From Crisis to Quick Close: How to Keep Your Commercial Real Estate Loan From Derailing

Recently, we helped a borrower who needed a quick-close bridge loan to take out his maturing construction loan. We funded the loan, but it wasn’t easy.

In fact, the deal derailed when the original title company suddenly insisted on a Certificate of Occupancy, which could have taken weeks. The borrower’s loan was maturing in days. Without title insurance, we couldn’t fund the loan.

In crisis mode, we searched for a solution. We turned to Christine Gilmore with Chicago Title. Gilmore was able to issue title insurance without the Certificate of Occupancy. With her help, we were able to close the $2.6MM loan within our tight timeline.

How to Choose the Right Title Insurance Company

As the go-to title representative for a long list of commercial lenders, Gilmore has a reputation for getting commercial real estate deals funded. She points out that many title companies can’t produce the same results. “Some companies are agents or brokers for the title insurer. That means they have little or no leeway to resolve issues that arise at the closing table,” she explains. “Chicago Title is a direct insurer. That gives me the authority to approve workarounds and get deals funded.”

Flexibility isn’t the only advantage of working directly with the title insurer. “Another important distinction is the ability of the title company to cover claims,” Gilmore says. Some companies don’t disclose their claims loss reserves. But this safety net dictates what a title company can do — how much risk they can take on.  “Chicago Title, by comparison, can cover a billion-dollar claim,” she explains.

Such a high claims loss reserve is especially advantageous with construction loans. Gilmore cites the example of a sponsor who was battling with a substandard contractor who performed unsatisfactory work. The sponsor needed to migrate a maturing construction loan into a bridge or long-term option, but they were stymied by the threat of an unresolved mechanic’s lien. Here, Gilmore was able to provide title insurance coverage, allowing the sponsor to close on the new funding, with the condition that he later resolve the lien issue.

Many of the deal-killers that creep up during title work are already baked in when the parties “inherit” the title company. An example is a borrower who wants to use the same company that handled the original purchase. That may save a little money on the title search, but that company may not be equipped to handle a subsequent construction loan, bridge, or long-term refinance as effectively.

“It’s like any situation where you pick the wrong partners,” Gilmore explains. “You need experience. You need a willingness to work for it, and to follow through. You need a professional who understands what they are doing.”

BEP President Dan Page explains why he prefers to work with Gilmore. “We work hard for our borrowers to get their loans funded. The last thing we want is an uncooperative title agent blowing up the deal at the last minute. We want an experienced title representative — a point person — who can jump in and resolve issues.”

“We understand the borrower may have a preference of title company and we try to accommodate that,” Page adds. “But if we have the option to switch from an ‘inherited’ company that won’t keep to the timeline or answer phone calls in favor of a pleasant, smooth closing, we’ll take it!”

Brokers Have a Role to Play

Brokers, too, can be instrumental in getting deals over the finish line. That can be as simple as staying on top of the title requirements and making sure borrowers are following up with requested information.

Another key step is accessing the preliminary title search. This is available as soon as the LOI is issued. “Read it,” Gilmore advises. “It tells a story. Find out in advance what issues the title insurer may find while there’s still time to fix it.”

Ultimately, increasing the likelihood of the deal funding comes down to staying connected. “When there is no established relationship between the title insurer, escrow agent, the lender or broker, there’s no incentive to work through the deal,” Gilmore warns. “No one’s reading the file. Or ordering surveys or recertifying liens. No one is returning phone calls. If the deal doesn’t fund, no one is getting paid.”

“It’s all about managing the risk of failure,” she adds. “The fewer variables the better.”

When it comes to choosing a title insurer, don’t take it for granted, Gilmore advises. “When you’re working with the right company, you’ll see the difference.”

Christine Gilmore is VP of Sales at Chicago Title Company, serving clients in multiple states. Prior to her career as a title representative, she worked in banking and finance, serving for two years in bank management, as well as working in the credit reporting industry, further broadening her knowledge base. With more than 18 years’ experience in the real estate industry, she strives to be the best service individual in the title industry nationwide.