Using the Web and social media to sell real estate

It is a simple concept and yet it will have a sweeping effect: banks are less comfortable in lending money in commercial projects than before and have reduced the loan to value ratio to 65%, which means that they will give you 650 thousand dollars on a one million dollar property provided you put 350 thousand of your own money in the deal.

Loan to value in commercial real estate loans has changed dramatically.

This would all be fine if the lending application were started today and if the market were stable or growing. Yet in the majority of the scenarios, with very few exceptions like Texas, the value of commercial properties is going down and many of the loans that will become due or will have to be renewed by the end of this year and next year have been given four or five years ago, when the market was booming and when banks were more comfortable in working with a 70% loan to value ratio.

And the 65% is not actually even related to the cost of reproduction of the building (how much would it cost to build it again), yet it is based on the “as is” value calculated today that might be quite far from the original value calculated 5 years ago. Some experts in loan evaluation say it might well turn out to be 60% or 55% of the real loan to value ratio once you factor in a series of elements that banks are now considering in reducing the actual value of the property.

This video gives you the varied opinions of commercial real estate experts based on what is going on today in the market.

Roberto Mazzoni