What Does a Commercial Mortgage Broker Do? Role, Process and How They Get Paid

A commercial mortgage broker arranges financing for income-producing real estate. The broker does not lend money. Instead, the broker analyzes a borrower's deal, decides which kinds of lenders are likely to finance it, packages the request, collects and negotiates offers, and manages the loan through to closing. The broker is paid a fee, usually around 1% of the loan amount, only when the loan closes.

The Broker's Role in One Deal

Every transaction follows roughly the same sequence.

What a Broker Does That a Borrower Usually Cannot

Knows Who Is Lending on What

Lender appetite changes constantly. A bank that wanted hotel loans last year may have stopped. A debt fund may have raised its minimum loan size. Brokers who are in the market every week know this, and the difference between a quote and a decline is often simply sending the deal to a lender that currently wants it.

Translates the Deal Into Lender Terms

Owners describe their property by what they like about it. Lenders want trailing-twelve-month income, a rent roll, the sponsor's experience and liquidity, and a clear use of proceeds. A broker reorganizes the story into the format underwriters use, and addresses the weak points before a lender finds them. The guide to structuring a deal package shows what that looks like.

Creates Competition

One lender quoting a deal has no reason to sharpen its terms. Several lenders quoting the same deal do. The broker's fee is often recovered through a lower rate, higher proceeds or a lighter recourse requirement than the borrower would have obtained alone.

Manages the Process

Commercial loans take 45 to 120 days or more to close and involve appraisers, environmental consultants, attorneys, title companies and the lender's credit committee. Deals fall apart when a step stalls. Keeping every party moving is a large part of the job. See why deals die for the common failure points.

How Commercial Mortgage Brokers Get Paid

Brokers earn a success fee. The usual arrangements are:

• Borrower-paid fee. A percentage of the loan amount, set in a signed fee agreement and paid from loan proceeds at closing. This is the most common structure.
• Lender-paid fee. On some loan types the lender pays the broker, either as a referral fee or from the loan's pricing.
• A combination. Part from the borrower and part from the lender, disclosed to the borrower.

Typical fee levels by loan size:

The percentage falls as the loan grows because the work does not scale with the dollar amount. Full detail is in the guide to broker fee structures, and annual earnings are covered in how much commercial mortgage brokers make.

Broker vs. Lender vs. Banker

When a Borrower Should Use a Broker

A broker is most useful when:

• The borrower's bank has declined or offered less than needed.
• The property is unusual, in transition or in a market the borrower's lenders do not cover.
• The loan is large enough that small differences in rate or proceeds matter.
• The borrower wants non-recourse debt and does not know which lenders offer it.
• There is a deadline, such as a purchase contract or a maturing loan.

A borrower with a simple deal and a strong existing bank relationship may not need one.

A Typical Week

Brokers split their time between finding deals and placing them. A week might include calls with owners and referral partners, underwriting two or three new requests, sending a package to a dozen lenders, chasing an appraisal, comparing term sheets for a client and attending a local real estate event. Newer brokers spend more of the week on sourcing; established brokers spend more on execution because referrals bring deals to them.

Becoming One

There is no required degree and, in most states, no required license. The path is covered in how to become a commercial mortgage broker, with the learning plan in commercial loan broker training and state rules in the licensing guide.

Where Janover Pro Fits

Lender matching is the step where a broker's knowledge matters most and where it is hardest to keep current. Janover Pro gives brokers a searchable database of commercial lenders by property type, loan size and location, with direct originator contact, so the matching step takes minutes.

Frequently Asked Questions