Commercial Mortgage Placement Costs
“The Time It Takes To Get A Commercial Mortgage In Place Is Largely Impacted By A Lender’s Third Party Verification Requirements”
Commercial mortgage placement costs are getting quite significant and if you want to not only increase the probability of getting the financing you want, in the time period you want it in, then you may need to consider spending even more money.
The standard underwriting requirements of all bank and institutional lenders now require commercial appraisals and environmental reports on just about any commercial mortgage financing they provide.
And if the loan is large enough, the cash flow verification requirements can demand review engagement or even audited financial statements no less than 6 months old.
While this is certainly not anything new to business owners that require financing on their commercial property, what many are still struggling with is getting in front of the right lender and getting financing in place in a reasonable amount of time.
The reason both of these are difficult is that most borrowers still want to apply for financing, projecting ahead what the appraisal and environmental report will say. They want to apply and get approved for financing, subject to the proper completion of all the third party verifications that the lender is going to be asking for.
There are a number of challenges with this approach.
The first is all about timing. In certain areas, at certain times of the year, it can be next to impossible to get a commercial property appraisal completed for several months due to the back log of the appraisers that work in the area.
This is not a big surprise in that all commercial property basically requires up to date or recent commercial appraisals, so at times its going to be hard to get one done quickly.
The second challenge is not knowing exactly what some of these third party experts are going to come up with in terms of valuation, potential liability assessments, business issues, and so on.
If there are any material surprises, its likely a lender will pass on the deal and your left to start over again with someone else.
To combat these issues, one can make the argument that it makes sense to get these third party reports completed on a regular basis or ahead of time on your own.
Yes, there is a risk that a funding source may require you to redo something using one of their approved service providers, but at least you can accurately present the information to make the case for financing in the first place without too much risk of being surprised further down the process from a third party report.
And, in many cases, assuming you are getting appraisals, environmental reports, and financial statements done by name brand providers with solid commercial reputations, there is always a good chance that their work will be accepted by a wide variety of lenders.
But even if you risk having to do things twice, you may still be much farther ahead than those that start out with nothing when they apply, or information reports that are badly dated and perhaps no longer closely represent the property in question to the lender.
Spending some money up front and being proactive assembling what a commercial property financing source is going to require any way can make all the difference in getting the deal you want done, and getting done in the time you have to work with.
About the Author Joe Walsh
I'm a Toronto Mortgage Broker that arranges mortgage solutions on residential and commercial real estate property. With over 30 years of mortgage financing experience, I'm able to quickly assess your financing requirements and provide relevant solutions for your immediate consideration. Joe Walsh Google+ YouTube Channel