so bad that he is desperate.  Loans for financially desperate borrowers almost never close.

  2. Communication gets garbled.  Do you remember that game in we used to play in the first grade?  Seven people stand in a line.  The first guy whispers a phrase into the ear of the second guy, “Billy Batson has a crush on Lizzy Larson.”  The second guy whispers the message into the ear of the third person … and so on.  By the time the message reaches the seventh person in line, the message has been grossly distorted, “Billy brained Lizzy with a bat, and now she’s in Larson Hospital.”  Lenders can tell when a deal is involved in a daisy chain.  They quickly get irritated and turn the deal down.

  3. Most daisy chains involve the blind leading the blind.  One of the first lessons that everyone learns in the commercial mortgage brokerage business is that daisy chains don’t close.  This means that if another commercial mortgage broker is willing to let you stay in the loop and add a point or two to the deal, then that second commercial mortgage broker is obviously a complete rookie too!  (In other words, this so-called placement expert upon whom you're relying is a rookie himself and an idiot.)   Rookies don’t have special, four-year relationships with some bank loan officer, the type of relationship it often takes to actually close commercial loans.  If you're involved in a daisy chain right now, you may still be in denial.  Don’t worry about it.  You’ll eventually discover for yourself that daisy chains don’t close.  We all learn that lesson.

  4. How it should work Suppose an experienced commercial mortgage broker uses rookies as his bird dogs to bring him commercial loan applicants.  He would pay his bird dogs 10% to 20% of whatever loan fee he managed to earn (rather than allowing them to pack on points), and he would insist on speaking directly to the borrower.  He would not allow anyone to stay between him and the borrower.  Then the experienced broker would take the deal directly to a bank, with no one else in between.   Such a working relationship is far-far different from the silly, hopeless daisy chains that we regularly see here at Blackburne & Sons.

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Topics: daisy chain

Example of a Commercial Loan That Will Never Close

Posted by George Blackburne on Fri, Sep 21, 2012

Just as I was finishing up my new training course on The Practice of Commercial Mortgage Brokerage - How to Fix Your Commercial Mortgage Business if You're Not Making Any Money (available 11/20/12), I received the following email from a sweet but obviously new commercial mortgage broker:

“Would any of your contacts fund a $50 million construction loan on a renewable energy project in Mexico?”

What a perfect teaching opportunity!  Let’s count together just how many important reasons why such a deal would never close.  The first three reasons are glaringly obvious.  The last two reasons are a bit more subtle:

  1. The loan is much too large for a newbie commercial mortgage broker.  Remember, to qualify for a $50 million loan, the borrower would need a net worth of roughly $50 million.  Don’t forget that the borrower’s Net-Worth-to-Loan-Size Ratio is supposed to be at least 1.0.  Borrowers with a $50 million net worth don’t often apply to newbie commercial mortgage brokers.  Borrowers with a bona fide $50 million net worth typically have a dozen different bankers soliciting their business regularly.

  2. Very few banks are making commercial construction loans right now Those few banks that are making commercial construction loans will seldom exceed 58% loan-to-cost.  This means that on a $50 million project, the developer would have to cover 42% of the total project cost, which equates to $21 million.  Not a whole lot of developers can contribute $21 million to any project these days.

  3. The property is located in Mexico, making this an international loanInternational loans almost never close.  Why?  Because most countries levy a 30% tax on the interest income of foreign banks.

  4. Daisy chains don’t close.  You’ll recall that a daisy chain is a deal that goes from broker to broker.   Blackburne & Sons is a small hard money shop, and our maximum loan is around $2 million.  There is no way we could fund a $50 million deal.  This means that we would have to broker out the deal ourselves, making this a broker-to-broker deal; i.e., a daisy chain.  Daisy chains don’t close!  (Unless each broker charges just a tiny fee – say, 15 to 25 basis points – and all of the brokers quickly get out of the final lender’s way.)
  5. The collateral for the loan will be a highly-unusual property type, an alternative energy project.  Properties like ethanol plants are always far more difficult to finance than plain vanilla commercial properties, like shopping malls.  Trying to finance an unusual property type during the Great Recession is a pipedream.

Folks, this nice lady broker is not likely to feed her family with a commission earned on the closing of this deal. 

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She needs to spend her time soliciting her referral contacts for do-able deals, like a $1.2 million refinance of a ballooning loan on an apartment building.

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Topics: Foolish commercial loan example

Commercial Mortgage Brokers Should Fire All of Their Employees

Posted by George Blackburne on Thu, Sep 20, 2012

With high-speed access to the internet, email, scanners with automatic document feeders, PDF software, and cloud computing –

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the typical commercial mortgage broker does not need a single employee.

If you currently have a loan processor and several junior loan officers working for you, I strongly encourage you to let them go as soon as possible.

You certainly don’t need a loan processor.  You can simply do the loan processing yourself.  After all, your commercial lender will do most of the actual loan processing. 

Your job is to solicit deals, screen them, figure out the most suitable commercial lender for the deal, present the deal in an organized and understandable manner (usually as a PDF), and to fetch the loan documents.

You don’t need a loan processor to do any of these things.  In fact, it will usually take you far longer to explain the deal to your processor than to just do the packaging yourself.

You will solicit commercial loans yourself using email and fax newsletters.  You have to write these newsletters yourself.  When you’re done writing the newsletter, you simply email it off to ConstantContact (email newsletter service) or Westfax (fax service) for delivery.  There is little that a loan processor can do to help you here.

You’ll have to read the loan documents yourself, so there is little that a loan processor can do here to help you to underwrite any of your loans.

In the old days, hard copies of commercial loan packages were delivered by Fed Ex, the U.S. Postal Service, or in person.  A commercial mortgage broker desperately needed a loan processor back then to assemble the package and to make multiple copies of it.

Modernly, you will assemble your commercial loan package on your personal computer and then turn it into a PDF.  Delivery will be accomplished by email.  There is nothing for your loan processor to assemble, collate, and photocopy.

What about the really thick legal documents, like tax returns and lengthy LLC Operating Agreements?  They are usually too large to be sent by email.

The custom today is to simply scan these documents, turn them into a PDF; upload them to some cloud computing service, like Box.net or Dropbox.com; and then to send your lender a link by email with instructions on how to download the documents.

You do NOT need a loan processor to scan a tax return when your scanner has an automatic document feeder.  You can perform the whole function yourself in less time than it would take to explain the task to your processor.

Commercial mortgage brokers simply no longer need a loan processor.

“But George, won’t a loan processor make me more efficient?”

Here’s the problem:  Commercial mortgage brokers typically close their deals in clumps.  Life would be so much easier if a commercial mortgage broker could count on closing two to three deals every month.  It doesn’t happen that way in real life. 

The typical commercial mortgage broker will go at least 70 days between loan closings several times per year.  He may close 30+ loans per year, but he will go 70+ days between loan closings at least twice a year.  (Then he’ll close five or six deals in a two-week period.)

Paying out a salary to a loan processor after you have gone 70 days without a loan closing is a budget buster.

Don’t do it.  You do NOT need a loan processor.

“But George, won’t I get lonely?”

If you get lonely, move out of the house and rent a desk in some realtor’s office.  But don’t hire a loan processor!

I also think that you should NOT train junior loan officers to work alongside you in your office.   You will waste 50+ working hours training each loan officer - hours that would have been better spent making sales and working on your personal newsletter lists.

Then, just when your junior loan officer finally starts making you money - after disturbing you daily for 14 months - your junior loan officer will leave you to go to work for another commercial mortgage broker down the street.  He’ll become your competitor.

Don’t do it.  Don’t take time away from your personal selling.  Don’t train your future competition.  Do not hire and train junior loan officers.

Folks, if you want to make and keep a lot of money in the commercial mortgage business, fire all of your staff.

If you found this article to be instructive, I strongly encourage you to subscribe to our blog via email.  To get a copy of each new training blog article as it comes out, without having to remember to come back, please fill in your email address in the space provided on the right.

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Topics: Fire your staff

Commercial Mortgage Brokers Do NOT Need a Fancy Office

Posted by George Blackburne on Wed, Sep 19, 2012

The wise commercial mortgage broker will run his mortgage business out of his house.

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Your borrowers certainly won’t mind.  In fact, they will probably think you’re pretty smart.  After all, just about every business owner in America was forced to make painful cuts to his staff and his overhead during the Great Recession.

You do NOT need a fancy office to impress your commercial mortgage borrowers.

If your commercial mortgage client needs to drop off some loan documents, just have him bring the documents by your house.  Don’t be embarrassed about it.

Now I don’t think I would invite some strange, deadbeat, home loan borrower to my house; but remember –

in commercial real estate finance almost all of your clients will be wealthy and classy.

So go ahead and introduce your multi-millionaire commercial borrower to your lovely wife.  Use this home visit to bond with your client, as he notices that your home is neat, clean, and tastefully decorated.  After the visit, he’ll almost feel like he’s part of your family.

Let me share a verbal proof story with you.  Before I made the move into hard money, I worked as a plain-vanilla commercial mortgage broker for seven years.  I started off by working out of my house, and I made very good money.

But then I opened an office that cost me several thousand dollars per month extra for rent, utilities, and janitorial expenses.  Slowly my finances began to deteriorate.  I no longer had a lot of extra cash in my business checking account.  My credit card balances grew. 

Eventually I realized that I would have to give up my office in order to lower my overhead.  I cut a deal with my landlord to escape early from my lease.  (I’m proud to say that I went back and repaid him every single penny that I owed him.)

Then I retreated back to working out of my house.  Almost immediately I started making very good money again. 

However, being the silly man that I was, I once again opened an office and took on an extra $2,000 per month (probably the equivalent of $3,500 today) in unnecessary expenses.

You will shocked – shocked, I tell you – to learn that the same thing happened again.  I quickly ran out of money, so I once again retreated to working out of my house.   Then – surprise, surprise – I started making very good money again.

“George, don’t you dare tell me that you were soooo stupid that you opened another office?  No one can be that stupid.”

Yup.  And once again I eventually had to retreat back to my house, where I proceeded to once again make very good money.  Is anyone seeing a pattern here?

Two years later I entered the hard money business and built up a large, automatic, monthly loan servicing income (almost like insurance residuals).  At that point, when I was bringing in $7,000+ per month in loan servicing fees, I once again moved out of the house and into an office for the final time.

Bottom line, folks, if you want to make and keep a lot of dough in the commercial mortgage brokerage business, you will either work out of the house or just rent a desk in some realty broker’s office for, say, $300 per month.

You do NOT need a fancy office.

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Topics: Loan office

When to Ask Your Commercial Mortgage Borrower to Sign Your Fee Agreement

Posted by George Blackburne on Tue, Sep 18, 2012

In our last lesson, I told you to always get a signed fee agreement from your commercial mortgage borrower.

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However, if you demand that your borrower sign your fee agreement at the very start of the application process, it is very likely that you will scare him away into the arms of one of your commercial mortgage brokerage competitors.

So how do you get your commercial mortgage borrower to sign your fee agreement?

The secret is to make your commercial mortgage borrower fetch you a lot of documents and to do a lot of work.  Then, before you personally do a lot of work on the loan, you ask him to sign your fee agreement.  At that point the borrower will be tired and reluctant to start the exhaustive process all over again with a competing broker or lender.  He’ll sign your agreement.

For example, the processing of a commercial mortgage loan might go as follows.  Please be sure to note that I usually don’t ask for the borrower to sign a fee agreement until day ten, after he has gathered more than 50 pages of documents.

  1. Day One:  Ask for a Rent Roll / Schedule of Leases and last year’s Actual Operating Expenses.  When they arrive, you should quickly scratch out a pro forma operating statement on a yellow legal pad and make sure the deal cash flows.  Call the borrower and give him the encouraging news that his loan looks good.

  2. Day Two:  Ask for color pictures of the property.  When they arrive, glance at them quickly and then do some demographic research to make sure the property is not located in some ghetto.  Assuming the area is okay, call the borrower with the encouraging news that his loan looks good.

  3. Day Three:  Ask for an old financial statement and two years’ tax returns.  Glance at the them quickly to make sure the borrower is making a little dough and that his net worth is at least as large as the loan amount.  Call the borrower and give him the encouraging news that his loan looks good.

  4. Day Four:  Ask for copies of all of the Leases.

  5. Day Seven:  Ask for a financial statement and two years’ tax returns on the LLC that holds title to the property.

  6. Day Ten:  Before you do any serious work on the file, tell your borrower that you are ready to submit his loan to your investor, but first you need him to first sign your “application.”  When the application arrives, he discovers for the first time that you are actually asking him to sign your simple fee agreement.  At that point in time, he certainly doesn’t want to start all over.  In most cases, the borrower will sign.   If he won’t sign, move on to your next deal.  Please note that you personally have done very little work, other than to label a file folder, fill it with his documents, and scratch out a pro forma operating statement.   It’s the borrower who has done all of the work.
Whatever you do, do NOT do a lot of work on a commercial loan file unless that borrower first signs your fee agreement.

If you found this article to be instructive, I strongly encourage you to subscribe to our blog via email.  To get a copy of each new training blog article as it comes out, without having to remember to come back, please fill in your email address in the space provided on the right.

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Topics: Getting Fee Agreements Signed

Fee Agreements and Commercial Mortgage Loans

Posted by George Blackburne on Mon, Sep 17, 2012

An important and painful lesson learned by just about every new commercial mortgage broker is to always require a signed fee agreement from the borrower.

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You’re going to learn this painful lesson eventually.  The only real question is whether you learn this lesson after losing just five big commissions ($20,000+) or you have to lose fifteen big commissions before you learn this lesson.  Either way, you will learn this lesson:

Always get a signed fee agreement with the borrower.

You probably think that the purpose of the fee agreement is to protect you against the borrower refusing to pay your commission at the closing.  This happens occasionally but not very often.  By the time most commercial mortgage loans get ready to close, most borrowers are exhausted, impatient, and eager to close the deal.  The borrower doesn’t want to risk starting the four-month application process all over again by appearing dishonorable in front of the lender.

The real reason you need a fee agreement is to protect yourself against (1) borrower fraud and (2) unjustified borrower cancellations. 

Commercial mortgage borrowers lie all of the time.  They lie about having the target property in contract.  They lie about having the cash to make the down payment.   They lie about the purchase price.  On refinances, they tell tall tales about the value of their commercial property.  They withhold material information about their past credit problems.  They lie-lie-lie.  If you have a fee agreement with them (a contract to arrange a commercial loan), you can sue them for lying to you.

You will also quickly learn that commercial mortgage borrowers have no appreciation for the value of your time.  They will work you for hours and hours … and then cancel on you for no legally sufficient reason.  Their attitude is, “Everybody knows that you don’t owe your mortgage broker a fee unless the deal closes.”

Excuse me, but these are not owner-occupied, one-to-four family loans with a personal, family, or household purpose.  Commercial loans are not subject to Reg Z.  There is no legal Right of Rescission.  If you cancel a commercial mortgage loan, in many cases you will still owe your commercial mortgage broker his fee.

I got screwed out of my commission so many times as a commercial mortgage broker that I went to law school and became an attorney.  Imagine going to law school with two children in diapers.  I never missed a day of class.  I briefed every case.  I graduated with honors.  I did all of this because I was tired of getting screwed out of my commission.

I never practiced law in the traditional sense, but over the next six years I proceeded to sue 30+ commercial mortgage borrowers who cheated my company and me.  I won almost every case.  These were not innocent consumers of whom I took advantage.  These guys were filthy rich investors who thought they could get away with cheating a poor mortgage broker.  Thirty times the court (more precisely the arbitrator) agreed that they had in fact cheated us.

I teach a separate Commercial Mortgage Broker Fee Collection course for just $199 that comes with a sample fee agreement.  I strongly encourage you to take this course.  It may prove to be the turning point in your career as a commercial mortgage broker.

Until then, here are some pointers:

  1. Always make sure that your fee agreement provides for arbitration under the Rules of the American Arbitration Association.

  2. Make sure your agreement provides that any hearing will be held in your own hometown, not in some state 1,000 miles away.

  3. Make sure your contract forbids the award of attorney’s fees.

  4. Make sure your contract has a non-circumvention clause.

  5. Your agreement does not have to be an exclusive agreement.

If you found this article to be instructive, I strongly encourage you to subscribe to our blog via email.  To get a copy of each new training blog article as it comes out, without having to remember to come back, please fill in your email address in the space provided on the right.

Lastly, if you're a buddy or a former student of mine, would you please-please-please do me the great kindness of hitting the Like button, the Google+1 button, and the Linked-In Share button above.  Thanks so much.  :-)

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Topics: fee agreements

Build Your Commercial Loan Business By Touching Wealthy Investors

Posted by George Blackburne on Tue, Sep 11, 2012

If you want to succeed as a commercial mortgage broker, you need two things:

  1. A large number of referral sources who are in a position to refer you a lot of commercial mortgage leads.

  2. A large number of wealthy clients who regularly need commercial real estate loans themselves and/or who have lots of friends who need commercial real estate loans.

Today we are going to focus on item two in the list above.

The good news – and this is really good news – is that its easy for a commercial mortgage broker to meet high-net-worth investors.   Why?

The vast majority of your borrowers will be wealthy investors.  After all, poor folks don’t own multi-million dollar commercial properties.  Wealthy investors do!  It’s like being a Rolls Royce salesman.  The people walking the car lot are unlikely to be janitors.

Therefore almost every time you are speaking with a commercial mortgage borrower, you are speaking with a wealthy investor.  In fact, I have often said,

There is no easier way to meet high-net-worth investors than to be a commercial mortgage broker.

[Side note:  I own a $50 million hard money shop, and every single one of my early trust deed investors was a former borrower.  Do you see the benefit of staying in touch with your wealthy former borrowers?]

Once you have worked on a commercial real estate loan for a wealthy investor, regardless of whether or not the deal actually closed, you have established legitimacy with him. 

You are no longer some stranger that he met calling out of the Yellow Pages or over the internet.  You are a real life person who treated him honestly and worked hard for him.  If the deal didn’t close, the investor may even feel a little obligated to you because you worked so hard for him and didn’t get paid.

You must be tenacious about staying in touch with the wealthy investors that you meet in the legitimate course of business.

Not only will these wealthy investors need commercial loans in the future, but so will their buddies at the country club.

So what’s the best way to stay in touch with your list of wealthy investor clients?  I recommend a fun email newsletter like this one.

If you want to be rich, you will add three to five new wealthy investors to your email list daily.

“Three to five per day?  George, I don’t meet three to five wealthy investors daily!”

Yes, you do.  How many commercial loan shoppers do you talk to daily?  Eight to ten?  If so, at least three to five of them will be bona fide income property investors, people with whom you want to stay in touch.  

Remember, all you have to do is to quote a commercial loan to an investor to establish the beginning of a relationship.  Even if he never sends you his commercial loan package, you should add him to your contact list.

You know what drives me absolutely nuts?  Newbie commercial mortgage brokers working on international loans, loans on gold mines, or other goofy, never-going-to-close deals, rather than building their email list of wealthy investors (with whom they have a little bit of a relationship) and their email list of referral sources.  Dumb-dumb-dumb.

You can make all kinds of money from your wealthy investor clients:

  1. You can arrange commercial loans for them.

  2. You can pay them referral fees for referring their friends.

  3. You can sell them mortgage investments.  Remember, I own a $50 million hard money shop, and all of my early mortgage investors were former borrowers.

  4. You can syndicate your wealthy investors to buy foreclosures or other opportunistic real estate investments.

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So pay attention!  You are already meeting three to five wealthy investors every day.  Capture their address, phone number, and email address and then add them to your email list.  Then hit them with a fun newsletter at least every three weeks.

If you found this article to be instructive, I strongly encourage you to subscribe to our blog via email.  To get a copy of each new training blog article as it comes out, without having to remember to come back, please fill in your email address in the space provided on the right.

Lastly, if you're a buddy or a former student of mine, would you please-please-please do me the great kindness of hitting the Like button, the Google+1 button, and the Linked-In Share button above.  Thanks so much.  :-)

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Topics: list of wealthy investors

How to Spot a Commercial Loan Commission

Posted by George Blackburne on Tue, Sep 4, 2012

Right behind my right ear is this goiter that swells up, pulsates, and glows a florescent internet green whenever I run across a commercial loan that smells like a big commission.  I call that goiter my "greed gland", and boy does that sucker pulsate (thump-thump, thump-thump) whenever I stumble across a hot commercial mortgage lead.

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It's sort of like that old joke, "What do a hurricane, a tornado, and a redneck divorce all have in common? Someone's fixin to lose a house trailer."  Well, when certain stars align, some lucky commercial mortgage broker is fixin' to earn a big commission.  But here's the $20,000 question, "What do the stars look like when a commercial loan is almost certain to close?"

It's easy to spot the hopeless deals:

  1. Commercial construction loans
  2. International commercial loans
  3. Letter of credit commercial loans
  4. Most large commercial loans
  5. Loans on casinos and mines
  6. Land loans

Here are some of the deals that make my greed gland glow:

  1. Loans with balloon payments.
  2. Deals where the bank has offered a discounted pay-off.
  3. Since the start of the Great Recession, low-LTV commercial mortgage loans to business owners to help cover their losses.
  4. When an heir inherits a free-and-clear commercial property, he usually has it mortgaged to the hilt within five nano-seconds.

I used to teach my students that, "Commercial property owners who pay off their mortgages almost never mortgage their commercial properties again.  Corrolary:  When an heir inherits a free-and-clear commercial property, he usually mortgages it to the hilt within five nano-seconds."  Yeah-yeah, I said the same thing in the list above, but this is so important that it was worth mentioning again.

Since the Great Recession, we have refinanced a number the commercial properties where the business owners had previously paid off their mortgages.  Clearly the rule is not perfect.  The Great Recession was just so bad that they just plain needed the money.

The wise commercial mortgage broker will therefore not waste his time working leads from the first list, but rather he will relentlessly pursue the leads from the second list.  And if he has worked all of the hot leads, he will devote his time to marketing for more referral sources.

If you found this article to be instructive, I strongly encourage you to subscribe to our blog via email.  To get a copy of each new training blog article as it comes out, without having to remember to come back, please fill in your email address in the space provided on the right.

Lastly, if you're a buddy or a former student of mine, would you please-please-please do me the great kindness of hitting the Like button, the Google+1 button, and the Linked-In Share button above.  Thanks so much.  :-)

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Topics: hot commercial mortgage leads