For success with commercial mortgages, residential brokers must analyze products and processes
Joe Mardesich, president, Nationwide Commercial Funding Inc.
As published in Scotsman Guide's Residential Edition, December 2006.
Have you ever wondered why some residential brokers can't transition from residential to commercial loans successfully? You'd think the skills for brokering loans would be transferable, but results don't always indicate that.
Although some skills are transferable, such as selling and marketing, there's one night-and-day difference between residential and commercial lending that invariably seems to get in the way -- product knowledge.
Product knowledge is more than just knowing about rates, terms and loan to values of commercial loan programs. You can get that kind of information off many commercial lenders' rate sheets.
Product knowledge also includes thoroughly understanding how commercial lenders view credit and underwriting. And it includes comprehending the processes by which they reach decisions to close and fund loans. These elements of product knowledge are so different from their residential counterparts that brokers who are residential geniuses often become commercial babes-in-the-woods.
Brokers who don't bother to learn the commercial business sink their own ships before they leave port. They don't -- and indeed can't -- set proper expectations for their clients. Thus, they face many surprises throughout the process, which inevitably affect their borrowers. They often try to defend themselves by blaming these surprises on the lender. The real reason, of course, is that the broker doesn't know the ropes and assumes the process will mirror the residential process.
When a broker does know what's going to happen and can set the correct expectations, however, the deals tend to go smoothly. For example, if you tell clients that their loan will take a month to close and you close it in 29 days, you're a hero. If you tell clients that the loan will take a week, and you close it in eight days, you may be seen as incompetent.
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