A commercial mortgage broker is a salesperson, and convincing the borrower to send in his initial commercial loan package is arguably the single most important sales step in the commercial loan business.
In prior lessons on how to rope in a commercial loan package, I laid out for you certain rules:
- Make sure that your initial list of requested commercial loan documents is short and very easy to gather. Right now you’re fighting inertia. The borrower is at rest, and a body at rest tends to stay at rest.
- Typically the first set of documents will be the income and expenses on the property, plus some color pictures.
- Be careful when asking for color pictures. If the commercial property owner is older, he may not know how to send pictures by email. If he doesn’t, and if he doesn’t have a property manager or a child who can send in the pictures for him, you should quickly back off from asking for any pictures.
- You should collect your commercial loan documents in a series of small batches, making sure that each step is relatively easy. Once the borrower has sent in his initial package, inertia is now on your side. A body in motion tends to stay in motion.
- Never ask for a complete package! Remember, out of the 1,000+ times I have asked for a complete commercial loan package, I have received exactly zero packages.
- Never send a commercial mortgage borrower a list of all of the loan documents that you will eventually need for your package. The list is far too long and intimidating. Your borrower will head for the hills.
- Never orally give your borrower a list of all of the loan documents that you will eventually need. You’ll scare him away 100% of the time.
- Don’t combine any document-gathering steps in order to “save time.” All you will end up doing is saving yourself the time and trouble of depositing a commission check. Instead, make sure that each step is easy and short.
Now let’s talk about Pooh-Pooh Soup. My lovely wife, Cisca, and I occasionally go out to French restaurants. French restaurants are expensive, the waiters are often rude, and the portions are tiny; but the food is usually excellent.
There is common characteristic of most French restaurants that invariably sets Cisca and me to giggling. No matter what you order, the waiter always tells you that you have made a great choice and that the food is going to be excellent.
For example, if you order the duck a la orange, the waiter will almost always say something like , “Ah, good choice! The duck a la orange is magnifique.” If you order the Crepes Suzette, the waiter will say something like, “Good choice! The Crepes Suzette are delicious!”
Therefore I have often wondered what would happen if I ordered the pooh-pooh soup? And yes, folks, the pooh-pooh soup is exactly what you feared – a couple of short brown logs in a delicate broth. Eeuuuu, yuck! Would the French waiter say something like, “Ah, the pooh-pooh soup is delicious!”
But as commercial mortgage brokers, we can all learn an important lesson from that French waiter. When he is telling us that the pooh-pooh soup is delicious, that French waiter is giving us positive feedback.
Commercial mortgage borrowers need a lot of positive feedback as they slave away over a copy machine making copies of their voluminous tax returns and thick leases. They constantly need to be reassured that they are not wasting their time.
The whole point of the Pooh-Pooh Soup Story is this:
In order to eventually compile a 200+ page commercial loan package, you need to gather the documents just a few pages at a time and then give the borrower lots of reassurance each time that his loan still looks good.
For example, after you receive the income and expenses on the property and the color pictures, you should call the borrower and say: “Dr. Smith, I analyzed the cash flow of your property, and the numbers look very good.” (The pooh-pooh soup is delicious!) Now all I need is an old personal financial statement and two years’ personal tax returns.”
“Dr. Smith, I looked at your personal financial statement and your tax returns, and the numbers looked quite good. (The pooh-pooh soup is delicious!) Now all I need is copies of the leases.”
And so on. Remember, make each set of documents just a short list. Never combine steps “to save time”. And be sure to give your commercial mortgage borrower lots of positive reinforcement. The pooh-pooh soup is dee-licious!