Commercial mortgage broker or your own bank: who should place your property loan?

Start with your bank, but do not stop there

If you have a bank that knows you and likes your property type, ask them first, because a relationship lender can be a good fit. But a single bank's offer is one data point, limited to that bank's appetite at that moment. A commercial mortgage broker or financing advisor takes the same deal to many lenders, brings back competing terms and manages the problems that come up before closing. For most acquisitions and refinances above a few million dollars, I think the comparison is worth having even if your bank ends up winning.

I have been on both sides of this. I have worked in real estate since 2005 and focused on commercial mortgage banking since 2012, and as an owner I have bought, rehabbed and sold apartment complexes myself. What follows is how I would decide if I were the borrower, including the cases where I would tell you to stay with your bank.

What a bank can do for you, and where its limits are

A bank lends from its own balance sheet. That brings real advantages: a loan officer who knows your history, deposit relationships that can earn better pricing, and sometimes flexibility a national lender will not offer. For a smaller property, a five-year business plan or an owner who wants everything under one roof, a bank can be the best answer.

The limits come from the same balance sheet. Every bank has a credit appetite that shifts with its own portfolio, regulators and internal limits. A bank that loved apartments last year may be full on them this year. Banks also tend to want recourse, meaning a personal guarantee, and shorter terms. And a loan officer can only offer you their bank's products. If the answer is no, or the terms do not work, you have learned what one lender thinks, not what the market will do.

There is also a timing cost. When you approach banks one at a time, each one takes weeks to review the file before answering, and a maturity date or contract deadline does not wait. Presenting the deal to several lenders in parallel compresses that search into the same few weeks, which is often the difference between choosing a loan and accepting whatever is left.

What an independent financing advisor actually does

At Terrydale Capital we act as the intermediary between the borrower and many lenders. We underwrite the deal ourselves first, so we know where a lender will push back, then present it to several banks, national lenders and family offices at the same time. The point is to put competing term sheets in front of you and let you choose the structure that fits your plan.

The lender universe is wider than most borrowers realize. Our loan programs page lists the main channels we work with, and each one has a different sweet spot.

• Banks and credit unions: relationship lending, often recourse, shorter terms.
• Fannie Mae and Freddie Mac: agency loans for apartment properties.
• HUD and FHA programs: government-insured options for apartment properties.
• Life insurance companies: low leverage on well-leased, high-quality properties.
• CMBS: a path to non-recourse financing on commercial properties of almost any size.
• Debt funds and family offices: faster, more flexible capital for bridge, value-add and situations institutions pass on.

When I would tell you to stay with your bank

A broker does not add value on every deal, and a good one will say so. If your bank already offered strong terms on a clean, stabilized property and you value the relationship, shopping the loan may gain you very little. The same is true if the loan is small enough that the bank's deposit pricing beats what the broader market will offer, or if you need a line of credit and treasury services tied to the same institution.

Even then, it can be worth having someone review the term sheet. I regularly see bank offers where the rate looks good but the recourse, prepayment or reserve terms carry costs the borrower did not price in. A second opinion is cheap compared with a ten-year loan you cannot easily exit.

When a broker earns the fee

The deals where independent advice pays for itself tend to share a few traits. Either the property or the sponsor does not fit a standard box, the timing is tight, or the loan is large enough that small differences in rate, proceeds and prepayment add up to real money over the term.

If your bank has already passed, I wrote a separate guide on what a commercial loan decline usually means and where to go next. And if a maturity date is driving the timeline, my guide to refinancing a maturing apartment loan explains why starting early matters so much.

• Your bank said no, or offered terms that break your business plan.
• The property is in lease-up, mid-renovation or has a story a lender needs explained.
• You need non-recourse debt, agency terms or a bridge-to-permanent plan.
• A maturity date or contract deadline is closer than you would like.
• Title, survey, environmental or sponsor issues threaten the closing.
• It is your first commercial purchase and you want someone managing the process.

Questions to ask any broker before you sign an engagement

The commercial mortgage world has excellent brokers and people who simply forward a file to two lenders and wait. You can tell the difference in one conversation if you ask the right questions and listen to how specific the answers are.

• What have you closed recently in my property type, at my loan size, and can I speak with one of those borrowers?
• How will you size my loan, and what do you expect the binding constraint to be: leverage, coverage or debt yield?
• Which lender types will you present my deal to, and how many?
• Do you underwrite the deal yourself before it goes out, or do you send the lender my documents as they are?
• Who will manage my file day to day through due diligence and closing?
• How exactly are you paid, when, and is that in writing?
• Tell me about a deal that nearly fell apart. What went wrong and how did you fix it?

Red flags that should end the conversation

Be careful with anyone who quotes a firm rate before seeing your numbers. Pricing comes from the property, the leverage and the sponsor, and a rate quoted on the first call is a sales tool. Be equally careful with a broker who claims to be an expert in every property type. We are open about where our deepest experience is, which is apartments and self-storage, and you should expect the same honesty from anyone you hire.

Other warning signs: large fees requested upfront with nothing defined in return, pressure to sign an exclusive agreement before you understand the scope, vague answers about which lenders will see the deal, and no clear person responsible for the closing checklist. A broker who will never tell you that a deal does not work is not doing you a favor. Some deals should not be financed as presented, and hearing that early saves you months.

Comparing a bank offer with a broker's options, line by line

Whichever route you take, compare offers on the full set of terms, not the headline rate. Picture two offers on the same Dallas property. The bank renewal is a quarter point cheaper, but it carries a full personal guarantee and a five-year term. The alternative is non-recourse, runs longer and has a prepayment structure that matches a plan to sell in year five. For that owner, the lower rate may well be the more expensive loan.

Put the offers in one table and read every row. If someone cannot explain a line to you in plain English, ask until they do.

• Loan amount and how it was sized, not just the rate
• Fixed or floating rate, term and amortization
• Recourse: full guarantee, limited carve-outs or non-recourse
• Prepayment: yield maintenance, defeasance, step-down or open
• Required reserves, escrows and holdbacks
• Lender fees, legal costs and third-party report costs
• Covenants you must meet after closing, such as coverage tests

What the right partner does after the term sheet

Choosing a lender is only the halfway point. The closing is where loans actually fail: appraisals that come in light, survey and title exceptions, Phase I recommendations, operating agreement questions and insurance requirements. A good advisor stays on the file until funding and coordinates with the lender, your attorney and the title company. A commercial title partner such as Gail Klaveness handles the title side, and our job is to keep every piece moving toward the same date.

If you want to know what fills those weeks, I wrote a step-by-step guide to how long a commercial loan takes to close. The short version is that most delays are avoidable when someone is tracking every item from day one.

How a first conversation with me usually goes

Bring whatever you have: the property, the price or current loan, the timeline and the term sheet from your bank if you already have one. I will tell you honestly whether I think we can improve on it. If your bank's offer is strong, I will say so. If it is not, we will underwrite the deal, take it to the lenders who fit it and show you the options side by side.

Terrydale is headquartered in Dallas with an office in Kansas City, and according to our about page our staff has been directly involved in more than 1,500 closed commercial transactions nationwide. You can submit a loan request through Terrydale Live for live quotes and current rates, or schedule a call with me if you would rather start by talking it through. Either way, you will leave the conversation knowing what the market thinks of your deal, not just what one bank thinks.

Questions people ask me