There’s no point in denying it: the commercial mortgage transaction process takes longer than its residential counterpart. While residential home loans typically close in about 3 weeks, it can take 40 days or more to perform the additional underwriting commercial mortgage loans require.
Residential professionals often tell us they would broker commercial loans if they didn’t believe the process to be complex and time-consuming. They know there’s an opportunity for growth with small-balance commercial lending, but they don’t think they have the time or patience needed to actually close deals.
Truth is, brokering small-balance commercial deals can be a fun and rewarding way to diversify your business. If brokers know what to expect and communicate often with their lender, they can avoid many of the delays and frustrations that give the process its current reputation.
After closing more than 35,000 small-balance commercial mortgages – often with novice commercial brokers – our team at Silver Hill has identified 5 steps you can take to help your deals land safely. If you focus on communicating clearly and manage client expectations throughout the transaction process, you can ensure your clients get the funding they need in a timely and pain-free manner.
1. Get to know your borrower and the property ahead of time
The Silver Hill transaction process begins with you telling us about your deal. It may sound like a simple task, but brokers who don’t do their homework often trip themselves up at this point and prolong the transaction process before it even begins. As you prepare to describe your deal to Silver Hill, be sure to assemble the following information:
- Property address including ZIP Code
- Type of property
- Requested loan amount
- The property’s estimated market value
- Net operating income
- The borrower’s credit scores
- The borrower’s motivation
As you work with your clients, don’t forget to ask about their specific needs. For instance, a borrower may need to refinance their multifamily property. If you already know they won’t be able to produce tax returns that support the property revenue, you can save time by choosing our Lite Doc Program, which doesn’t require tax returns or 4506Ts.
You can also speed up the transaction process by providing your Silver Hill Regional Manager with up-to-date and detailed property information. Many commercial deals have stalled when a lender’s underwriters discover that the actual property financials or documentation differ greatly from what the borrower initially presented.
2. Turn in complete submission packages
After the borrower signs a non-binding term sheet outlining the basic structure of the proposed loan, our team will deliver a Letter of Intent (LOI). Before we can do that, you and the borrower need to work together to provide some important documentation:
- Fully completed and signed application
- Credit report
- If a purchase, fully executed valid Purchase and Sale Contract with all amendments
- Current Rent Roll signed by the borrower/seller for the subject property
- Signed Operating Statements for the subject property for the past 2 years and year-to-date.
- All applicable personal and business tax returns with schedules for the borrower(s) (including all related business entities) for the past 2 years
This is where most commercial deals seem to stall. If the borrower struggles to provide tax returns or provides an incomplete rent roll, the transaction will almost surely be delayed. However, if you can ensure that they provide all documentation and complete each form, you can easily shave serious time off the expected transaction process schedule.
If you’ve never closed a deal with Silver Hill before, we highly recommend registering with us as soon as possible. Becoming an approved broker allows you to get paid for your efforts and gives you access to tools and resources that can help you close more small-balance commercial mortgages.
What you’ll get:
- Unlimited access to our Silver Qualifier tool – Determine rate, margin and estimated monthly payments for each eligible Silver Hill loan program available to your borrowers.
- Exclusive marketing tips and resources – Email/phone scripts, customizable flyers, and more
- Expert assistance from your Silver Hill partners
3. Work with one of our approved Appraisal and Title companies
Silver Hill has established working relationships with a number of appraisal and title companies around the nation. These partnerships were created to save time and ensure that borrowers only receive quality service from third parties during the transaction process.
Our partners share our sense of urgency and desire for clear communication and work closely with us to keep the transaction process running smoothly.
4. Communicate during the underwriting stage
The underwriting stage of our transaction process typically takes 25-30 days to complete. Silver Hill’s parallel underwriting process expedites this stage, as initial documentation is reviewed prior to the receipt of 3rd party reports.
Even though your Transaction Manager works with our underwriters before the appraisal comes in to ensure all documentation is in order, the underwriters can still discover incomplete documentation or find that additional reports are needed during their review.
If you return the key conditions early and maintain close communication with your Transaction Manager both before the appraisal is returned and throughout the underwriting process, you can avoid the hassle of having to provide additional information at the last minute. Even if all reports are in order, you can impress your client by providing regular status reports.
5. Follow the closing instructions
Once the deal is approved, your work is mostly done. However, you do have an opportunity to help the borrower avoid a final delay. Advise them to listen closely to the Closing Agent and title company’s instructions and bring all necessary documentation and proceeds to the deal closing.
Our closing process should only take a day or so to complete, but miscommunication here could delay closing and leave a bad taste in your client’s mouth. You don’t need to attend the closing, but you can create one final positive impression with the borrower by helping them collect everything they need for the final step of the process.
If you successfully manage client expectations and communicate clearly and consistently with your Silver Hill partners, you can sidestep the issues that stall the transaction process and close more commercial deals.