Advice for Commercial Real Estate Loan Brokers

As a commercial mortgage banker, you only get paid if deals actually close. Here are some practical tips that will help you feed your family.

1. International deals almost never close. In 30 years I have only known of one international commercial loan to ever close, and it was a lousy $3 million hard money loan on a piece of land in Mexico that was only 10% LTV. The loan was guaranteed by a number of professional ball players.
2. The larger the loan, the harder the deal is to close. The closing ratio declines exponentially as the loan size grows. A $1 million commercial loan has a 30 times greater chance of closing than a $10 million loan. Mortgage bankers with less than five years of commercial experience should resist the temptation to work on commercial loans greater than $4 - $5 million.
3. Large commercial loans only close when you don't need the money. If you have a terrific pipeline of small commercial loans in the range of $500,000 to $4 million, and you don't even need the commission on that $7 million deal to close in order to sock money away into savings this month, then, and only then, will that big loan close. But if you need the commission to eat, the Fates will take great delight in killing your big deal.
4. Construction loans are ten times more difficult to close than permanent loans or bridge loans. Ninety-five percent of the construction loans that reach the desk of mortgage brokers are deals where the developer is contributing less than 20% of the total cost of project. If you do try to originate a commercial construction loan, be sure to ferret out the developer's cash contribution into the project first. I can almost guarantee you that the developer won't have enough skin in the game to ever close his commercial construction loan.
5. Sure, large loans close. Sure, construction loans close. And I am sure that even a few international loans have actually closed. But if you have a family to feed, be smart. Play the percentages.