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   ARTICLE   |   From Scotsman Guide Commercial Edition   |   January 2018

Cater to Your Connections

Cultivate relationships with private lenders to give your clients more funding options

Cater to Your Connections

As we enter 2018, it’s inevitable that commercial mortgage brokers are focusing on ways to make the most of their business in the new year. Many brokers have realized that diversifying the loan programs they offer prospective borrowers is a good way to differentiate themselves from the competition.

Branching out into private lending is a great way for brokers to reach investor clients and supplement their own income with a steady stream of business from parts of the industry that are historically underserved by traditional mortgage lenders. Navigating options in the private-lending space, however, requires establishing effective lender relationships.

Commercial mortgage brokers should know that lenders are vetting them to ensure they are worthwhile business connections. Think of it this way: Just as you are more likely to work with lenders that make your life easier, lenders are looking to find brokers who are both easy to work with and understand the lenders products and processes.

In return, lenders will often work harder to keep their best brokers happy and will typically be more flexible with their clients’ requests. So, what is the key to standing out in a space that is becoming more competitive each and every day?

The most successful brokers are masters of catering to both borrowers and lenders. The secret is that once you establish strong relationships with reputable lenders, they will go out of their way whenever possible to ensure your borrowers are happy.

Know your lender

When initiating a new lender relationship, it really is easier than it seems to make a good first impression. Simply familiarizing yourself with the lender’s products and criteria prior to a preliminary phone call or e-mail can make for a more meaningful conversation. This allows you to know the questions you want answered going into the conversation, as well as any potential client hang-ups the lender could address upfront.

Not only will the lender appreciate that you have, at the very least, a basic understanding of what they do, but you will seem more knowledgeable of their niche and, in their eyes, be easier to work with. From there, figure out the key information the lender is looking for early on when vetting a loan scenario and make sure it is delivered.

Lenders will often work harder to keep their best brokers happy and will typically be more flexible with their clients’ requests.

This approach doesn’t mean you have to make a full loan-package submission — just the details a lender needs in order to make an initial decision. Make sure you know exactly what information they need for your client’s file to move forward. This can make all the difference with time-sensitive scenarios that occur in private lending in particular.

Some of the best brokers will send an upfront, comprehensive summary of their client’s deal, for example. Typically, this includes basic details like the property address, purchase price and renovation costs; the borrower’s estimated credit score and experience level with investing; and the desired loan amount and the use of proceeds.

This is, by no means, a full loan package, but it may be all a lender needs to determine if it can proceed with the loan. This results in the broker receiving faster updates and, ultimately, a preliminary approval that can be relayed to their client so the origination process keeps moving forward.

Know your borrower

Now that you are familiar with a lender’s sweet spot and are ready to refer deals to them, it’s time to turn your attention to your borrowers. Just as it was important to familiarize yourself with your chosen lenders, it is equally, if not more important, to familiarize yourself with your clients’ deals before you bring them to a lender.

You must do your own initial due diligence on your borrower’s loan scenario so that you can answer basic questions when discussing it with a lender. It’s not uncommon for loans to be slowed down — time and time again — because a broker doesn’t have answers to initial questions about the borrower.

Think of it this way: Would you ever consider working with a lender that offered to “get back to you soon,” but couldn’t immediately answer questions about their interest rates and loan terms? If you don’t know details of your borrower’s loan request, it not only slows down the process because of the increased back-and-forth communication, but you also come across as inexperienced to both the lender and your client. Understand the ins and outs of your borrower’s loan scenario and be able to provide important details that the lender is looking for.

Private lending can be very lucrative because there is a high likelihood that you’ll develop a network of repeat clients.

So, what happens when you run across flaws in your client’s deal? You may think it’s easier to gloss over flaws and let the lender discover them in their due-diligence process. That is, after all, what underwriting is for, right?

Wrong. Hiding any issues with a borrower’s deal can ultimately prolong the origination process or, in some cases, kill the deal entirely. At the very least, hiding blemishes on a borrower’s file can interfere with the lender providing correct loan terms.

Honesty really is the best policy, so be direct with your lender about any flaws in your client’s deal. Also, be understanding of any concerns the lender or your client may have going into the deal. This will allow you to articulate any concerns between all involved parties, and thereby arrive at a faster resolution.

Know your value

Mortgage brokers have a crucial role in the commercial real estate lending industry. Being a liaison between clients and lenders is not an easy task, so it makes sense that compensation is usually one of the first points of discussion when initiating a transaction. You’ll want to ensure the legwork is worth it.

When approaching a discussion of fees, however, it is important to make sure you are asking for a reasonable amount. As a commercial mortgage broker, private lending can be very lucrative because there is a high likelihood that you’ll develop a network of repeat clients. Unfortunately, lenders often witness brokers lose out on repeat business because they charge customers too much money off the bat. You should never put a deal in jeopardy because the fee is too high.

Be willing to openly discuss compensation with lenders, because most good ones will give you guidance on an appropriate amount to charge a borrower based on the specific deal. A strong private lender wants to see brokers succeed and be satisfied with their income because, if that is the case, there is a much higher likelihood of the broker bringing future business back to the lender.

Ultimately, it all comes back to developing a strong relationship with your clients and lenders. Once you’ve successfully done that, the money will follow.

•  •  •

As you continue to plan for your business in 2018, understand how the work you put into developing relationships with private lenders and clients will pay off. The most successful brokers add the most value to each transaction by catering to both client and lender needs.

In return, you can expect private lenders to reciprocate with benefits such as greater flexibility with your clients, faster decisions and funding of deals, more accurate pricing and even a steady stream of referrals. These perks will keep you ahead of the competition in your clients’ eyes and elevate your business to the next level. 


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