How the Commercial Real Estate Loan Process Works
At Boulder Equity Partners, our experienced staff guides borrowers through the commercial real estate loan process, from loan origination to underwriting and funding. Borrowers have a role in the process, too. So, it’s helpful to understand what to expect from your commercial real estate loan application:
Request a Quote
The “start here” in the commercial real estate loan process is a request for a soft quote. This is the big picture view of whether the borrower’s project is fundable. By answering the questions posed in our Request a Quote page, we can respond to your initial request, usually within a day or two.
Conditional Loan Approval
The next steps in the commercial real estate loan process each entail digging deeper into the loan request. First, the borrower provides some additional information or verification. If that checks out, we will provide a CLA — Conditional Loan Approval. The borrower will need to accept the CLA to proceed to next steps.
Letter of Intent to Fund
The borrower will then need to provide the next layer of documentation. Once we delve into the borrower’s file in more detail, and everything checks out, we issue a Letter of Intent to fund or LOI. If the borrower accepts this commitment, we require a deposit to move forward. These funds are used to cover title search and insurance, closing and legal documents, appraisals, and formal underwriting.
We do not want to collect a deposit until we have taken steps to “pre-underwrite” the loan. We need to feel confident that the loan request will make it through the underwriting process before we ask a borrower to submit a deposit.
This formal process will focus on verification of financial information and entity and title documents. It is not uncommon for underwriting to request borrower information like tax returns, profit and loss statements, rent rolls, and business entity documents. The borrower should be prepared to provide any requested information as quickly as possible.
It also is common for issues to arise with the title paperwork. This may be as simple as an errant comma before the LLC in the company name on the corporate documents that doesn’t match the name on the property deed. More complex issues can stem from inconsistencies in business entity documentation. Boulder Equity Partners can assist borrowers in navigating this underwriting requirement by explaining the issues and suggesting ways to fix them.
At this stage in the commercial real estate loan process, an independent appraisal will be ordered. Location, volume, and schedules can impact how long it takes to complete an appraisal. Delays in completing the appraisal can delay the closing of the loan. So, our staff stays on top of this to ensure that the appraisal is ordered well in advance. Borrowers can help, too, by being available to provide access to the property on the appraiser’s schedule. In the meantime, we work to complete the remaining underwriting requirements, so we are ready to proceed once the appraisal comes in.
When underwriting is complete and the loan is approved, it will be set for closing.
No matter how careful everyone involved in the process has been in completing underwriting, between the approval process and the closing there inevitably is a last-minute hustle. Maybe the underwriter can’t find a document in the file and needs another copy. Maybe the title company needs an alias name affidavit. Or the name on the borrower’s check doesn’t match exactly the name on the loan application – those pesky commas again!
It’s this stage in the commercial real estate loan process where persistence pays – and this is where our tenacious president Dan Page truly shines. Example: When a bank’s failure to produce a pay-off statement was threatening the borrower’s scheduled closing, Dan tracked down the bank’s president (who was on vacation) to free the bureaucratic logjam!
Most closings occur in an office setting, usually at the title insurance company. However, it may be possible to accommodate a borrower who cannot be present by hiring a mobile notary service to oversee the signing of the closing documents. Because Boulder Equity Partners is involved in the commercial real estate loan process from start to finish, we are familiar with the intricacies of a borrower’s loan request. That allows us to provide a higher level of service than our competitors.
Copyright © 2021 Boulder Equity Partners LLC.
All rights reserved.
Commercial Real Estate Loans: When Paying Higher Interest is the Cheaper Option Recently Funded: $157,000, Single-Family Investment Property in Baton Rouge, LA