The Principal Parties

• Borrower (Buyer) and Seller: the primary participants.  The Borrower seeks financing, the Seller transfers ownership, and the Lender provides the purchase-money loan as a key party.
• These parties are the catalyst that drives the transaction forward.

Example:

A buyer purchasing a $1.2M commercial property needs a $750K loan.  The Borrower and Seller agree on the terms, and the Lender provides financing.

Takeaway: “Borrowers and lenders aren’t just names on paper—they’re the engine behind every deal.”

The Fiduciaries

• Real Estate Agents and Mortgage Brokers: These professionals act as fiduciaries representing buyers, sellers, or borrowers.  They guide the process, ensuring all parties feel supported and confident in their roles.
• Important distinction: Agents are not principal parties—they facilitate, advise, and execute.

Example:

A mortgage broker structures a deal for a Borrower with complex income streams, ensuring the Lender receives a clean, organized submission.  The real estate agent negotiates repairs and timelines to keep the deal on track.

The Lender

• Role: Approves and funds the loan based on underwriting standards.
• Responsibility: Evaluate risk, verify property value, and confirm Borrower’s ability to repay.

Example:

A private lender reviews a Borrower’s request for a $500K second lien on a multifamily property.  They require a title report, appraisal, and three months of bank statements before issuing a commitment.

The Loan Servicer

• Role: Manages payments and account administration after closing.
• Responsibility: Collect monthly payments, handle escrow, and manage payoff requests.

Example:

After closing, the servicer sets up an online portal for the Borrower to make payments and track the loan balance.

When the Loan Process Begins

Once the Borrower signs a Letter of Interest, the Lender starts processing and underwriting.  Key points:

• A Letter of Interest is typically a memorandum of understanding, not a binding contract.
• It outlines proposed terms and conditions, subject to credit review and due diligence.

Example:

A Borrower signs a Letter of Interest for a $2M bridge loan.  The Lender begins ordering an appraisal and a Phase 1 environmental report before issuing a formal commitment.

Takeaway: “A Letter of Interest opens the door—but underwriting decides who walks through.”

Recap

• Principals: Borrower, Seller, Lender
• Fiduciaries: Agents and Brokers
• Support Roles: Loan Servicer
• Letter of Interest: Non-binding, signals start of underwriting