Multifamily Financing: Divide and Conquer

Multifamily Financing: Divide and Conquer

Loan documentation.  Paperwork.  There is no way out.  There are numerous parts to obtaining a new commercial loan.  Where many people go wrong is in assuming that the task of getting to closing is the job of someone else.  If not you, then who? Instead of pointing fingers how about dividing the task list into segments and determine who is responsible for each?

Granted, a coordinator is required- a central "documentation station".  And that's just for the paper.  Someone still has to assure that the pile of paper is more than just a fallen tree, more than just paper.  The loan application, applicable attachments (and the people attached thereto) must be acting in concert with everyone on the same page.  The order of things requires skill, patience and the ability to build and maintain relationships.

For this discussion I use the word "loan" without attempting to identify the type; re-finance, purchase, or portfolio.  For the points presented here any loan will require all of the steps mentioned.

Pre-loan. Who is on point for deciding that a new loan is in order? Before searching determine a probability of success.  A $10M deal with $9.5M in existing debt is a poor candidate for a re-finance unless equity considerations are part of the equation, for example.  If there are partners, is every one on board?  Who is actually "signing" for the loan and who is responsible for default?  Everyone?  Just the asset?  Determine probability, responsibility and risk tolerance pre-loan.

The Search. Once a review of probability is accomplished, do you have existing relationships to approach for a new loan or are you open to meeting new people?  Will you seek local financing or CMBS?

The Application. It can be arduous or easy but it has to be done. This is often a team effort where each person has a segment to roll up into one place with one person responsible for completing the entire application.  There is assembly and there is completion- this is the end result of rolling up all parts into a completed application.  Read Paperwork With A Purpose for further detail.

Third-party Reports. Often, the lender has preferred providers for appraisal, environmental and mechanical- but not always.  If they are looking for recommendations do you them ready to provide? Are there third-party vendors that you have a relationship with that would be happy for the work?

Legal. Commercial financing, for purposes of representing your interest, requires of you to engage a real estate attorney.  The nuances of a commercial transaction demands experienced professionals that are accustomed to the language, tenor and tone of how these deals work.

Loan Closing. When all is done and done well closing day still requires of you to be alert, on point and ready to respond to last minutes changes, request, dropped emails, forgotten disclosures, water-soaked signature pages- whatever comes. The loan is not closed. Until it is.

Post-closing Administration. A closed loan never dies- until it's paid in full for the mortgagee or the mortgagor.  From the day of closing until the day of payoff someone is engaged in making, receiving, recording and tracking payments, balances and escrows.

Can one person do all?  No. Not once. This is a team effort. Choose your team and proceed with purpose!  Even better, with responsibility centers in place that allow for application processing and loan closing to proceed without one person as key-man with "all" responsibility for "everything".  Extra sets of hands and eyes should come in designed to disperse the workload while maintaining work quality.

This article is intended to be informational only and does not provide legal, financial or accounting advice. See Multifamily Insight.

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