Why use a Property Finance Broker?

michaelBrokers are the lifeblood of the property industry.

I’ve used agents, facilitators and intermediaries countless times as a principal. And I’ve been a commercial property agent for Cushman & Wakefield and occasionally do some consultancy work still as an advisor to developers seeking equity investments for their projects.

Some of the best direct property brokers I’ve worked with include David Marsh of Landsource, Daniel Minsky of Estate Office and Steve Ayers from Ayers & Cruiks. Each one has added considerable value to the relevant off market transactions. Pushing the deal along and managing both sides of the transaction to ensure that the deal goes ahead with the minimum of friction.

The same can be said for many of the finance brokers we’ve worked with at Avamore too. What would I say the key advantages are for a lender are when we are working with a finance broker? Here’s a selection of a few points I would highlight:

  • A broker generally provides clear presentation of the lending opportunity/proposition
  • Good brokers generally know when a borrower is for real and not “fishing” for a deal to put their default lender under pricing pressure. That reduces time wasted preparing offers for deals that aren’t real
  • Management of borrower expectations on leverage, timing and price in advance
  • Sensible pre-selection of lenders to be approached (thus saving the lender time and effort)
  • If the borrower gets a better offer and is proceeding, the broker will tell the lender to close the file and the lender can free up the balance sheet for a fresh deal
  • Broker can roughly advise the pricing required to secure the deal (without prejudicing the ability of the borrower to get the best deal possible). Again saving the lender time and effort
  • Broker can arrange valuation, borrower financial information and relevant property information in advance to speed up lender due diligence. The more info provided the more streamlined the lending process
  • Broker can liaise with lender’s lawyers, the lender directly and the borrower’s advisers to push the legal process and to move the deal forwards.

Working with brokers does come at a cost and occasionally the level of greed on fees can be frustrating. But on balance we actively favour working with brokers over dealing with borrowers direct.

As a lender dealing directly with a borrower it can be very frustrating and time consuming. It may not result in any business going ahead either. Only this week a borrower we have been talking to directly for the past 6 weeks came back to us saying “lender X just offered us 80% LTV at 0.x% per month” when we knew that they were lying. If the borrower here had been represented, the situation would have been very binary as good brokers don’t suffer time wasters. Either the offers are good enough or they aren’t and if the borrower expects too much, the broker will move on. Time is one resource we can’t get back, so the impact of a broker in that situation is invaluable.

So why should a borrower use a broker? Here’s a selection of reasons:

  • Brokers generally have a great knowledge of the lenders in the market. That means they might only need to approach 3-4 lenders for terms because they know those lenders will be the most effective and competitive.
  • Lenders can promise the earth but not necessarily deliver on those promises. The brokers worth their salt know which lenders are performers and those which are just talkers and will direct the borrower accordingly. Remember, particularly in bridging and development, it’s not really about price but in fact delivery.
  • Experienced brokers can identify troubling or problematic terms/covenants in a term sheet that a borrower might not realise could be problematic in the future.
  • Experienced brokers might be able to identify cheaper, but equally effective valuers and solicitors to act for the lender and borrower to manage costs.
  • The broker will be able to present the borrower’s case in a way that enables the lender to make an indicative offer quickly
  • The broker will also be able to collate all the info required by a lender on the borrower so the transaction can proceed further, faster.

The above lists are not exhaustive and we welcome any feedback from other lenders or brokers to complement the points raised.

Any borrowers looking for a referral to a broker should please get in touch and we would be happy to direct you to someone appropriate, particularly if Avamore is not the right lender for you.

Michael Dean is a principal at Avamore Capital. Any enquiries please get in touch: enquiries@avamorecapital.com

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