If you broker loans for a living, whether commercial or residential, you’re only as good as the lenders with to whom you submit those loans. If you’ve been in the business for any length of time, then you know that your enemy is “time.” Your lenders are constantly change their guidelines, loan appetites, credit boxes, submission procedures, etc. all the time. Staying on top of those changes so that you can be an effective resource to your clients, is almost a full time job in itself.
Let me introduce you to the “Three Lender Rule.” I discovered this in my brokering career by accident. Basically it says that if you submit your loan request to multiple lenders and THREE of them give you essentially the same answer (accept or pass), then that will represent roughly 98% of all lenders to whom you submit that transaction. So what’s the take away and how do we leverage this for success.
First, you can use this as an effective time/loan management tool. If you get three “no’s,” then it is probably a good idea to let another broker waste HIS time on that loan while you focus on another one. (I’m not saying that this rule is perfect, but if you’re managing a large pipeline, then it’s a VERY good rule of thumb). Or give it to an assistant to try to find that lender exception.
Second, you can use the rule to develop a very effective Lender List. Now you know that you can pick 3 bridge lenders, 3 multifamily lenders, 3 office building lenders, etc. until you have a full grouping for those types of properties in which you care to specialize or represent. This magic number is also much easier to stay on top of then say 20 bridge lenders, 15 self storage lenders, and the like. Yes, have some back-ups, but keep 3 “top tier” lenders for each category of property you like to finance.
Last, you will find that giving most of your attention to fewer lenders will result in getting better concessions and exceptions from those lender when you really need them. Loyalty can provide you with rewards when you need them.
Next week I’ll discuss how lenders are more important to you than borrowers with regard to growing and maintaining your loan brokerage business.
Craig Higdon is the Chief Executive Officer of Dragon Realty Capital, a nationwide private money direct lender. More information can be found at www.DragonRealtyCapital.com. We also offer educational, interesting, FREE Reports for industry professionals and investors: Click Here to get yours. And Click Here to obtain free Broker-specific tools.
