Commercial Loans and Fun Blog

Vanilla Shell, Cash-Out, Contracts of Sale, and Commercial Loans

Posted by George Blackburne on Thu, Sep 28, 2023

Screen Shot 2023-09-25 at 9.28.20 AMI've got some superb commercial loan training for you today, but first a slightly racy joke.   

Joke Du Jour:

A 10-year-old girl asked her mum, “How was I born?”  The mother smiled and said, "A long time ago, your Daddy and I decided to plant a wonderful little seed.  Daddy put it in the earth, and I took care of it every single day.  After a while, the seed grew more and more leaves.  In a few months, it grew into a beautiful, healthy plant; so we took the plant, dried it, smoked it, and got so high that we forgot to wear a condom.


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Vanilla Shell:

I learned a new commercial real estate (CRE) term this week - vanilla shell.  A vanilla shell refers to how a CRE property is delivered by a developer to the tenant. These properties, sometimes also referred to as ‘white boxes’ or ‘warm shells,’ commonly feature -

  •  Finished interior walls
  •  Functioning HVAC system (hence the warm shell moniker)
  •  Open ceiling concept (drywall) ceilings
  •  Basic flooring
  •  Restrooms
  •  Lighting 


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Cash-Out Commercial Loans:

Residential lenders and some banks often look down with distain on residential or commercial mortgage loans where the borrower is pulling cash-out.  Yuck.  

To Blackburne & Sons, the words "cash-out" are the sweetest sound in any language. As I keep pounding into my commercial loan staff, we are in the business of providing cash-out.  It's what we do!

Do you have a commercial or residential borrower who needs cash out?  As they say in the game shows,"Come on down and apply for that cash-out loan!"

Contracts of Sale:

Contracts of sale or land contracts are ways of selling property, where the buyer is given possession of the property but the seller retains bare legal title until the buyer tenders the full purchase price.


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To understand contracts of sales, it's easier to go back in time 100 years.  The buyer goes to a bank for a mortgage loan, but the bank says no.  "You are not strong enough."

The buyer goes to the seller and says, "I want to buy your property, but I need to you to carry back the purchase price.  I will pay you every month."  The seller says, "I am not willing to just give you title to the property.  I want to be able to quickly kick you off the property if you miss any payments."  The buyer says, "Okay, you keep title in your name until I have completely paid you off.  If I miss any payments, you can just come in and evict me."

Over the years, many unjust situations arose.  Imagine missing just the last payment. Eventually every court in the land ruled that contracts of sale are no different than mortgages.  They must be foreclosed in the same manner.

Nevertheless, you will still see them occasionally.


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Interesting Loan With a Contract of Sale:

Today, my son brought me a commercial loan where the buyer was making payments of a $230,000 contract of sale.  He had only paid the loan balance down to $180,000.  The borrower wanted to pull cash out [gasp] because the property is now worth $500,000.

Cash-out?  OMGoodness!  How would I rule?  Remember, the words, "cash-out," are music to my ears.  We love-love-love cash-out deals.  Yum!

But what about that contract of sale?  The borrower hasn't finished paying it off.  So what?  Remember, think of a contract of sale as merely a mortgage.

Would Blackburne & Sons make a $325,000 first mortgage on a commercial building?      Does my sweet hound, Scarlett, pee on every blade of grass along our two-mile daily walk?  [Chuckle]


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Some Thoughts on North Korea:

My old high school roommate from Culver Military Academy (best high school in America) says that Putin met with North Korea to get ammunition for his howitzers.  My old roommate is probably right.  But I have a different theory.

North Korea wants the world economic boycott of North Korea to end.  North Korea has nukes, so no one is going to invade the country.  I would also bet money that North Korea has two satellites in geosynchronous orbit above the United States.  Each satellite has a nuke designed to be dropped and exploded 30 miles above us.  The EMP pulse would fry the entire country's electronics.

North Korea therefore has little to lose.  No one would dare to attack it.  In an attempt to force the world to end the economic boycott, what if North Korea started sending fresh troops to Ukraine to help Russia?  Hmmm.


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Topics: Cash-Out Commercial Loans