Most experienced commercial mortgage brokers would agree that you should always get a signed fee agreement with your commercial borrower.  But when do you ask him to sign it?

If the client is new and you ask him to sign a fee agreement right away, he’ll probably refuse.  Commercial borrowers want the freedom to keep shopping for a better deal, and unfortunately there’s a competing commercial mortgage broker on every corner.  If you try to force him to sign a fee agreement right out of the starting gate, your commercial borrower will probably just walk down the street to another broker.

Instead, you should just be patient.  Convince your commercial borrower to send you his package.  It’s often true that the first broker to get the borrower’s tax returns usually wins the deal.  These tax returns are usually too thick to easily make multiple copies.

Once you have the borrower’s loan package, you should prepare a mini-package for prospective commercial lenders.  We’re not talking about a lot of work here – just an Executive Loan Summary, some pictures, the pro forma operating statement, a lease schedule and a few years’ historical operating statements.  You should be able to whip this up in less than an hour.

Armed with your mini-package, your various commercial lenders should be able to issue a verbal proposal.  Be sure to tell your lender not to start work on a written term sheet until the borrower agrees to his terms by signing your fee agreement.  Then take the best loan proposal and present it to your commercial borrower.

If he wants to proceed, it is now time to explain to him that he must first sign your fee agreement.  If he refuses to sign it, you’re done.  You’ve only lost about an hour on the phone and an hour preparing your mini-package.  Just move on to your next deal.

Most commercial borrowers at this point, however, are anxious to move forward on their loan.  They’ve invested a lot of time with you fetching various documents, and they certainly don’t want to start the whole process all over again.  Therefore most commercial borrowers at this point will readily sign your fee agreement.

Once it is signed, you can then ask your lender to prepare a written term sheet.  Your lender will appreciate knowing that the borrower has just signed your fee agreement – an agreement that described the bank’s loan terms – so your lender is not wasting his time.

No matter what, however, always get a signed fee agreement.  Just about every experienced commercial mortgage broker can tell you a horror story about the time he failed to get a signed agreement. Ouch.

1. Never sign a long term lease.  Instead, get your landlord to give you lots of one-year extensions.  This way you only have to survive for a few more months until your lease expires, and then you can move into smaller, cheaper space.
2. Don't over-expand during recoveries.  Leave some money on the table.  Yes, it's true.  If you add ten more employees you might make a bigger profit during boom times, but what are you going to do if those ten employees serve you loyally and well?  Fire them at the first hint of a slowdown?  Naw.  You'll try to carry them way longer than you should.  In the process, you'll have to draw down heavily on your line of credit.  By the time you are finally forced to cut them loose, you could easily be so far in debt that you've passed the point of no return.  You end up losing your company and all of the profits you made during the boom times.  So don't over-expand during a boom!
3. It is almost impossible to cut someone's salary.  If if they don't quit, they'll resent you.  They'll hate you, as if you caused the recession.  Instead, keep your base salaries low and simply compensate your loyal employees with frequent bonuses and incentives, like $50 per closing, etc.
4. Don't hesitate to move your office back into your home.  In fact, you should pay extra and buy a bigger home, just in case you do have to retreat to the home.  Borrowers understand.  Recessions are tough on their businesses too.
5. During boom times, get your bank to approve a big line of credit.  Borrow on it regularly, but quickly pay if off.  When your loan balance is zero, and when your profits are booming, apply to your bank for increase in your operating line of credit.  This way, when the recession comes, your line of credit will already be approved, and you can draw down on it.
6. Remember, a real estate recession will hit you hard every seven to ten years.  You can bet on it.  Run your business as if you are preparing your ark for a massive flood.

Let's suppose you're a commercial loan broker working on a commercial mortgage loan.  Suppose three couples own a small office building as tenants-in-common, the Smith’s, the Jones and the Kowalski’s. Should you call this the Smith loan? The Kowalski loan? No.

"If someone does not understand what LEED Platinum is, it is akin to 1990 when someone said they were getting a “cell” phone, or 5 or 6 years ago when someone mentioned “hybrid” car.

"Those that know what “LEED” is tend to be more aware of what is happening in the world of buildings. I would venture to say that 100% of licensed Architects, 98% of commercial office building construction companies, and 70-80% of commercial real estate brokers are very familiar with LEED. You are correct here because I would also estimate that only 10-20% of Bankers are even slightly informed.

"What on earth does LEED mean anyway?" I asked.

LEED stands for Leadership in Environmental and Energy Design. It basically is a point based, voluntary building code (about to become law in San Francisco) and is administered by the US Green Building Council (see www.usgbc.org). It is kinda like the Energy Star program is for appliances.

1. If your operation is small, close your office.  Retreat back to an office in your home.  Don't worry about your image.  Every else in America is cutting back as well.
2. If your operation is too large, then retreat to a smaller, less expensive office the moment your current lease expires.  And in your next life as a mortgage company owner, never sign a long term lease!  Sign short term leases with lots of options to extend.
   
3. If you have dozens of loan agents, you don't need an assigned desk for every one.  Instead, provide desks for about 30% of the number of loan officers currently working full or part-time for your company.  Each desk just needs a phone and a networked computer.  No one gets an assigned desk. In real life, only a handful of your loan agents will ever be working the floor at any one time anyway.  This allows you to lease far less space and keeps your overhead down.
4. Make sure your loan agents know how to arrange both home loans and commercial loans.  You need to be able to make some dough from any lead.  The cheapest way to teach your staff how to arrange commercial loans is to order our nine-hour video training program.  This way any new loan agents can quickly be taught commercial mortgage finance.
5. If you have a large mortgage company with lots of loan agents, you can hire me to fly out and train your entire staff in one nine-hour training session.  The cost is $6,000.  More on this ...
6. If you are going to broker commercial loans, concentrate on the do-able deals.  For example, international commercial loans never close.  Don't waste your time.
7. Don't work on construction loans.  If the developer had enough cash into the deal, his own bank would have made the loan.  Invariably the construction loan requests received by mortgage brokers are deals where the developer doesn't have enough skin in the game.  They are a waste of time.
8. Unless you have been brokering commercial loans for at least five years, don't work on commercial loans larger than $5 million.  Any investor strong enough to borrow $5 million knows fifty bankers personally.  If the deal was do-able, they would have done the loan for him.  These large deals are pipe dreams that waste your time.
9. Buy commercial mortgage leads from C-Loans.  They cost only $1 to $3 each, plus 37.5 bps. if the deal closes.
   
10. Focus your extra time on developing a marketing list (direct mail, fax or email) of contracts who can refer deals to you.  The best commercial leads are the ones that come from referrals.

Let's suppose a borrower cheats you out of a loan fee of $10,000 and you decide to sue him.  The problem is that if you hire an attorney to represent you, he'll likely charge you $25,000 to $40,000 to handle the case through trial.  Even if you eventually win, it will be a pyrrhic victory.  You will have spent $35,000 to collect $10,000.

The reason you may be tempted to hire an attorney is because your mortgage company is a corporation or an LLC.  Corporations and LLC's must be represented by an attorney in civil court.

One way around this is to include an arbitration clause in your fee agreements.  In most states, corporations and LLC's can be represented by non-attorneys at the arbitration.

If, however, you failed to include an arbitration provision in your fee agreement, there is another solution.  Your corporation or LLC can always assign the cause of action to you personally.  Then you can, as an individual, sue the bad guy in pro per (as an individual without an attorney).  Individuals are not required by law to be represented by an attorney.

You can apply to hundred of commercial lenders in just four minutes using C-Loans.com.  And C-Loans is free!