Owners ask me this all the time, usually right after a bad experience with somebody else. Fair question. If you're going to pay someone to help with a loan, you should know exactly what you're paying for.
The short version of the job
A good broker does four things for you.
First, they figure out what loan actually fits your plan. That means asking how long you'll hold the property, whether you want to pull cash out later, and how much prepayment flexibility you need. Then they build a package an underwriter can approve without chasing you for documents.
Next, they put your deal in front of many lenders at once, not one or two. Community banks, credit unions, SBA lenders, debt funds and private capital all look at the same deal differently. Last, they negotiate, compare the offers side by side with you, and manage the deal through closing.
What it costs
Most commercial brokers charge either a percentage of the loan or a flat fee. It should be in a written agreement before your deal goes to a single lender. In most cases you pay it at closing, out of the loan, and only if the loan closes.
Some lenders also pay brokers a fee. That's normal, but you should know about it. A broker who won't tell you how they're being paid is telling you something.
At Massif Capital Group, the first consultation is free, and we talk about pricing once we understand the scope of the deal. In most cases we're paid only when your deal funds.
Why so many owners think brokers just add cost
My honest read of the industry, after a lot of years in it, is that it splits roughly 10, 20 and 70. That's my view, not a study, but I think most lenders would recognize it.
About 10% of brokers are worth every dollar. They know which lenders want which deals, and their fee pays for itself. About 20% mean well but are learning on your deal. You pay for that learning curve in missed deadlines and re-trades. The remaining 70% are chasing a quick fee. They send your file anywhere that will take it and charge more than the value they bring.
If you've only met the last group, you'd be right to think brokers add cost.
Advisor or order taker
The difference isn't really experience. It's how the broker thinks.
An order taker hears that you need a loan and goes to find one. Whatever comes back first becomes the recommendation. An advisor starts with what you're trying to build and designs the loan around that. They'll also tell you when the right move is to wait, or to keep the loan you have.
Business happens when value exceeds the cost. If a broker can't show you where the value is, their fee is just a cost.
Where the value usually shows up
Better terms come first. The spread between the best and worst offer on the same deal is often bigger than people expect, and it isn't only the rate. Prepayment penalties, recourse, deposit requirements and covenants can matter more to your plan.
The package matters too. Lenders move faster and price better when the file is complete and easy to underwrite. A clean package is where a good broker earns a big share of the fee. We go into detail on that in what goes into a lender-ready commercial loan package.
And there are new relationships. Most owners have one or two lenders. When those are full on your property type, a broker can introduce you to lenders who want the deal, and those relationships pay off on the next one.
Five questions to ask any broker
- How many lenders will see my deal, and what kinds?
- What will you charge, how, and when? Put it in writing.
- Tell me about a deal like mine you closed in the last year.
- What could stop this loan from closing, and what would you do about it?
- Will I see every quote that comes back, or only the one you pick?
A good broker answers all five without hesitating. Vague answers on fees or lender count are your cue to keep looking.
If you have a deal coming up, or terms you'd like a second opinion on, schedule a free consultation. I'll tell you straight whether I can beat what you have. You can also see the advisory work we do before a deal ever goes to a lender.