Wealth Opportunities in Commercial Real Estate: Management, Financing, and Marketing of Investment Properties

Negotiable Points of a Loan

With regard to what can and cannot be negotiated, it is important to note the distinction between deal points and loan documentation. The deal points, the spread (and hence, the interest rate), the loan amount, amortization, and the assumption provisions are all negotiable. The items I previously identified as key factors to consider in a real estate loan are all subject to negotiation. When you are discussing the loan transaction with a financial institution, you are working with one or two individuals, and these individuals are subject to the art of persuasion. In contrast, today when you are discussing the documentation of large commercial loans, although some wording may be modified, lenders tend to be hesitant to alter the basic gist of the overall language. The usual rationalization they offer is that the loans are targeted for securitization and sale. The end buyers demand uniformity, so loans that contain specialized language are not saleable. It may be permissible to change the interest from 6.25 to 6.15 percent—an easy deal point change—but radically redrafting the defeasance language probably would not be permitted.

I suggest that you can save money by selecting a lender you can work with and attempting to originate multiple transactions with this same lender. In connection with this philosophy, it would be prudent to work through a set of loan documents with borrower's counsel and counsel for the lender and then, for subsequent loans, use ...