Why a declined deal is not the end

Why a declined deal is not the end


The most frustrating thing for any broker is having a deal rejected without knowing why – which can make explaining to a client exactly what has gone wrong pretty difficult and can also have potential ramifications for future business relationships.

So what happens if you’ve got a great deal, which has been passed to the lender you think best able to complete it, yet it still ends up being turned down?

Tomer Aboody, Director of non-status lender MT Finance, told B&C, “Every time we get a case we ask some key questions: is the deal regulated, what is the LTV, what is the asset/security and where is the geographic location? Most of the time, if a deal falls down it is because the LTV is too high or it is geographically unsuitable for us.”

Terry Markham, of specialist distributor The Funding Operation, stressed that the grounds on which loans are turned down is often due to down valuations.

Being supplied with the reason behind a lending decision is one of the most important facets of any introducer-lender relationship. James Bloom, the CEO of development lender Regentsmead, said: “We try to educate brokers so they send us the right deals, but of course we still get calls coming in which we can’t place. We have quite consistent criteria if people take the time to look though and our brokers can be reassured our criteria won’t suddenly change.”

Different companies have different strategies with regard to explaining what has gone wrong to intermediaries. Jonathan Rubins, Managing Director of Alternative Bridging Corporation, explained that, “If we do have to say no to a deal, usually the BDM speaks to the broker directly, particularly if it has gone to credit stage.”

Jonathan Samuels, CEO of Dragonfly Property Finance, said: “Here at Dragonfly, all our staff are very experienced so any one of us could relay the feedback to the broker. It goes without saying that we explain why we are not comfortable with a deal, as this provides all-important clarity.”

The biggest frustration from packager Terry’s perspective is “lenders’ unwillingness to challenge a valuation”. Jonathan Rubins shed some light on the valuations topic, stating: “We try to speak to valuers early on, and get them to do a desktop valuation on anything we don’t instinctively feel comfortable with. This ensures that the borrower isn’t wasting money on a valuation if, at the end of it all, we aren’t going to complete the deal.”

So if a deal fails with one lender is it always dead in the water?

Terry said, “When a case falls with one lender it quite often means that it is the end of the road, particularly if the reason behind it is down valuation. Having said that, if adverse is involved we can sometimes switch the case to another lender, and obviously if it becomes apparent that a deal we thought was BTL should actually be regulated we have to switch funders to ensure the appropriate lender is used.”

For James, “the key thing is helping brokers to place a deal. We have ‘whole of market’ knowledge, which is sometimes more extensive than a particular broker’s, so if a deal is fundable – whether through us or not – we like to help the broker get it completed.”

One major way tricky deals can be funded is through referrals. Tomer explained, “If a deal is not suitable for us, we might recommend another broker or lender who can help. We also hear about cases which have come our way through referrals – it is great to hear that people will recommend us or give us repeat business as a result of good service.”

James added, “We are very open about what we are doing and feel we can work with other lenders who are also open. Some of the lenders we have referral agreements with on the bridging side include Cheval and Masthaven, and we also refer to Bishopsgate for more Northern-based development deals.”

Although Terry cautioned that, in his experience, some lenders can still be “very precious about referring their business and want to ringfence their introducers”, some lenders appear willing to outwardly refer. Particularly on a reciprocal basis, to ensure that brokers have the best chance of getting a deal funded and to keep industry relationships strong.


By Miranda Atty

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