This spreadsheet contains the emails, addresses and phones of all the banks in MA as listed on the web site of the State as of 2012. All banks were either called directly to get their mortgage department email or their loan contact email was taken from their web site. It contains about 250 banks with about 200 emails. It took a lot of work to collect these emails.
Having 200 emails is an excellent way to contact the banks initially to see if they have what you are looking for as a Landlord in Massachusetts. Don’t just sign what they give you. After the initial response from them ask to see their sample Note and Mortgage. Don’t spend the money on the appraisal before you have negotiated everything you need over email because once they make you spend the money on the Appraisal, they know that you are much more likely to sign whatever they give you later.
Here is what I do:
1. Ideally I would be looking for 20-year fixed commercial loans but in my experience no bank in MA currently offers them on 3-family non-owner-occupied buildings and above. I will settle on a loan that is 5 year fixed, renewable every 5 years with 20 or 25 years of amortization.
2. I won’t sign anything that is 100% “on demand.” “On Demand” means they have the option to ask for their money at any time for any reason including reasons that have nothing to do with you (for example, the state of the economy or state of their own finances).
3. I won’t sign anything that has language under the definition of default that says something to the effect that “you would be in default if the bank deems itself insecure for any reason”. The reasons the loan is called have to be only related to you otherwise we have the same problem as in point 2 above.
4. I won’t sign anything that has balloons. Balloons are when the payments are low as if though you have a 20-year loan but the loan is due in less than 20 years so the final payment is tens of thousands of dollars. I don’t buy their promises that they would refinance at that time.
5. I would not sign a loan that has re-appraisal requirements after the initial appraisal. If a bank orders an appraisal in the 5th year, lets say, and the value comes at $100,000 while your current outstanding balance is $100,000 or more, the bank may require you to pay them immediately $25,000 in order to bring your outstanding balance to 75% of the new value.
6. I won’t sign a loan with a bank that won’t allow me to rebuild my building with the insurance proceeds in a case of casualty even when I was not in default at the time of the casualty. If my building burns and the insurance proceeds are $100,000 while my outstanding loan is $150,000AND the bank prevents me from rebuilding then I would be on the hook for $50,000 without having the rent income. Not cool.
7. Ask for a list of at least 3 appraisers with their prices listed where you can choose one of them. Many banks insist that you only use the appraiser they give you. There is a conflict of interest here. Insist in advance on being given options and choose the appraiser that is more expensive to minimize the chances that you would get the appraiser the bank is most “comfortable” working with. Banks tend to choose appraisers that will give them the lowest valuation. That way they are assured they can grab your building at close to nothing in case you skip a payment. Tell them to put 5-10 appraisers in a hat and you will pull one. If they tell you you must use their appraiser, only one choice, that’s a sign to stay away from that bank.
8. I would not give them any money for the appraisal until we have agreed on all terms first. Ask them to email you a sample copy of the Mortgage and Note so you can review first what you would be expected to be signing. Some banks spend your money on appraisal first and then if you start asking questions about the terms, they tell you to sign it and agree on all their terms or leave it and lose your appraisal money. Appraisal is only needed to determine the exact amount of the loan not to determine if you qualify for a loan.
All of these 8 issues (among others) can bring your business to bankruptcy if you don’t read what you sign.
In addition, the benefit of being able to contact 200 banks at the same time instead of 3 or 4 which is what people usually do is to find the best interest rate and financial terms. Even slight differences can cost you tens of thousands of dollars in the long term. Why should you give the banks any more money than what they already have?
The price of this spreadsheet is $20
If you want to buy it, please, send me an email at e AT massachusettslandlords DOT com.