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With all of the recent turmoil caused by greedy banks, brokers, and investors, I thought it might benefit you to know how to avoid some of the problems that arise when dealing with these institutions.
1. Full Disclosure
Any person or organization you choose to work with should be up front with what they charge to provide a service. Oftentimes with mortgages this can be complicated because there are plenty of bogus fees and ways to hide what a broker or bank is truly charging when lending money. An overview of all fees and charges should be disclosed up front and should include not only the origination fee but all the outside costs including appraisal, environmental costs, title, escrow, processing, etc. A good broker will know most of these right away based on property type and loan amount or will be able to find out within two days. The estimate should be very close to the final costs of the loan, any added costs should be fully explained and proved necessary before you sign any closing documents.
2. Referrals
This one is not always as easy as it sounds. "My cousin does commercial loans" is not a great referral. Family and friends are typically a good starting point when looking for trustworthy people to work with, but it shouldn't end there. Ask the broker or bank for past clients or others that can provide input on how it was to work with them. If they cannot provide a single person, that should raise an immediate red flag and business should cease right there. The only thing you have to do is CALL THEM!! I'm continually amazed at how many people get taken advantage of by family or friends because they trust them and don't look into the background of the person with which they are working.
I'd want to know if a surgeon has a history of taking off the wrong limb or drinking on the job, wouldn't you?
3. No Pressure
"If you're not bleeding, they shouldn't be applying pressure"
This is a great quote and should be remembered when dealing with anyone and your money. Yes, sometimes there are dead lines and hours of operation, but any broker that makes you feel uneasy or rushed should be kicked to the curb. The only additional advice I should give that benefits you as a borrower is try to have everything ready BEFORE your transaction starts. A good broker should be able to give you a list of things needed to get your loan to underwriting after your first visit. Do your best to get it all together at one time to have a quicker transaction.
4. One Size Does Not Fit All
Did you know that there are commercial banks that only lend on environmentally unsafe property?
Some banks are better at one thing than all things. For example, they may be a "commercial bank" but really only prefer to fund apartment deals or very low risk properties. They will still accept loans for other properties, but will take forever to decide to fund, or give a much higher rate than originallyquoted on a rate sheet. This is where an EXPERIENCED broker will be a huge help. He or she will know the industry well, including who is the best source for your specific need and who can fund with little or no headaches.
5. All Questions Answered
There are simply no stupid questions when it comes to commercial real estate and financing. If you feel like you are "bothering" your broker, or they will not explain everything in great detail, then look elsewhere. A good broker or bank will answer all your questions and disclose information that you didn't even think to ask.
Thanks for taking time to read this. I hope it was informative and helpful to you. Remember I am only a phone call away!
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