They say that, “Timing is everything.” Right? Well it certainly holds true when it comes to financing commercial real estate. There are times during the year when trying to get a loan financed is pure misery and there are times when the financing “gods” are looking down benevolently on you. But let me tell you a little secret: It’s not rocket science to figure out when is the optimal time to get things financed. It’s plain common sense. Shown below are the worst times and then the best times to get your property financed.
Worst Times to Finance CRE
- June 10th through Labor Day – If you haven’t signed your loan application before summer starts, good luck! Summer is the time when kids are out of school and family’s take long vacations. Loan officers, underwriters, loan processors, real estate brokers, mortgage brokers, attorneys, appraisers, etc. all lose focus during the summer months and as a result the financing process slows down to a crawl, or so it seems.
- November 1st through Year End – If your loan is not expected to close before year end, your deal will go to the bottom of the pile. All the focus during the end of the year is to work on deals that will close before year end so loan officers can make their quotas and for those who have had a good year, to make their bonuses.
Best Times to Finance CRE
- First Quarter – The best time of the year to start the financing process is during the first quarter. Bankers are refreshed after the holidays and eager to start working on their annual quotas in order to acheive their year end bonuses. Most insurance companies will be back in the market ready to lend. As the year progresses, they become more and more selective on property type and quality of transaction.
- Labor Day through October 31st – People are back from vacations, kids are in school, and lenders are again eager to get their last round of deals started for the year so that they close before the holiday season.
- November 1st through the 15th – To paraphrase Charles Dickens, “These are the best of times and the worst of times.” No sane loan officer should commit to closing a loan in less than 60 days. But those loan officers who haven’t reached their quota, or have, but want to increase their bonuses even further go into “warp speed” trying to cram in the final deals for the year. If the “moon and the stars” line up perfectly or they’re just plain lucky they succeed. I just found out late last week that I have a client that must close his commercial real estate purchase before the end of the year or he will experience adverse tax consequences. There are less than 50 days to the end of the year and the deal is not yet under application. I haven’t closed a loan this year under 75 days, most have been considerably longer. And yet, I have four lenders who have committed to closing on this deal before year end. This just tells me there are a lot of hungry loan officers who want to get deals closed no matter what it takes.
So when is the best time to finance commercial real estate? It’s plain common sense: Whenever your loan officer is highly motivated to get the deal done.
Source: The Importance of Luck and Timing in Real Estate, by Kevan McCormack, Metropolitan Capital Advisors