Calling all mortgage brokers...
For anyone that works at a commercial debt brokerage shop, (Meridian, CBRE, JLL, Eastil, Newmark) can you explain a typical day of your life. I’m interested in learning more about the process of getting a loan commitment for your clients and what differentiates every company from the others. What makes a debt shop more active than others such as Meridian? Is it knowing more owners, banks and lawyers? In contrast to real estate brokers where there are countless of properties everywhere in the country, why can’t debt shops call the banks did funded a recent huge transaction? Is it all relationship driven?
Also, what are you doing on a day to day basis in terms of evaluation? What are the biggest complexities when working on mortgages and what do owners look for when searching for loans?
If anyone can offer some insight into the world of a commercial debt broker and analyst, I would highly appreciate it. Thanks.
Also interested in this, have a SA stint with one of them coming up. Commenting for sub.
certain debt brokerages have key partnerships and existing relationships with various lenders. the debt broker knows the market and has an idea of whats achievable in terms of financing before he markets the deal, and the lender knows this and competes to win the deal because they know more than one lender is looking at it (usually). This often results in the client (borrower) getting the best financing. The value add a mortgage broker brings is that the broker shops the deal and pitches the story of the asset to x amount of lenders. This is usually done strategically as the broker knows which lenders have an appetite for that specific deal, so this saves everyone time in the process.
More importantly, if its a straight foward deal, a borrower might just walk into a branch and talk to a loan officer directly (completely avoiding paying a broker.) A deal that is more complex and/or has some hair on it typically benefits more from a broker because there may be some structure involved on the financing that really needs to be analyzed and looked at on the lending side. The debt broker's creativity typically comes out in these cases.
Day to day in terms of evaluation is underwriting the deal, sending it out to x amount of lenders, receiving feedback and/or following up with lenders and presenting the info back to the borrower(client). Now multiply this by 5+ deals at a time, things can get busy.
Thanks chekdastack
Relationships are largely key in commercial mortgage brokerage. Mortgage brokerages typically hold relationships with all types of lenders and this includes life companies, pensions funds, banks and CMBS. These relationships are probably the main driver of what makes one shop more active than another because these lenders typically have a lot of money to lend on but their own teams are so small, so they rely on brokers in other markets for the knowledge and for the properties that can be brought forth. Borrowers usually come to mortgage brokers for lower interest rates on the mortgage and/or different loan products/types to fit the investment need i.e. bridge and mezz loans. Also, life companies for example will likely to lend on high performing assets that appear less risky due to the property type and market the subject is in (i.e. Apartment building in a suburb of SF). CMBS products are likely to be originated by risk hungry lenders, but this could apply to a new build property with no operating history or a property struggling to be profitable due to its type and location (i.e. hotel in Detroit).
Thank you for the repsonse. Makes sense.
I don't get why an enterprising borrower wouldn't just contact those lenders directly. Fine maybe some borrowers have so little time they'd rather pay someone to shop it around for them, but a term sheet is pretty easy to email. Of course establishing the relationship is valuable, but if I were a lender or a borrower I'd want to cut out the middleman.
From a lender perspective, particularly with banks, brokers are an extension of their origination team. Brokers act like their 1099 consultants who are not on their payroll thus allowing them to stay lean. This is critical in a cyclical business. Plus, most banks dont pay brokers any referral fee for deals, borrowers are paying them anyway, so its a fantastic set up for lenders. From the borrowers perspective, sometimes there is no value added by an intermediary and sometimes there is. It just depends. For your 8 unit multifamily in New York, maybe there is no need for an intermediary but for several assets, you need to know the right lenders in order to get the best financing/terms and "good" brokers are every valuable.
No good lender would ever respond to a cold email. I used to think the same until I worked in the industry. Thought debt brokers were useless and way overpaid. Now I know they're not especially in times like these. They'll reach out to 100 lenders, some you never heard of, know what to say and more importantly what not to say, and a million other little things. It's also immensely time consuming. Unless you want to try and close a deal that requires a good amount of DD and respond to daily questions from 50+ lenders you gotta hire a broker.
Banks absolutely pay fees to brokers (rebates). Not all but tons do.
Brokers still produce 80% of all loan production nation wide. As savvy as some investors are where they fall short is that they're not in the debt market as a career. They are missing some new/different lenders that offer specific niches. Also, when it comes to what to say and how to talk to a lender, brokers are great filters especially on a deal with even the slightest bit of hair.
And lastly, it's just not worth the time and headache if the investor has a large pipeline of closings to shop a deal to save a half point when they know their broker has closed 20 deals for them.
I've seen some brokers absolutely make a killing because they have one active client and they just go to bat for these guys to get ridiculous pricing thats only available because they have so much business.
I hate this job. Don’t do this
How come? Would love an explanation since this is an area I'm interested in
Join a national firm as a production/brokerage analyst.
It will open doors to continue as a broker or to move into acquisitions or asset management on the principal side.
Do not start as a broker if you’re not 100% sure that’s what you want to do.
It’s a fantastic way to not only be exposed to deal flow, but all different types of asset classes within CRE. Get on a good team and be a great analyst/associate for 2-4 years and you can jump to the principal side easily or start producing and make a killing. Been doing it for 4+ years and did the latter. Smart shops know their time is best spent doing what they do best, finding and closing deals, so they hire debt brokers to outsource the capital raising function. This makes all the sense in the world for high volume shops. Sure, if you’re only doing 1-3 deals a year, you don’t need to hire a debt guy and you have time to gather 2-4 term sheets from your banker buddies from the country club.
Just out of curiosity, when transitioning to producing deals, what did you start out doing to build up your book of business?
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