Commercial Mortgage Brokers - Worth The Risk?
If you are seeking development financing for a commercial real estate project, commercial mortgage brokers may be able to offer you the loan that is right for you. All really great commercial mortgage brokers are focused on getting your transaction matched to an institution that will meet the commercial mortgage broker's needs. If your needs are met, so much the better, but that's not a requirement in their world.
A fundamental understanding of the principle of the time-value of money comes into play for the brokerage industry. Brokers live on deals that are already in perfect condition for submission. They will not perform any due diligence until the institution tells them the transaction has passed the first review. The second issue is brokerage fees. Unfortunately, there are all too many brokers out there who are really not brokers, they are playing a different game - the application fee game. Recently, a number of them on Wall Street have been busted and some rather high-profile players are going to go to jail, but Rainmaker does not believe this will lead to any substantive change in the industry. Forewarned is forearmed so we will provide you with additional information that may be helpful in your funding solicitation cycle for a DEVELOPMENT STAGE financing.
For one thing, most commercial mortgage brokers don't have a direct correspondent relationship with an institution; their approach is to solicit a number of institutions and hope one of them will pay their fee (getting their fee paid takes precedence over getting your project funded). In other words, you are going to be paying them to do no more for you than you can do for yourself with no tools or special knowledge that you do not already possess.
Another thing is the underwriting of the investment. It used to be that the underwriter would be that firm that undertakes the investment responsibility, meaning; they assembled the capital out of their own resources and packaged it into the investment security being offered by the promoter group seeking the capital. Today, underwriting has deteriorated so badly that the only real responsibility is the loan file. This means the "underwriter" is being paid an "underwriting fee" to assemble the transaction documentation. Funding the deal is left up to someone else. Is that what you want?
Why not talk to Rainmaker about a quasi/semi-public underwriting using the indirect solicitation method? You would be surprised what you can learn and how fast your transaction can complete its own underwriting process.