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   ARTICLE   |   From Scotsman Guide Residential Edition   |   August 2007

Commercial Partnerships Can Pay

Adding commercial lending services to your brokerage can be easier with a referral partner

With the recent changes in the residential marketplace because of the nonprime debacle, allegations of fraud and slowing refinance business, most residential mortgage brokers are left scratching their heads and wondering, “What now?”

Many have thus turned to commercial lending. In fact, some commercial lenders are reaching out to residential brokers, trying to coax them into a career change, boasting how easy it will be to switch to commercial. Whether we like it or not, however, commercial loans are simply a different animal from residential loans.

Consider, if you will, a shift in commercial lenders’ advice: Don’t waste your time trying to start a new career from scratch unless you really want to. and unless it is for reasons other than sheer panic about the current residential lending landscape. That landscape will change.

Indeed, you may often be asked to help assess commercial loan opportunities in your community and perhaps to find a lender. This can be tempting, but consider the likelihood of your success in placing that loan and proceed accordingly. If you are uncertain about or uninterested in the commercial loan process, consider your other options.

Instead of taking on the burden of selling, processing and closing commercial loans or passing the opportunities up completely, consider offering another solution to your clients: Refer them to an expert. By partnering with a commercial broker and setting up a referral program, you can develop a relationship that will bear fruit for you for years to come.

What to look for in a partner

When seeking a commercial partner, look for one who will:

  • Protect your fee. Make sure you have fee agreements in writing for every loan you refer. Do not rely on just a handshake to secure your interest in the loan.
  • Negotiate your fee for you. A good partner will take on your projects and pay you a fee of as much as one point should the loan close.
  • Pay your fee from loan proceeds. A good partner should have the experience and products that allow your fee to be paid from loan proceeds.
  • Communicate. Remember, you are referring your clients. Those clients should be treated with respect, and so should you. Work only with partners who provide regular status updates on each project.
  • Service many loan types with great product offerings. You should be able to find one or two main partners who can offer the lion’s share of loan products available in the marketplace today.
  • Refer residential loans back to you. Don’t choose a partner with whom you are in competition. Good partners will be happy to refer residential mortgage leads back to their residential partners. Remember, legally, you cannot pay a referral fee to your commercial partner.
  • Arrange closing, title insurance, etc., for you. Your partner should take complete control and remove all the burdens of time investment for you. Many commercial companies own their own settlement and legal companies. If you can find one that does, this is a strong benefit. If used properly, these companies will have a much tighter grip on your clients and will demonstrate a better closing ratio for you.
  • Deliver. Talk is cheap. If you choose to work with a partner to handle your loans from start to finish, you will have to take a leap of faith on the first few loans. Once you start the process, there should be no doubt in your mind as to whether you have found the right partner.

Getting started is the tough part. But if you find a partner who meets the above criteria, give it a shot. Use your instincts. Listen closely to the subtlety of your first call.

Does your potential partner seem eager to do business,? If you leave a message, how promptly is it returned? In short, does your potential partner sound like somebody who you’d consider a good representation of your business and even of you personally? After all, you are putting yourself and your reputation on the line when you refer your clients. Go with your gut; it is right most of the time.

Finally, don’t forget to do your homework. It is fair to ask for references. In addition, check the Web and the Better Business Bureau for information about your potential partner’s business. And don’t forget to ask your colleagues. Generally, good news spreads fast, but bad news spreads even faster.

•  •  •

A great commercial referral partner will be an excellent addition to your business. Plus, a successful partnership will provide expanded services for your clients, which could lead to repeat business for you. It will provide a great source of revenue for you while allowing you to continue to grow your residential practice. It also will help build your reputation as an adviser and one to whom all residential loans should come when the need arises.


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