Commercial Loan Processing - How Much Should You Expect To Pay?
Commercial loan processing is the third phase of the process. Here, you will be charged a fee for the required third party reports.
At this phase, it’s important to know…
- What these third party reports are
- How lenders view them to determine if you still qualify and
- How much these reports will cost
With that in mind, here are…
Your Questions
What are the required third party commercial loan processing reports?
What is the lender looking for? How do they underwrite each report to determine if I still qualify?
&
How much does each commercial loan processing report cost?
Real Answers
What are the third party commercial loan processing reports required at processing?
On your pre-approval letter you'll also find the request for these reports. They are things such as the…
- 1. Appraisal
- 2. Environmental Report(s) (Phase 1 and possibly Phase 2)
- 3. Title Commitment
These third-party reports all come with a price tag. Don't confuse this with an application fee. Instead it’s the fee assessed to pay for the required third-party reports.
The total price of these reports can range from $2500-$10,000 or more!
We’ll explain more about why each report is needed and the price tag that accompanies them.
What is the lender looking for? How do they underwrite each report to determine if I still qualify?
&
How much does each commercial loan processing report cost?
1. Appraisal
The appraisal is required in order to determine today's market value of the property. Lenders will assume that the property is worth the appraisal value or the sales price, whichever is less.
So if your property is appraised at $600,000 but you sell it for $400,000 then it's only worth $400,000 as far as the lender is concerned. But if you try to sell the same property for $800,000 it's only worth the appraisal value of $600,000 and the sales price must come down to match the appraised value.
The price of an appraisals for commercial properties are much higher than residential. While residential appraisals may cost as little as $300, commercial appraisals may range from $1500-$5000 depending on…
- Location
- Type of property and
- The appraisal company chosen
By the way, lenders will most often require that only they (the lender) can order the appraisal. With these lenders, searching for cheaper appraisal company is usually out of the question altogether.
The good news, thought, is that some lenders have a bidding system that allows you to get the best price on the appraisal.
Here's how it works. They’ll have approved appraisers throughout the country. Let's say three of them are in your local area and are competing for your business. The lender will send the deal to all three and go with the lowest bidder.
At Guide-to-Business-Loans.com, we know the lenders who use this bidding system to save you money.
2. Environmental Reports (Phase 1 and possibly Phase 2)
The environmental reports tell if any contamination has occurred on the commercial property site.
This report is required by just about every commercial lender because many federal and most state laws require that any contamination must be cleaned up by the PRESENT owner!
So if the lender ever ends up owning the property, that “present owner” would be them. This is too much of a risk for them to take on. As a result, they review these environmental reports with a fine toothed comb.
Because some property types are almost always contaminated, they are among the most difficult to finance. They are…
- Gas stations
- Dry cleaners where the cleaning is done site
- Truck storage yards and
- Heavy industrial sites
The good news is that there are lenders who specialize in funding these property types and are more skilled at handling environmental issues.
To find the most appropriate lender for your needs, contact us 24 hours 7 days a week at (800) 778-5361.
Be sure to request our free Pre-Application Consultation Program.
Also, this BONUS Recording will help you to answer the question…
BONUS RECORDING - How do I know which is the best lender for my needs?
The cost of a phase 1 report can range from $500-$4000.
The results of the phase 1 report will determine if a cleanup job is needed before the lender can fund the deal.
The cost of actually cleaning the soil or hauling it away can range from $60,000 to several million dollars depending on the extent of the contamination!
You can understand why lenders avoid this potential liability like the plague.
A phase 2 report will be required if the phase 1 reveals a need for drilling and soil analysis.
The cost of a phase 2 report can range from $8000-$15,000.
If the phase 2 reveals contamination it's almost impossible to get financed. At least not until the costly cleanup job is complete.
3. Title Commitment
It's simply the legal evidence of your right to ownership of the real estate.
If there are any legal ownership issues, the title commitment will reveal them. Such as…
- deed restrictions
- clouded title or
- boundary encroachments
The title commitment and plot survey will allow the lender to…
- Verify the properties dimensions
- locate easements and
- affirm the boundaries
Title fees can range from $800 to $2000. This is the only one of the third party processing reports that is collected at closing. The fee for the tile will be included in your closing costs.
Ok. It looks like all of commercial loan processing reports and documents are in. We’ve gone through…
- Application to
- Pre-approval and
- Processing
Now the lender can review all of the documents and make a final decision. They will review your file as a whole and determine if you get a final approval. That final lender review is called underwriting.
So let's head over to underwriting now and see what we find over there.
(630) 755-6979
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