im a lender, primarily residential, but i offer very competitive commercial products too. i routinely lose deals to local banks. what is it that local banks offer that get them over the hump? it cant just be the checking account business
after the last crash, i got into the property tax appeal business. I'm fluent in the valuation and cash flow issues of property ownership. Now that the current market has created fewer opportunities to appeal tax assessments, i want to capitalize with offering financing to my clients. but my concern is competing with small local banks
[{"id": "i0re89q", "text": "I know one local bank that seems to have pretty lax underwriting.  Just throwing away money right and left, non-market, lax documentation, low interest rates.  I\u2019m not sure they will be around in ten years, but they seem to lend a lot to anybody with a pulse.", "replies": [{"id": "i0reybp", "text": "O4-07 seems to come to mind reading this comment\u2026yikes!", "replies": [], "depth": 2}, {"id": "i0rpn5d", "text": "That can be dangerous: they MAY be trying to juice up their asset size in order to be a more attractive acquisition candidate by a larger bank.  Or, like you imply, they may simply fail. But either way, there will be new financial entity owning that loan. They will look for any opportunity to force the borrower to comply with tighter loan covenant requirements, or call the loan", "replies": [{"id": "i0rsyh5", "text": "Agreed.  I try to steer clients (I\u2019m a lawyer) away.  If it seems to good to be true, it probably is.", "replies": [], "depth": 3}], "depth": 2}, {"id": "i0sfxyo", "text": "What bank is ir?", "replies": [{"id": "i0smxae", "text": "Ahhh, I\u2019d hate to say that.  Just a local community bank.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "i0rfi0b", "text": "It all comes down to:\n1. Lowest rate\n2. Lowest down payment\n3. Accessibility\n4. Ease of transaction", "replies": [{"id": "i0rreb0", "text": "Just be willing to work with the people goes a long way. The bankers say, \u201coh it\u2019s a relationship business\u201d but when it comes down to business, there\u2019s no relationship the bank is trying to build.\n\nApplied for a CRE loan and had to sign docs to open accounts, I asked for copies of every doc I signed and the bank was reluctant to provide it stating \u201cit\u2019s internal we can\u2019t give you copies. Just trust the bank. You don\u2019t need copies once the accounts are opened. I can give you unsigned copies if that makes you feel better. It\u2019s our policy to not give signed copies. Why are you making a big issue.\u201d Etc. I got up to walk away and the banker ran out to \u201ctalk to the corporate\u201d and came out to hand me my copies. I asked him to explain what I was signing and he obv was annoyed and told me \u201cjust read it. It\u2019s a disclosure. It\u2019s in plain English.\u201d No! You do this every day, you explain to me what I\u2019m signing. Don\u2019t give me attitude.\n\nThey say \u201cits a very simple process, I\u2019ll take care of you just call me\u201d then make it difficult and ask all sorts of absurd documents. I provided monthly bank statements but he wanted all the daily transaction level details. I was annoyed that someone is going to look at how much I spend on groceries and coffee and pizza. Like, you have monthly statements that shows the balance, why do you need my personal details on my spending. The statement showed consistent and same deposits and withdrawals, nothing unusual. \n\nSo when a banker tells you, \u201cit\u2019s a relationship business\u201d it\u2019s really not. It all comes down to money. So don\u2019t be surprised when people walk away to another lender that\u2019s willing to work with people.", "replies": [], "depth": 2}, {"id": "i0t23sj", "text": "Ease and speed of closing on the transaction are likely higher on this list.\n\nRates and down payments are usually competitive, but people usually won't swap to a different bank over a 25 bps difference.", "replies": [], "depth": 2}, {"id": "i0ue2xj", "text": "Every bit adds up over time", "replies": [], "depth": 2}], "depth": 1}, {"id": "i0rh6rw", "text": "No one in the commercial real estate industry wants to work with a vendor or professional who primarily deals in residential. You are looked at as either a tourist or someone who is in over their head, trying to break into an industry that is well beyond your skill level. Not saying any of that is true but I can almost guarantee that is part of what you are up against. The stigma against residential folks from the CRE folks is STRONG. They are most likely dealing with someone at that local bank who only deals in commercial lending, so they look like more of an expert than you do. No one wants to be your guinea pig or experiment, regardless of whether that is actually the case. If you want to break in, don't ever talk about your residential business, advertise under a DBA that only conveys a commercial product, or even better, bring someone on to do CRE BDO work.", "replies": [{"id": "i0sppjk", "text": "yea.. i can get over the stigma because of the property tax appeal work i do has given me a tremendous amount of expertise on all variety of property. in order to win tax assessment appeal, i typically build a cap rate from scratch and then defend it while getting grilled by the jurisdiction's attorney in front of a state tax commission's members. its an interesting niche. and im not afraid of the CRE stigma, but i hear what you are saying so thank you.", "replies": [], "depth": 2}], "depth": 1}, {"id": "i0rjhio", "text": "I went with a bigger bank over a local bank recently. They had slightly better rates, but the big thing was their team was super helpful in terms of helping me get the loan closed. The local bank didn\u2019t do a ton of CRE lending and they didn\u2019t make it easy enough for me to get through the process. \n\nIf you don\u2019t know why you are losing deals, I would take that as a hint that you are not getting close enough to your potential clients. If you were, you would know their pain points and goals and target numbers, and you would be following up with them already and you would know why you didn\u2019t get their business. \n\nSo, either your product isn\u2019t appealing, or your sales/account process needs work.", "replies": [], "depth": 1}, {"id": "i0rpbty", "text": "If you are losing deals to local banks you are not as competitive as you think. You might be better servicing your market by going deeper into the products that your clients come to you for rather than taking a wide approach and competing against a different segment of the market. \n\nIf you are not holding anything on a balance sheet or servicing any of your loans your best bet will be to focus on those borrowers that are not bankable that are just outside of the 1-4 space. That's where you can add the most value and truly be competitive. You wouldn't lose out on rate and you'd be solving a need as you offer an alternative credit box.", "replies": [], "depth": 1}, {"id": "i0rv8ne", "text": "How do you plan to fund these commercial loans? Unlike residential the secondary market is pretty weak (especially for non bank originators).", "replies": [], "depth": 1}, {"id": "i0tvv93", "text": "Are you QM or non QM?", "replies": [], "depth": 1}, {"id": "i0uj084", "text": "I'm looking at funding a few purchases, if you would like an honest shot and some equally honest feedback, dm me.", "replies": [], "depth": 1}, {"id": "i0vwr7m", "text": "The pain of local banks lending on commercial are the financial proctology investors have to go through to get past credit, generally recourse debt, deposit relationship requirements, typically won't take out of state borrowers, and last minute retrading or denials by committees.", "replies": [], "depth": 1}]