Commercial Investment Real Estate March/April 2017 | Page 19

on state law, and the transfer of ownership through the lender’s trust deed. Unfortunately, some lenders may use this mechanism as a way to take title to a property by aggressive leverage and high pric- ing, often leaving the borrower with unlikely prospects of repay- ing the loan. However, most lenders simply want the principal returned, and the lender’s ability to foreclose through a stream- lined process gives incentives for the borrower to repay the loan. While all underwriting involves some combination of art and science, it is recognized as more objective to underwrite property than to underwrite a borrower. Forecasting Outcomes While all underwriting involves some combination of art and science, it is recognized as more objective to underwrite property than to underwrite a borrower. Anomalous situations aside, a lender can forecast a host of outcomes and structure the loan accordingly, while knowing the value of the underlying collateral. On the other hand, it is very diffi cult to determine a borrower’s net worth. Even if a lender can reach a well-supported net worth fi gure, it can be diffi cult to gauge liquidity and the borrower’s ability to quickly repay the loan. Since many loan requests require quick funding, sometimes in less than two weeks, a lender must underwrite the deal quickly. Digging through a borrower’s tax returns, brokerage accounts, and other assets only delays the process. Collateralizing real property by relying on an appraised value of property is a more effi cient business practice when a lender is working with a borrower who must act quickly to capitalize on an opportunistic transaction. In this way, secured debt allows the lender to move quickly, a benefi t that is passed on to the borrower. Will McCabe is investment associate/originator with iBorrow, a direct lender specializing in private money loans for commercial real estate nationwide. Contact him at [email protected]. CCIM Institute’s 2017 Capitol Hill Visit This Spring, CCIM Institute is leading a delegation to Washington to meet with U.S. Senators and Representatives. For a chance to have your voice heard at the highest levels of government, join us on this historic trip. May 15-20, 2017 during the REALTORS® Legislative Meetings & Trade Expo in Washington, D.C. CCIM.COM Visit www.nar.realtor/midyear to register or contact [email protected] for more information. March | April 2017 17