For an apartment building thta i am bidding on, my commercial loan broker suggested that I can get a loan with 25% down payment. After submitted the bid, the listing agent asked for proof of fund for 35% down payment. Any suggestion why?
I expect the seller to be concerned about the final price, but probably not the down payment amount. It would be a different issue if the seller is concerned about my ability to get the loan.
Any suggestion on how to ease the seller's concern or to strengthen my bid would be greatly appreciated!
The broker was probably figuring one of two things. Either figuring in closing costs, or 6-12 months of PITI left in the bank.
Lenders, especially commercial lenders, want to know that you have some reserves leftover in case something happens right after you close, so you can make your payment to them.
So, your broker is probably making sure that you can close the deal if you put it under contract. It's better to be safe than sorry.
Hope that helps.
25% PP down payment and 10% to cover any closing cost. They just want to make sure you can close the deal.
The only reason they want a POF is because there are people who would bid on such things without a nickel to their name otherwise.
It’s hard to believe someone would try to get a million or even billion dollar loan knowing they can’t float it, but one just has to look back at the housing bubble and all them subprime borrowers who bororrowed money without a 2nd thought the minute someone removed a few rules.
@Levi T. I had a guy the other day with a less than 600 credit score and $5000 of net worth that wanted to tackle an $800k+ property. He was upset when we said that we couldn't make that happen.
This is why potential new clients for commercial I make them send me a PFS with bank statements, stocks,etc.
If they want to remain secretive then I do not work with them. I am not a commercial lender but the commercial broker. I want to see capability and type of debt structure and cap rate return they are seeking to see if it is a long shot or reasonable given market conditions.
Time is money so you have to work with buyers that are ready,willing,able, and realistic.
Brokers like to work with other brokers because they know most brokers have screened their buyers to perform. In the commercial world a listing broker if a deal fails when they told the seller to take the deal that can harm them for future business. So they like working with other commercial buyer brokers that are known closers.
I find some buyers do not fully understand loans and finance and what will be required depending on asset type. Someone might have great net worth but it is tied up into retirement accounts. Net worth might be great but liquidity to net worth ratio might be off.
Example they are worth 5 million but 4 million is not liquid and 1 million is so lenders would like to see a reposition of the portfolio some after down payment for the asset.
I can't look for these potential roadblocks if I do not get the PFS and bank statements. Buyers sometimes are not truthful and that is why they do not want to show funds. The funds might be from a friend or family member with a bunch of conditions tied to it but the buyer acts like they have the cash or they want to do a syndicate without telling you upfront.
It's a different risk tolerance for a buyer owning directly with 1 million to put down versus a newer syndicator wanting to raise money for property to buy.
Possibly overage to cover buildings that not appraised to the stellar accepted offer. You pay the difference to show you are a strong buyer.
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