Brokers and Private Lenders: How a Broker-Submitted Deal Works

Many real estate investors find their lender through a mortgage broker. A good broker knows which lenders fit which deals, helps package the file, and keeps the process moving. Here is how broker relationships generally work in private lending, and what makes a broker-submitted deal close smoothly.

RSC Private Lending works with mortgage brokers. Brokers submit scenarios the same way borrowers do: through Submit a scenario on rscprivatelending.com, by phone at (832) 648-4619 or by email at info@rscprivatelending.com.

What a broker does on a private loan

A broker sits between the investor and the lender. On a typical deal, the broker:

• Learns the investor's plan, timeline and experience
• Matches the deal to lenders whose programs fit
• Collects documents and submits a complete scenario
• Relays term sheets and helps the investor compare them
• Coordinates conditions, appraisal, title and closing

The lender still underwrites, approves and funds the loan. The broker doesn't set the lender's terms.

How brokers are paid

Broker compensation is usually a fee or points paid at closing, shown on the settlement statement alongside the lender's fees. Rules on how brokers may be paid, and what licensing they need, vary by state and loan type. Business-purpose investor loans are treated differently from consumer mortgages in many states, but brokers are responsible for knowing their own requirements.

Example, round numbers only. On a $500,000 bridge loan, a lender charges 1.5 points ($7,500) and the broker charges 1 point ($5,000). The investor sees both lines on the closing statement and pays $12,500 in total points. Transparency here protects everyone.

What a clean broker submission includes

Lenders move fastest on files that arrive complete. A strong submission covers:

• Property address, type and current condition
• Purchase price or as-is value, and the contract if there is one
• Rehab or construction budget and scope of work
• After-repair or stabilized value, with supporting comps
• Requested loan amount and purpose
• Borrowing entity and guarantors
• The investor's track record and estimated credit range
• Exit plan and timeline

Consistency matters. When the contract, budget and value don't match each other, the file stalls while everyone sorts it out.

What brokers and investors should ask a lender

• Do you accept broker submissions, and is there an approval process?
• How do you handle broker compensation and disclosure?
• Who is the point of contact on the file?
• Will you communicate directly with the borrower, the broker, or both?
• If the investor comes back for another loan, how is that relationship handled?

What this means for you

If you're an investor, a broker can save you time and open doors, as long as fees are clear and the file is complete. If you're a broker, the lenders you'll want to work with are the ones whose process is predictable and whose terms hold up through closing.

Have a deal to place? Send the scenario to RSC Private Lending for a term sheet in 24 hours. Subject to underwriting.