If you’re a new commercial mortgage broker and are here to learn the fundamentals of this business, then you’ve come to the right place.
This talk is designed to give you some core insights into this incredible industry.
We hope you enjoy this glimpse into our mindset and ethos, which have kept us successful for over 30 years.
Are you ready? Ok, let’s dive in.
Requirement #1 – Understand The Deal
First off, I want to start by saying that I’ve been in the mortgage business for a long time, and I’ve worked with all types of brokers.
And the very first thing you need when making a deal, something that is absolutely essential, is to have a complete understanding of what’s going on.
You have to understand what the borrower’s situation is, how much the collateral is worth, what their income is…and absolutely make sure that you look at the expenses.
Are the expenses as-is, or are they projected?
Every deal is slightly different, but you can uncover basic vital information like this that will clue you in on how successful or unsuccessful a deal is likely to be.
This might seem obvious, but it is really easy for new commercial mortgage brokers to get swept away by excitement and not focus on the central details.
Make sure you master staying focused. Don’t get involved with the deal only knowing little bits and pieces of it.
You might have heard the story about President Lincoln, what he said when they asked him what he would do if he had 45 minutes to chop down a tree. He said, “For 35 minutes, I would sharpen my ax.”
That’s the same principle here. Load up on knowledge, get your base of understanding in place, and then come in charging.
Requirement #2 – Learn About The Property
This requirement is an extension of requirement one, but this one is really about hyper-focusing on the property itself. What type of area is it in, for instance? Are there a lot of board-ups around? What about zoning? Does the area have a lot of crime?
These are all very important questions that should be addressed upfront.
Our word of advice is, always tackle the bad news first, get it out, and then the good news will follow. Really dig into what’s wrong with the property first before digging into what’s right about it.
And ask every question in the world you can.
After you get all the information you can from the borrower, the next step is to research as much as possible.
For example, let’s say you’re looking at a retail shopping center, and you don’t have experience in underwriting, and you don’t even know what to ask for.
You don’t know what common area, maintenances, and credit tenants are, not to mention triple net leases.
What I would do is I would speak to the borrower and get the basic information. Then, as soon as I hang up the phone, I’m Youtubing and Googling everything about common area maintenance, triple net leases, credit tenants, retail strip centers, and so on.
Learning about your property in this way is critical.
In fact, learning about your property is even more important than learning about the borrower. We at Gelt always focus on the properties more than the borrower. We’d rather have a great property. We’re not as focused on the borrower’s credit.
Requirement #3 – Learn About The Borrower and Their Motivation
Although learning about the property is primary, you should still learn everything you can about the borrower.
Are they employed? What’s their income? When did they buy the property? What’s their debt on it?
Beyond these questions, you also need to find out what the borrower’s motivation is. Have they come to you to refinance or buy the property? Is it for cash out? Are they in foreclosure? Are they delinquent on their mortgage? Do they have a partner they’re fighting with?
Knowing the motivation is key.
How To Learn From A Borrower
If you’re a brand new commercial mortgage broker or are just thinking about getting into the field, you probably won’t know how to talk to a borrower.
Fortunately, there’s nothing overly complicated here.
This doesn’t mean that borrowers aren’t sometimes difficult to talk to because they can be, but the steps you need to follow when speaking to them are pretty straightforward.
Here are the steps we follow:
A. Ask probing questions
Some people are very scared or embarrassed about their financial situation. But you still have to ask them about it. If you are having a hard time getting through to the borrower, a little empathy goes a long way.
When we talk to people, we’re open about the fact that we’ve seen it all, and we’ve been through the wringer too at times.
When I say we have gone through hard times and have suffered, we mean it, and sometimes it’s been public. We’ve all been beaten up by life. We all get it, whatever it is.
Once your borrower knows you can relate to their situation, they will be a lot more likely to share important details with you because trust has been established.
B – Be relaxed but resilient
If a borrower tells you bad news, don’t explode. They’re telling you for a reason, so make them feel relaxed. Don’t put them on edge.
You want to avoid coming across aggressively—like you’re grilling them almost. Be the opposite. Be friendly.
C – Create an environment of respect
Treating borrowers with the respect that they deserve will help you a million times over.
Whatever situation they are in or whatever hardship they are going through, deal with it the best you can and always act professionally.
D – Don’t dodge the details
When making a deal, don’t skip the important stuff. This goes back to asking probing questions.
Deals hinge on the details, so really, don’t skip them.
If we get a deal at Gelt, and we find out the borrower wants to rent an apartment for $1,000 a month while buying a house for $200,000, we’re going to ask questions.
Are they moving into the house? Are they going to continue renting the apartment?
Logic says that if they’re renting an apartment, and they’re buying a house, chances are, they’re going to move into the house.
Please remember that this is just an example. We deal in commercial, not buyer-owned residential.
E – Excavate For The Truth.
This one is particularly important because there are times when borrowers don’t tell you the truth.
Sometimes you have to ask a question two and three different ways to get the real answer. This can put your deal in jeopardy if you don’t realize this.
Always dig for the truth, and make sure what the borrower says makes sense from multiple angles.
F – Focus On The Borrower Intently For A Long Period Of Time
When I was an active loan officer, I used to try to spend as much time as I could with borrowers.
Whether it was 5 minutes, 10 minutes, half an hour, an hour, whatever it was. I did everything I could to increase my chances of closing deals.
Taking your time to fan a conversation and develop rapport and understanding with borrowers will increase your chances as well.
Requirement #4 – Learn The Products
The next requirement is to become an expert in or at least thoroughly understand the product you are dealing with, whether it be a credit tenant deal, a strip center, or a multifamily unit.
Once you have the product you want to tackle, and you’ve got a good feel for what the borrower is looking for, get busy with Youtube and Google. This goes back to what we were saying in requirement 2 about researching what you don’t know about properties.
Honestly, if you need help learning about a product, we will teach you. In fact, we should come up with a whole education series on this stuff because it’s just unbelievable what’s out there.
It’s funny. I put out a few educational pieces for mortgage brokers already. We don’t charge anything for them. We’re not selling anything like that.
All we want to do is educate brokers because if we educate brokers and they make money, we’ll make money, and we will all be better off.
Requirement #5 – Learn About The Lender
Learning what a lender likes and dislikes is a very effective way of getting deals through. Learn their sweet spots, their trade-offs, try to get into their head, and understand how they work because the psyche of every lender is different.
You know, some lenders sell to wall street, some sell to other places. We’re portfolio lenders, personally.
Side Note On How We Lend
Let’s say you bring us a deal on a five-unit property, you speak to a borrower, and they need to close quickly, but there’s no time for an appraisal. I’m guessing 99% of lenders would want that appraisal.
In our case, if it’s the right deal, we’ll do it without an appraisal. We’ll come up with our own value.
This saves a ton of time.
Requirement #6 – Take The Time To Educate Yourself On The Subject At Large
If you want to be a lawyer, you have to go to law school for six years. Medical school is the same, or any other profession that requires a lot of knowledge.
Being a commercial mortgage broker is just as hard in many ways. You have to have an in-depth knowledge of this business to succeed.
Even for us, after 30 years of successful lending, there are certain types of properties that we don’t do because we don’t have the education for them.
If you’re going to do a specific product, use it as an opportunity to expand your knowledge. Invest in your own education. Take courses if you have to.
The power of the internet is unbelievable. You can learn just about anything online, especially YouTube, so make the internet your best friend.
Case in point, a while back, I wanted to improve my use of Outlook. I wasn’t doing a good job. And so what I did for a few nights was just get on YouTube and learn how to run Outlook better. And you know what? After three or four nights, I felt like I really knew it. That’s all it takes. All it takes is effort.
You Can Be Successful In Any Environment
All I want to do is educate people. Brokers are always asking us for education, so I hope this talk has been helpful.
I’m passionate about this stuff. I want to educate people who are brokers, who want to be brokers, and I want you to be successful.
You can make money. You can be successful in any environment. It doesn’t matter—computers, internet, you name it.
Don’t let anyone tell you why you can’t be successful.
Invest in yourself and focus on long-term productivity and how much you know.
Want to learn more?
For more information about what we do and the services we offer, check out our Home Page.