Tips on Converting Term Sheets…

Posted by in Brian's Blog, Commercial Real Estate, Tip Of The Week

The following was a tip I sent out to my net branches last week.   It talks about term sheets.  For non-net branchers reading this, if you don’t know what term sheets are, they are a great tool for locking clients down and getting quick revenue in commercial.  I did a conference call about them on the Commercialhotline.net website which all paid subscribers of that site can download for free.  To join, just go to www.commercialhotline.net.  Enjoy this week’s tip!

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Before I went on vacation, one of our branches sent a deal in to me to work.  She asked me to sell the term sheet since they had not had much success getting the term sheet signed.  I did the call with her on it, presented the term sheet, and the client signed and sent the check in the next day.  So I asked her what she heard me do that was different than what she had been doing and this is the response….

I feel it was 3 things:

  1. The confidence you had in saying we can get this deal done.  (I’d like to talk to you more about this some time.) 
  2. The simplicity of the call.  Just going over the Terms & origination fees & not getting bogged down with all the other verbiage.  K-I-S-S.
  3. How you related to her on the call, e.g.  “man I know what you’re going through – this is a rough environment for getting loans, isn’t it?”

FYI:  I had also spoken to her about how crazy it is with the banks these days, and that it wasn’t her – it was the banks.  I know how difficult it must have been for her to be turned down for the 1st time in 38 years.  Both she & her husband feel the banks have really let them down.

Sincerely,

J.H.

Now to her comments I will add the following….  I do not have the deal approved yet, but I am confident that the numbers work and I can get it done.  That being said, not every loan I write closes.  I was unable to do a rock star investor deal in Ohio, despite it being the strongest investor deal I had ever seen.  But I was confident on that call as I was on the one with J.H.  You must ACT CONFIDENTLY to exude confidence.  If you are waiting to close 20 loans before you will act with confidence you will never close 20 loans or even 1.

Also, relating to the client is important; but keep in mind, I get to the real deal.  I know that almost everyone I talk to has already been turned down somewhere no matter how strong they are.  I assume it, and cut to the chase.  Very often it is not the client – those are the deals you write up.  The strong deals that have been denied by the local bank that really is not lending.  You can NOT write up the weak deals because they do not get funded.  The strong deals are not getting approved by the local banks and those are the deals I write up.  This client cash flows to support the debt and has high 700 scores – yet she got shot down by her bank.

Finally, I don’t book every term sheet I present.  When I don’t, it is almost always because the borrower has not humbled themselves to market reality and believe they will get a better deal.  I lost one in FL where the investor property barely cash flows at 1.2 DCR at the cash out amount.  Now on rate and term, it debt covers at 1.25 and I can get that done.  I issued a term sheet on a rate and term.  But cash out needs to be much higher – 1.35% DCR on FL investor property and she was at 1.2 at that loan amount – way off.  Borrower was adamant that many people will fund her the cash-out she wants.  Silly rabbit, she has no chance.  I don’t fight with those people, I explain the marketplace and then follow up a month later and often, book them in the door once they have been shot down a few more times.  Follow up wins the game!

Hope that helps!

Brian

P.S.  We will be closing off the Commercial Net Branch opportunity at the end of September.  We have grown so much, I do not want to take on more net branches.  If you are interested in joining me and revolutionizing commercial, you need to do it before Sept. 30th.  For more info, or to join, call Seth Parr at 866-355-1244.  Special pricing this week only so don’t delay!