Any commercial loan broker with more than six-month's worth of experience will tell you, "Daisy chains never close." A daisy chain occurs when one commercial loan broker takes a loan to another commercial loan broker, rather than directly to a commercial lender.
So why do daisy chains never close? There are three reasons: First of all, the points get too high. The lender charges points, the second broker charges points, and the originating broker charges points. At some point the borrower says, "There is no way I am going to pay three (or more) points! Sayonara."
The second reason is that the communication process is very unwieldy. The lender asks the second broker a question, who has to ask the originating broker the question, and then the originating broker has to ask the borrower the question. By the time the question goes down the line and the answer comes back, the answer is often garbled junk. It's like that game many of us played in kindergarten. Eight kids stand in a line, and the first kid whispers a sentence into the ear of the second kid, who whispers the sentence into the ear of the third kid. By the time the sentence gets to the eighth kid, the final sentence has no relation to the original sentence.
The third reason why daisy chains never close is because the process is incredibly slow. In the meantime, the borrower is shopping his commercial loan to direct lenders all over town.
Since commercial loan brokers know that daisy chains never close, a commercial loan broker will exhaust every direct commercial lender that he knows before bringing his commercial loan to a wholesaler. By wholesaler, I mean a commercial loan broker trying to act like a middle-man between direct commercial lenders and other commercial loan brokers.
This means that the typical commercial loan brought to a wholesaler has already been turned down by a half-dozen direct lenders. The deal is a stinker, and it will never close with anyone.
To make matters worse, the originating commercial loan broker will NOT tell the wholesaler that the deal has already been shopped all over town. He will NOT tell the wholesaler why the loan was turned down - horrible area, toxic issues, vacancies, problems with the borrower. He hallucinates that the wholesaler will never discover the huge black hairs. A black hair is a flaw in a commercial loan application.
The result is that the wholesaler spends hours and hours working on trying to place a commercial loan, only to learn what the originating commercial loan broker already knew - that the property was located in a horrible area, that the property was toxically contaminated, that too many units were vacant, or that the borrower has more problems than Doan's has pills (poor credit, unpaid income taxes, judgments, unpaid child support, delinquent real estate taxes, etc.).
Working as a commercial loan wholesaler is a huge waste of time that produces very little income.
So how should a commercial loan broker work with other commercial loan brokers? Answer: You should work only on a name-and-number referral basis in exchange for a 20% referral fee basis. Make the originating broker get the heck out of the way so that you can work directly with the borrower.
The originating commercial loan broker has to be content that the second commercial loan broker will get as large of a loan brokerage fee for the team as he can, and then he has to be content to take just 20% of the total fee to the team. What if the originating commercial loan broker insists on adding a point? You will have to tell him, "Don't let the door hit you on the back of the head on your way out."
But guys, you have CommercialMortgage.com! "Wholesaler? We don't need no stinkin' wholesalers." You can find all of the banks and credit unions that you need using CommercialMortgage.com ("CMDC"). Every day we add two to three new banks. We literally now have thousands of banks and credit unions on CMDC.
And guys, CMDC is free! You deal directly with these banks, and neither CMDC nor any stinkin' wholesaler will try to insert a fee between you and the lender.
So how does C-Loans, Inc., the owner of CommercialMortgage.com, make any dough? Because we own the portal, we get to see every lead. We then solicit you to allow our hard money shop, Blackburne & Sons to make your commercial loan. Between loan fees (pretty modest for a hard money shop) and our loan servicing fees (it's the loan servicing income, dummies), we make a ton of money on every hard money loan that we close from CMDC. In truth, CMDC is a honey trap, and because it is 100% fee, you would be crazy not to dip your wick into this delicious databank of commercial lenders.
And guys, if you are working daily to build a loan servicing portfolio - which pays you monthly even during recessions - you are truly blowing it. I make $76,000 per month in loan servicing income, whether I close a new loan or not. And servicing performing loans is a piece of cake. You will pay a sub-servicing company a few dollars per loan per month to service your first 30 loans, and later, when you are loaded with dough, you can simply buy your own loan servicing software. Easy-peasy, if you make good loans.
It's the loan servicing income, dummies!
