Friday, June 29, 2007
It is wise to have a lender take a good look at a retail property before making an offer on it. Even in premier city locations, let's say San Jose, there will be differences in the rates a lender will charge depending on the neighborhood. Is this "red-lining" - no such thing in commercial. Neighborhoods are ranked, A, B, C... and a lender will add costs to the margin depending on its lower grade. This can be shocking once you are in escrow and committed to close the deal. Of course, condition, age, tenant profile, lease terms, and more will also affect the rate a lender is willing to offer. I highly suggest having a lender who is willing to give you quick commitments when shopping for a center. Does anyone wonder why many deals fall apart, especially on high cap rate deals?