All real estate transactions can be complex, but commercial real estate deals can often be fraught with even more requirements and contingencies, all of which have the potential to stall the entire process. Beyond the financing itself, one element that most often threatens to kill commercial real estate deals before they close involves commercial insurance. Unfortunately, when an insurance problem arises due to lack of compliance, the delays can become tedious and lengthy. This most often occurs because the mortgage broker in question is not completely familiar with the requirements as they relate to commercial insurance.
Lack of Commercial Insurance Knowledge Can Place Deals at Risk
While it might seem inefficient, mortgage brokers often find themselves in the role of referee as they attempt to handle negotiations between clients seeking loans and the lending institutions responsible for making sure that clients meet various requirements before granting those loans. It is not uncommon for all parties to come together at the closing only to realize that the insurance is not in compliance and, therefore, the lender’s requirements have not been met. When that happens, the entire closing is at risk of falling apart.
When a mortgage broker is familiar with commercial insurance, this problem can be rectified in several ways. For instance, such problems can often be avoided from the outset when a mortgage broker who is familiar with commercial insurance is able to work with his or her clients to ensure that suitable insurance is secured before reaching the closing table. Additionally, in the event that a problem should arise prior to or at closing, a knowledgeable mortgage broker can work with industry partners like Evergreen Insurance to find suitable solutions and ensure that the mortgage process is not disrupted or placed on hold.
Complexity of Commercial Property Insurance
Lending institutions can require a variety of different types of insurance coverage in order to make certain that the property they are financing is not at risk, thus jeopardizing their collateral. Among the types of coverage most often required by lenders is replacement cost insurance and agreed amount coverage. Replacement cost insurance is designed to cover the actual cost to replace the building to its current value.
Without all insurance requirements met prior to the day of closing, the lender could decide not to fund the loan, in which case the deal could be placed on hold or not close at all. When the mortgage broker involved in the deal understands the intricate details related to commercial insurance, it can often help avoid the tedious and complex communications to and from the lender that can cost both time, money and energy.
Evergreen Insurance offers a variety of different types of commercial building insurance options to meet lender requirements. Contact one of our representatives today to learn more about insurance coverage options for meeting lender requirements.