A Sean Aguilar

Capital Synergies Real Estate Investment podcast with Mr. A Sean Aguilar, CCIM, and Vice President of Steelhead Capital.

On this show, Sean speaks with the host about the second phase of the commercial lending process, and discusses some of the core aspects of qualifying for a commercial real estate loan. Sean describes in detail the importance of matching the commercial loan product to match your exit strategy, along with an in depth discussion of prepay penalties as they relate to your investment goals.


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DARBY: Hello this is Darby Worley, your host for the Capital Synergies Talk Show For Real Estate Investors. And today we have back joining us again, Mr. A. Sean Aguilar, CCIM and Vice President of Steelhead Capital. So Sean is here to speak with us today about the third phase of the commercial lending process which is called "underwriting." Sean welcome back to the show.

SEAN: Thanks for having me back.

DARBY: Alright. So tell us, just give us kind of an overview of what underwriting actually means. What happens then?

SEAN: Well actually underwriting is the culmination of getting third party reports together, the entire report, the appraisal, any kind of inspections, and basically the operating statements. Getting everything altogether and having the banks underwrite it, if you will, so they can get it to the credit committee and get a credit decision.

DARBY: Okay. So this is the part when you find the lender that's best suited for us? Kind of a matchmaking process?

SEAN: Yeah. Basically by that time we've identified the lender and we've made application. Now we're going down the path with them. Application fees have been exchanged, and we're working towards the goal of completing the transaction.

DARBY: So what are some important things to think about as a client is going through this part of the deal. How do you keep the deal moving forward?

SEAN: Well I think communication is key. A lot of information is flowing back and forth, and you're dealing with a bunch of different personalities and different groups, i.e. the lender's side, your own side, the mortgage broker's side, the investment sales side, and you have title officers involved. There's a lot of information there, and it just needs all to be well organized and just processed thoughtfully. Great communication is the key, because lenders, you don't want to give them things in drips and drabble. You want to give them as much information as possible and really not hold anything back.

DARBY: So is that one of the things that slows people down?

SEAN Yes.

DARBY: You do things one piece at a time as opposed to presenting an organized package?

SEAN: Absolutely. Part of it is based off experience. You may think, "Well hey, I have this right now. Let me just give them this rent roll, but you may not have the operating statements, and if your a novice at it you may be thinking, "Well I gave you the rent roll, can't you start with that. But they really need the rent roll and the operating statements, because that's all part of the operating numbers of the property. And so you really need to try to give complete information to the lender because otherwise if do it piece meal, human nature being what it is, you're thinking, "Well can't you just start with that and get it moving?" It just really doesn't work that way.

DARBY: Yeah. So they can't do it one piece at a time, they have to have every bit of the package together to even get started.

SEAN: Yeah. Yeah. So then if you look back at the beginning of the process, when you're working with a broker that's putting the deal under contract for you, its always good to ask "What documentation do you guys have available for me to have once I sign up and go under contract with you?" So you when you look at the financials on the property, if they have everything great. But if the don't, well then you really need to encourage them, "We really need to get that together because my lender's not going to be able to do much for us until we have all that information to them."

DARBY: So who keeps track of all these various documents, and ordering the title, that kind of stuff.

SEAN: Well at Steelhead, we tend to provide the oversight, and really engineer the whole process. That's one of the things we do is, we get involved at all levels, and it's really our job to shepherd it through. So I would say your mortgage broker, and/or investment sales broker really should be providing the oversight on that to make sure it gets shepherded through. That's one of the things we do here because we realize based off experience that if you leave it for everyone else to try to do, nobody really steps up and quarterbacks the transaction through, and that's one of the things we do here in…

DARBY: I know that from buying a basic residential home how many documents are involved. I can't imagine how much exponentially greater an organizational packet is when you're talking about a big loan like this.

SEAN: Sure. There's a lot of moving pieces, and you really need to be able to know what to anticipate, what to see, and what needs to go where.

DARBY: Let's go back to that matchmaking phase a little bit, like when you're finding the lenders. How many lenders do you guys approach? Or do you kind of have such a good knowledge of who's out there, and who's going to be appropriate that you don't have to talk to a whole lot of lenders?

SEAN: Well its an interesting comment you bring up, because there's lots of lenders out there, and mortgage brokers like to be able to represent, "Oh we have access to 30, 40, 50, 60 different lenders for you." And from a marketing side that sounds really great when you're trying to prospect and procure for business. But the reality of it is, a good mortgage broker at the end of the day should basically after revealing the deal and sizing it up, should probably be able to find out who the most five or six most logical lenders are for that loan assignment. And that's really where the value of a good mortgage broker comes in, because he should be able to determine based off his bucket of lenders to choose from, who's the most logical lenders for that assignment. And again, as nice as it sounds to prospect, "Oh I have 60 different lenders I could put this loan in front of," the reality is you should really know who the most five logical strongest lenders suited for that deal are.

DARBY: To me that sounds like a time saving device too, like it could be a long process, but if you have already established from the beginning, narrowed the field so to speak, that seems like its going to save your buyers time.

SEAN: Well your right, you're right. Because you're under contract, and have deadlines to meet. And so again, the mortgage broker should really know, "Who are the most logical guys to take it to." Because it's still a time consuming process just to present it to five lenders. You need to submit it; you need to review it with them. You need to talk through the deal points, see where their comfort level is, and then you've got to get them to agree to issue a term sheet so that you can get an application, start underwriting it.

DARBY: So how long does this part of the lending process take? What's the average or is there one?

SEAN: The underwriting side?

DARBY: Yeah.

SEAN: Once you're under application, rule of thumb is usually you try to get the loan under it and with the lender anywhere from 30 days to 45. And part of that process is, just because it could take up to three weeks just to get an appraisal. Once that appraisal is in, it gets…the lender submits it, it could probably go to committee after that. They probably need a good week to pull everything together, because even though the appraisal hits the lender's desk, it still needs to be pre-underwritten by the lender before they go to credit committee.

So the underwriting process could take anywhere from 30 to 45 days. It could be a lot shorter depending on how well organized everybody is, and if the lender will actually schedule time ahead to process that loan on an expeditious matter, or it could be longer. So you really need to dialogue with your lender and all the people involved and see what a realistic timeframe is.

DARBY: Ok. Is there anything else we may have missed?

SEAN: Well on the underwriting side I just think you obviously during that underwriting time; you're getting a third party reports back, your property condition reports, and your appraisal reports. You may have an environmental report. Make sure you review them, and look at them. And at the same time you have your title report. When you get that title report make sure you get what we call the underlying exceptions with that title report, and review those, and you may want to have an attorney look at those because there maybe some certain exceptions to that title report that may not be good to have on there, and you may need to get it removed, and you may need legal council to help do such.

DARBY: Ok. Well if our listeners want more some more information about working with Steelhead where can they go for information? What's the website?

SEAN: They can to our website the www.steelheadcapital.com, or they're more than welcome to call us on our toll free number at 888-951-6600.

DARBY: Very good. Well Sean thanks so much for joining us again on our show, and guys join us next time when we will talk about the fourth and final, and very exciting phase of the commercial lending process called "closing." This has been Darby Worley, and you've been listening to Capital Synergies. We'll see you next time.