Opinions on Loan Brokers and Assessing Loan Brokers
So we have a good relationship with a local loan broker that handles alot of the large deals in my submarket.  I've been getting calls lately though from other brokers trying to get our business.  My question is how do I assess these individuals and their companies?  And, do you really need a Loan Broker?  

I can close a deal with a lender without anything on their side, so what am I getting for an origination fee?   Is the value of their relationships with lenders really worth that?  Are they all created equal, as far as terms that they would be quoted by agencies?

And finally what questions should I be asking to identify their ability to deliver value?
[{"id": "h2tgpsf", "text": "That depends on your connection with lenders. Brokers are in the business getting connected with a lender and sell your loan to another lender.  But they seem to have products big banks do not always to offer.", "replies": [], "depth": 1}, {"id": "h2tkjw4", "text": "The origination fee is charged by the lender - its part of how they get to their return. The loan broker charges a fee outside of that to source the debt - they\u2019ll charge a % of the UPB. \n\nWe don\u2019t really use loan brokers but we have a capital markets team that has lender relationships and does it direct. If you have the time and resources you can dial for dollars at banks and cut out the loan broker, but if not they\u2019re useful in that they have a Rolodex of lenders that are lending in the space you\u2019re in for the type of asset you have and can help you put together a book, get a bunch of quotes and help you get the best rate.", "replies": [{"id": "h2txbw0", "text": "Thanks you for the correction on origination, I understood the distinction but in my mind and analysis just include that as part of the up front loan fees.   \n\nYour second paragraph is where I have been getting to in my own thesis.  I was hoping there was a more sophisticated answer then \"do you have the rolodex\" and the insight to negotiate a favorable deal, but that seems like the natural answer.  \n\nI guess what still seems to be ambiguous to me, is what is the value beyond the rolodex, if two groups go to the same lenders, does the client get the same result?  Can one broker negotiate a better deal?  Is it volume based?  How do you assess if one broker is better than another ultimately?", "replies": [{"id": "h2u7nke", "text": "Naw brokers can\u2019t really negotiate a better deal - maybe on the margins. Honestly rate comes down to the proceeds request, riskiness of business plan, and sponsor history. Also some of the lenders will just up and get more aggressive if they\u2019re trying to fill out their book with X product and you happen to have what they need to diversify balance sheet / CLO issue", "replies": [{"id": "h2w66wh", "text": "I'm biased bc I'm a mortgage broker but we typically do get preferred pricing with our lender relationships. We have had many instances that the borrower goes directly to their bank and we use our contact at the same bank and receive a much more competitive quote. If we have a lender contact that we do a lot of volume through, they will typically push their credit team for higher proceeds/lower rate/longer amort/etc.", "replies": [{"id": "h2w7ibr", "text": "Yea I mean your mileage may vary, I\u2019m not really a \u201ctypical borrower\u201d. I work for a pretty big sponsor so we get the \u201chouse\u201d discount a lot, on bridge product our name helps a lot with the CLO and looks good on the BS for those guys. Not really a SASB shop but it\u2019s pretty tight on those executions too. I think the only time we use a broker is for GSE since you can\u2019t go direct, need the DUS guys. \n\nThat being said if you\u2019re a smaller sponsor / not in the capital markets as much I can see the debt broker being pretty valuable. We\u2019re super active on deal flow and have a big credit team so we\u2019re pretty on pulse with what market should be on our new deals and refinancing", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "h65ue0b", "text": "&gt;s - they\u2019ll help you assess the opportunity to acquire, recap, etc. they can be great resources in developing your investment strategy. Part of that is figuring out what kind of debt you need and if you\u2019re someone active in the space you know there are a lot of lenders and different ways \n\nI've been looking for a lender in Dallas FW area to refi our 4 unit apartment building worth roughly 850k, but can't find any lenders willing to do anything less than 1M.  Anyone have any suggestions?", "replies": [], "depth": 2}, {"id": "h65uphb", "text": "I've been looking for a lender in Dallas FW area to refi our 4 unit apartment building worth roughly 850k, but can't find any lenders willing to do anything less than 1M.  Anyone have suggestions?", "replies": [], "depth": 2}], "depth": 1}, {"id": "h2ts6x7", "text": "https://www.scotsmanguide.com/search/commercial", "replies": [], "depth": 1}, {"id": "h2u6hmy", "text": "I am biased, because I am a mortgage broker\u2026 that being said, find one that doesn\u2019t require an exclusive agreement and see what they have to offer.  Ask them to give you a list of lenders they plan to approach or tell them what lenders they can\u2019t.  It\u2019s a win win for you\u2026 either you get a better deal and new relationship or you know your deal is good.  As a broker, if I don\u2019t bring you something better (my fee included), why should I get paid?", "replies": [{"id": "h2w6c79", "text": "Well said. It costs nothing to have a mortgage broker get bids while you also get bids. Just compare cashflow between the broker quotes (inclusive of fees) and your direct quotes and pick the best.", "replies": [], "depth": 2}], "depth": 1}, {"id": "h2ucp7h", "text": "I work for a Multifamily agency lender and have thought about this a lot and here are my conclusions:\n\n1. There are brokers that have underwriting and real estate chops - they\u2019ll help you assess the opportunity to acquire, recap, etc. they can be great resources in developing your investment strategy. Part of that is figuring out what kind of debt you need and if you\u2019re someone active in the space you know there are a lot of lenders and different ways to structure deals\n\n2. If you end up having a diversified strategy, you will utilize different sources of capital for different investments - a good broker has a relationship with agencies, local banks, national banks, debt funds, cmbs originators, etc etc\n\n3. They can also help raise equity and source deals\n\n4. Assuming #2, I do think some brokers know what they can get from lenders and know what to push for and can leverage the amount of business they do with s specific lender to get favorable treatment even if you\u2019re small time/haven\u2019t done biz with that shop before (this one is from personal experience - if I have a broker that does $200mm with me a year, I\u2019ll give you the best treatment even if your deal is $5mm etc)\n\nIn summary, you have to determine if saying 50bps and outsourcing to a broker is worth it (either bc you don\u2019t have the network/expertise or because you don\u2019t have the time). Also, if you are doing the same types of deals over and over ie you only do agency deals, then you are better off just developing a relationship with one of the shops originators and those guys are also capable of brokering a 1 off deal if you need it. \n\nI could be biased, but if you do a good bit of agency, I\u2019d go that route. And I think you can get referred to s good broker/originator from your network but it honestly depends on your personality and what kind of \u201cpartner\u201d you want on that side. I think you really have to do a deal or 2 and see how you like their execution.", "replies": [], "depth": 1}, {"id": "h2vowxv", "text": "You ask what deals they've done and have a convo with them to ask how they can get your deal done or how they add value. You can also ask them to provide a high level quote and fee structure. Do you also need equity? What's your business plan? \n\nThere are levels of brokers and only select shops have Fannie / Freddie / Hud licenses, others broker them to license holders. \n\nSome can \"guide\" the appraisal and PCR to make sure there aren't any hiccups. Having a good legal team that doesn't charge by the minute can also provide value. Did the appraiser just put in a huge replacement cost and crappy comps, yep, that can be an issue. Need IO or some other loan option like flexible prepay? \n\nSome brokers can also handle multiple types of CRE, not just multi. And they can go out to 10 or 20 lenders at once, not just to the groups within their bank walls. This can find the \"hottest\" money in the market because the market is always changing. Some have exclusive relationships. \n\nSome can provide alternatives when Fannie and Freddie are out of the market or pricing wide. \n\nSome know how to underwriter in a way where they can mitigate risk and have the loan close without issues. And they can ease their credit teams. \n\nMost of the above is for non recourse and I work with folks that do all of the above. Lowering your contingent liabilities can be a really good thing. \n\nIf you are doing one to two deals a year then you may be able to skip the broker, but you could also be adding risk or not finding the best deal, but if you are doing a lot of flow you probably won't have time to fuss with finding funding. \n\nOr, if you are just doing one off recourse bank deals then strike a relationship up with your local banks.", "replies": [], "depth": 1}, {"id": "h3x7s00", "text": "Don\u2019t pay more than a point to a broker.", "replies": [], "depth": 1}, {"id": "h4k7n2b", "text": "I\u2019m a loan officer at a direct lender, I can say that definitely broker will cost you an extra fee and he is not getting you a better deal at all. They don\u2019t really have any negotiating power. I would highly recommend just speaking with a loan officer about whatever loan product you are interested, they are usually more knowledgeable as well about helping you achieve your CRE financing goals.", "replies": [], "depth": 1}]