20 Dec Reversing the perspective: Broker to Lender
Strong broker and lender relationships are key to the success of any deal. Whilst both parties are working towards a common goal, it can sometimes be challenging to understand the needs, demands and time constraints of one another.
At Avamore, we benefit from having a unique internal perspective. Chris, Avamore’s Transaction & Underwriting Associate joined the company from a broking background. His knowledge and experience working on the other side of the spectrum allows him to be able to engage with and assist brokers with greater understanding.
Chris shares with us some of the key learning points he has gained moving from broker to lender.
What do you think the biggest barrier is to a successful broker lender relationship?
Relationships are so important in our business, whilst it is in both the lender and the broker interest to close a deal for a borrower, there is a huge amount of trust required from both parties and if you don’t have that, it can become problematic.
Things can be particularly difficult if you have not done business before or seen previous transactions through to completion. Naturally, brokers are wary about placing deals with new lenders because they have to be confident that they will perform for their customers and it is their reputation on the line. From the lender perspective, once you have reached a certain point, you have to trust that the broker and borrower are committed to seeing the transaction through with you until the end.
Another point to think about is that every lender has their own way to assess a deal and the information that needs to be presented on day 1 may vary. It is really useful for lenders to be completely clear about the initial information that they need to provide but also for brokers to follow this as inevitably, a brief enquiry will generate questions from the lender. Mitigating this initial back and forth fairs well for laying out a good relationship in the future and avoids frustrations on both sides.
What is the biggest lesson you learnt moving from broker to lender?
Moving from broking to lending has shown me how much of a broader perspective on the deal a lender has. As a broker, you simply don’t have that same oversight which is why an open and trusting relationship between both sides is so crucial.
If I went back to broking I’d certainly do things differently, I’d take the ‘lender approach’ which would help with placing deals more accurately. Examples of things I’d analyse include the GDV against market comparables, the build cost and whether the site has planning.
I think that as a broker it is so important to play the role of an ‘investigator’, if the deal doesn’t look right to you, it is unlikely that a lender would move forwards with it. Whilst I was broking I was inundated with deals and I know how easy it is to pass things straight onto the lender but by stepping back and taking a view on all the information you are sharing, you can push the deal through quickly and build a good relationship.
What top three qualities do you consider to be good broking?
Good broking depends on being transparent with the information you have access to (and also being open if you do not know something), being thorough in your approach which can come from assessing a deal yourself and finally being open to discussion.
How has your experience shaped the way you work with brokers?
My prior experience means that I often know where a broker is coming from and can understand some of the key challenges and barriers they face. It is so important for brokers to get a quick decision and have access to key decision makers and I think that shapes the way I handle deals as they come in, I understand the level of urgency and the frustration of a slow response rate. I also know that I need to give a new broker a reason to trust me, I have already mentioned how important this is so I will always make an effort to reassure the broker and keep them updated on internal progress making things feel like a partnership early on in the process.
What advice would you give to a new broker approaching development finance?
Development finance is incredibly complex and I know that when I moved into it after dealing with other asset classes, it sometimes seemed like an insurmountable task to be able to understand the deals properly. I learnt from working with other development finance brokers to understand the process and asked as many questions as possible.
For me now, I would prefer a broker to be open that they were still finding their way on development finance so that I can guide them through and work alongside them to get the deal done. There are so many factors consider and I know first hand what a big jump it is so would always be happy to help a broker out.