117348 Resource 78777 78860 78860 1141137008583 1142029081757 Controlled Commercial Construction Loans and Market Risk

Market Risk is the Risk That the Condo's Won't Sell or the Space Won't Lease

<p>Commercial construction lending involves two major risks - construction risk and market risk.&nbsp; Market risk is the risk that the world will not want the completed project.&nbsp; </p><p>If you are building condo's, maybe the condo's won't sell for enough money to pay off the construction loan.&nbsp; If you are building office space, maybe the space will not lease for enough money to support a <strong><em>takeout loan</em></strong>&nbsp;large enough to pay off the construction loan.&nbsp; A takeout loan is a permanent loan obtained&nbsp;right after a new &nbsp;commercial project is completed to pay off or &quot;take out&quot; a construction loan.</p><p>The lender who usually assumes the market risk&nbsp;of&nbsp;a construction project is the construction lender.&nbsp;&nbsp;The construction lender is normally a lender with an office close to the project because the supervision of construction will require a number of <strong><em>progress inspections</em></strong>.&nbsp; </p><p>A progress inspection is a visit and inspection of a real estate project under construction to measure the progress of construction and to verify that the project is being built according to plans and specifications.&nbsp; A construction lender doesn't just give the developer $2 million in cash and say, &quot;Please build the agreed building.&quot;&nbsp; Instead, the bank gives the developer a little dough, and then the bank comes back a few weeks later to verify that the money was used properly to advance the project.</p><p>Another reason why construction loans are normally made by local lenders is because it is the local lender who knows his market.&nbsp; &quot;There is no way on earth you are going to be able to sell $450,000 condo's in our little farm town.&quot;&nbsp; &quot;Yeah, you can probably lease new suburban office space in our community for $16 per square foot.&nbsp; This project makes sense.&quot;</p><p>So if you are seeking a construction loan, you should apply first to all of the local banks.&nbsp; Or you can apply to hundreds of commercial construction lenders using <strong><a href="http://www.c-loans.com/onlineapp">C-Loans.com</a></strong>.</p> 9 application/xml false apartment construction loan commercial construction loan commercial loan commercial mortgage commercial real estate loans construction financing construction lender progress inspection Apply to Hundreds of Commercial Construction Lenders in Just Four Minutes http://www.c-loans.com/onlineapp Mozilla/4.0 (compatible; MSIE 6.0; Windows NT 5.1; SV1; .NET CLR 1.1.4322) 71.50.245.172 71.50.245.172 GBlackburne false true false false true 198508 false false true false false false true 78777 blog blogsite/CLoans/web