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Commercial Mortgage Deal Killers


What keeps your deals from closing and how to avoid them.
Sometimes it seems that the hardest part of the deal is not finding it but finishing it! Investors look diligently for deals, put them together and then the unthinkable happens - it falls apart. Why does this happen? There are four primary things that are terminal to deals. Make sure they don't apply to you!
Time is the number one killer of deals is time, that is, the inability for an investor and their team to get a deal closed. Delays in getting to close weaken the resolve of all parties and make the deal more tenuous. For example,[link widoczny dla zalogowanych], when parties cannot get addendums executed quickly suspicions quickly rise and often give way to canceling the transaction. In order to assure that your deal is on track making sure that you are ushering the paperwork with top priority. Communicate frequently with your team to assure that the data is flowing without delay. Use a checklist with
Misleading your team. Another quick way to derail a deal is to not give full and complete information to your team and that includes your attorney, your real estate broker and your mortgage broker. Too often,[link widoczny dla zalogowanych], borrowers try to mask or bury damaging information about their employment, assets, credit scores or liens,[link widoczny dla zalogowanych], and that information - when it comes out - delays the transaction and for example, to locate a better loan program based on your situation. Always be upfront with any hurdles you see - these are the reasons you have a team-to help you solve these problems.
Bad analysis. Good deals are so difficult to find that oftentimes investors are so excited to get them done that they skip over many parts of due diligence. As a result, they miss critical items that will hinder the closing or kill it outright. Not performing a careful analysis of a property's historical financials will cause errors that will change the projected earnings numbers for a property and,[link widoczny dla zalogowanych], consequently, change its projected value. When presented to a lender, they will question the valuation and a borrower's credibility is tainted. Take the time and make sure that your due diligence is thorough and accurate.
Over / Under Valuation happens too often. A buyer wants the property valued as highly as they can so they can leverage as much as the can with their lender and increase the depreciable basis. Conversely, they lowball the property to get a better deal. The problem lies with fair market value and perception. When a property won't appraise it causes delays and raises questions. Do not try to fudge the valuation of a property. It never works.
Keep in mind that in order to make a profit on a deal, either through cash flow or appreciation (or both),[link widoczny dla zalogowanych], the investor has to secure the deal first! When an investor moves quickly, deals honestly, and works diligently they deal will move through the process smoothly and gets done. Shortcuts lead to bad deals.
Copyright (c) 2007 VEC Financial Group
                
                
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