Commercial brokers increase income as mortgage brokers

Real Estate Weekly, March 29, 2006 by Joseph Mardesich

While commercial real estate brokers have historically found ideal properties for their customers to buy or lease, they are now adding a valuable new service to their already formidable arsenal of attractive services. Due to a recent rise in mortgage rates and to a red hot real estate market, real estate brokers are finding it increasingly valuable, for both themselves and their customers, to add mortgage brokering to real estate brokering.

Commercial real estate brokers have found that excellent benefits accrue to themselves by helping their customers finance investments in real property. For example, if a customer purchases or finances a $10 million property and the real estate broker assists with $8 million in financing, then the broker will earn from 1/4% to 1/2% for a simple referral. If, however, the planner takes on the role of mortgage broker, then the earned fee would be 1%. On an hourly basis, compensation ranges from $200 to $400 an hour for a $1 million deal. On larger deals, compensation increases.

As a result of opportunities available to themselves and their customers, commercial real estate brokers have sought mortgages for those who invest in a wide range of commercial properties. Commercial real estate mortgages often have balloon payments due as the mortgages terminate. Invariably, those balloon payments are refinanced, and commercial real estate brokers can seek refinancing for their customers by performing the role of mortgage brokers. And because there is a constant market of loan transactions, many real estate brokers are choosing to serve as regular part time mortgage brokers, who earn commissions regardless of the interest rate climate. What's more, financing services give real estate brokers an opportunity to expand their own customer base through additional referrals within the industry.

Those who focus strictly on commercial real estate investments find that there are fewer rules and regulations than in the residential market: Good Faith Estimates, Truth-in-Lending Disclosures, and other time-consuming paperwork required in the residential mortgage industry are not customary in commercial mortgage transactions. Many commercial lenders do not restrict or disclose the payment of fees to referring mortgage brokers, including yield spread premiums (although real estate brokers must be sure to comply with their own industry's rules and regulations regarding receipt and disclosure of fees).

Altogether, mortgage brokering has become a highly remunerative addition of services that ambitious aim entrepreneurial commercial real estate brokers can offer to their customers. It's no wonder that so many real estate professionals are adding mortgage brokering as an important and valuable adjunct to their services.

For a free Tip Sheet on how commercial real estate brokers can become successful mortgage brokers, one should send an e-mail to tipsheet@incomepropertyfunding.com.

JOSEPH MARDESICH

PRESIDENT

NATIONAL APARTMENT FINANCE