Reprinted From Scotsman Guide Residential Edition and scotsmanguide.com, February 2007
All rights reserved. Third-party reproduction for redistribution is prohibited without contractual consent from Scotsman Publishing Inc.
How to Find Commercial Leads
There are easy steps brokers can take to find and cultivate commercial business
By Ken Markizon, underwriter, APEX Mortgage
There has been much discussionlately about why residential mortgage brokers should take on commercial deals. Many articles on the topic cover how to pick a lender, how the appraisal process works, how much money you can make on the deals and how the language for commercial deals is different from residential.
But the questions many mortgage brokers continue to have are: "How do I find commercial deals?" and "What do I do when I get a commercial client?"
Here is how to address these concerns.
Steps to finding leads
There are five ways that could help you generate commercial loan applications:
1. Place advertisements in local news-papers. These ads are generally inexpensive, and many business-owners read these publications. Write something to the effect of: "We get commercial loans approved when the bank takes too long or just says no. Hard-to-prove income, tax debt, past credit issues, unique property? No problem."
2. Call 10 certified public accountants (CPAs) in your community. Ask them for a few minutes of their time over a cup of coffee. Tell them that you have some nontraditional-lending sources for their clients. Remember, CPAs often do their clients' taxes. They know which clients cannot qualify for traditional bank financing and need other help. A stated-income sales pitch often will work well with CPAs.
3. Make direct contact with business-owners. Think small. If there is a street in your town that has many mixed-use and commercial properties, start there. Print 50 fliers, and walk down that street handing them out. Believe me, business-owners and commercial-property-owners are always thinking about money, and they often keep printed material that concerns access to cash. You also can send a mailer.
If you like, pick an industry with which to start. For example, you can contact all auto-repair shops, bars and restaurants, motels, medical offices, day cares or grocery stores in your area. They're likely wondering how they can lower their monthly bills, buy a new piece of equipment, pay off their tax lien or get another property.
4. Go through every residential loan application (1003) you took in the past two years. Look at the schedule of real estate to see if there is a commercial property. Did you do any deals with no-income verification? You may be amazed at what opportunities you have in your files right now.
5. Contact the local banks. You can start with the loan officer who helps you with residential leads, or call the local branch manager and ask to speak with a commercial lender. Tell them that you are generating commercial deals, and you need to understand what the bank is looking for in terms of an application. Then let them know that you may have sources for the deals that they turn down. Also tell them that you can help those borrowers who have notes ballooning with the bank but will not be rewritten.
Let the banks know that if they refer their customers to you when they turn down a loan request, they can at least save the relationship they have with their depositors.
When you have the lead
When you get a commercial lead, although the application process can be more cumbersome, the sales process isn't that much different than with residential deals.
Business-owners, even more so than the average homeowner, are worried about lowering their bills, paying off old debts, freeing up cash for new investments and getting out of debt quicker. Don't be intimidated. Ask questions, find out their monetary needs and determine why a loan will make sense.
Consider the following questions: Is there a high-rate first mortgage? Is there a first mortgage that balloons? Is there a lot of credit card debt? Has the Internal Revenue Service caught up with the business? Are real estate taxes due? Is there some equipment they need to buy? Do they just want out of a private mortgage?
It is important that you understand why the loan makes sense. If you don't understand it, you'll have a hard time getting the loan approved. You must be able to explain to the lender how this loan will help your borrower.
Then simply complete a 1003 using the commercial property as the subject. Generally, with the 1003, the credit and a basic understanding of what the borrower is trying to do, most lenders can give you an indication of their interest. They also will let you know what else you should collect from your borrower.
Finally, be careful if borrowers ask about rates and terms. Just like in residential, borrowers will always push you to quote rates early. And just like in residential, you should be careful not to set unreasonable expectations. It is important to note that commercial rates are higher than residential.
Some brokers have submitted requests for 575 mid-score, stated-income bar-owners requesting 75-percent loan to value (LTV) and expecting an 8-percent fixed rate for 30 years. When the only lender interested is quoting 12.99-percent fixed for 15 years at 60-percent LTV, with upfront
"Think small.
If there is a street in your town that has many mixed-use and commercial properties,
start there."
Continued ...
Ken Markizon is an underwriter for APEX Mortgage, a nationwide lender that specializes in stated-income, small commercial mortgages ($25,000 to $750,000). APEX understands the credit of the self-employed and generally closes deals within three weeks from application. Markizon can be reached at (800) 262-2739, ext. 262, or at kmarkizon@apexmtg.com. Learn more about APEX at www.apexmtg.com.All rights reserved. Third-party reproduction for redistribution is prohibited without contractual consent from Scotsman Publishing Inc. Reprinted From Scotsman Guide Residential Edition and scotsmanguide.com, February 2007
points and prepayment penalties, however, the broker will have trouble selling it. The expectations were set too high from the beginning.
The best and safest way to go is to tell borrowers, "I appreciate your concern about what rates are available, and if we were talking about a home mortgage, I could quote you a rate right now.
"With commercial property, however, there is a wide range of programs with a wide range of rates. The final product will depend on many factors. Different lenders have different appetites for different scenarios. Now that I've learned a little bit about your business and your needs, let me go talk to some of my investors and banks. It won't take me long to get you an idea of what's available. My job is to find you the best deal available, and I promise I will do that."
How to Find Commercial Leads... Continued
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