Understanding the Value of Working with a Commercial Mortgage Broker

If you're looking for a new commercial mortgage, you have two options. You could approach lenders yourself or work with a broker who does all the hard work for you. These professionals act as a go-between for you and commercial mortgage lenders, helping you refinance an existing property or secure a loan for your next asset purchase.

Lenders consider commercial mortgages riskier than traditional residential mortgages, meaning you'll need someone who understands your financial situation and can negotiate the best terms and commercial loan interest rates. A broker does just that – and then some. Here are a few of the benefits of working with one.

Expertise and Industry Knowledge
The commercial real estate market is in a constant state of flux, and it can be challenging to secure the financing you need. Many lenders have strict criteria for obtaining a commercial acquisition loan or refinancing an existing loan. So, qualifying for the right debt product can be an uphill struggle, and it’s best to canvas the entire market. 

Commercial mortgage brokers know the latest market patterns and trends, helping you predict what's likely to happen in the industry in the future, which makes them highly valuable for investors. Brokers have an extraordinary amount of knowledge about the commercial real estate sector. They can navigate complex financial products and regulations with ease, increasing your chances of qualifying for loans with the best rates and terms.

Many investors don't think twice about paying a fee to a money manager or accountant when building their real estate portfolios. However, they are often reluctant to pay for the services of mortgage brokers – professionals with the same amount of industry knowledge and experience. That's because investors think they can do the job just as well themselves. In reality, forgoing a mortgage broker might mean you end up with a subpar purchase loan or refinance product that doesn't meet your needs. You could also pay more interest in the long run because your options are limited.

The best commercial mortgage brokers are truly advisors and don't just obtain a handful of rate quotes from different lenders. While that's still helpful, especially if you don't have the time or resources to search for the best deals, you need a professional who provides advisory services and helps you understand the market. That way, you can be in the best position to secure the most competitive mortgage options for your commercial real estate investment.

Access to a Wide Range of Lenders
While investors can obtain their own loan quotes and approach lenders themselves, they might miss out on the most competitive commercial loan rates and most valuable financing solutions without a well-connected and seasoned commercial mortgage broker. These professionals are more than just the "middle person" between you and lenders. They provide an incredible amount of value by connecting you with niche and highly specialized lending institutions. The result? You have access to a more diverse range of commercial real estate loans.

Brokers have already established relationships with financiers, so you don't have to waste time approaching them yourself and waiting for a reply. Consequently, you can secure a product that helps you achieve your real estate goals – one with tailor-made debt or equity options based on your budget and other factors.

It's important to note that not all commercial mortgage brokers are the same. Work with one who clears the market by presenting all financing options transparently. Your broker should also have relationships with lenders specializing in the commercial real estate asset class you're interested in, whether that's multifamily investment property, shopping centers, warehouses, net lease retail or something else.

Negotiation Skills
As mentioned earlier, you need a mortgage broker who does much more than obtain a few loan quotes. Find a professional who can negotiate with different lenders on your behalf and secure favorable terms and conditions.

Working with a broker experienced in negotiating interest rates, repayment terms and other loan conditions can benefit you in many ways. For example, you could potentially save thousands of dollars over the life of your loan and invest this money in additional commercial real estate opportunities. A broker can also prove useful if you're a new investor and don't have relationships with commercial lenders.

Without a broker, you might make mistakes during the negotiation process and settle for a product with unfavorable terms that ultimately cost you more in the long run. The best brokers won't stop negotiating on your behalf until they find the best possible loan deal.

Time Savings and Streamlined Process
It can take many months to secure a purchase loan or refinance with a commercial lender, and this process can involve multiple tasks, including:
•    Comparing different lenders on the market
•    Ensuring you qualify for a loan
•    Finding and submitting the right evidence and paperwork
•    Negotiating terms with a lender
•    Keeping track of the entire process to ensure the loan closes on time

Depending on your resources and experience, you might not be able to complete all these tasks on time. That ultimately delays closing and prevents you from obtaining the funds you need for your next commercial real estate investment.

Brokers take care of all the administrative and paperwork burdens associated with applying for a commercial loan, freeing up your time so you can focus on other jobs. These professionals coordinate with all parties involved in the loan origination and underwriting process, ensuring a smoother transaction. You may also be able to speed up approval and closing times, meaning you'll access your funds more quickly.

Risk Management and Mitigation
Various things can go wrong when obtaining commercial financing, such as applying for the wrong product, submitting the wrong paperwork and not negotiating properly with a lender. In fact, you could leave a significant amount of money on the table if you chose the wrong financing solution or fail to meet a lender's requirements. Working with a qualified broker ensures these problems don't happen.

A good broker helps structure deals that minimize financial exposure, protecting your assets in the long run. They also mitigate risks by helping you comply with legislation, regulations and industry standards.

Customized Financing Solutions
No two investors are the same, and you deserve a commercial mortgage product that's tailored to your unique needs and financial situation. Brokers can help you create a financial strategy that aligns with your budget, goals and objectives, meaning you don't have to settle for cookie-cutter financing that doesn't meet your specific requirements.

For even more successful results, work with a broker who has experience structuring loans that match your specific asset types.

Risks of a DIY Approach
Obtaining commercial financing yourself doesn't necessarily mean disaster. However, you could lose out on the benefits that only a broker can provide. Here are some risks you might encounter when going alone:
•    A lack of market knowledge can lead to uninformed decision-making, resulting in a mortgage product that doesn't meet your commercial real estate investing needs.
•    Limited access to a wide pool of lenders and competitive financing options might harm you in the long run.
•    You may not have access to national lenders that usually provide the best financing.
•    Without expert assistance, you could obtain financing with unfavorable terms and commercial loan interest rates, meaning you'll spend more money over the life of your loan.
•    The DIY approach can increase the risk of errors and oversights during loan origination and underwriting.
•    Obtaining a loan yourself is a time-consuming task. Working with a broker means you can dedicate your resources elsewhere.

Conclusion
While using a commercial mortgage broker costs money, it provides more value in the long run. You'll be able to work with a professional who has an incredible amount of industry knowledge, access a wider pool of specialized lenders, save time, mitigate risks and more. So, instead of the DIY approach, consider working with a broker who becomes a valuable partner. Doing so could give you a strategic advantage when obtaining financing for your next commercial real estate product.

Find a local office or connect with our debt and equity experts today for more information.