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Tuesday, Aug 16, 2022
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SHELLY GARCIA Staff Reporter A sharp increase in the number of commercial and industrial real estate transactions is putting a strain on lenders, appraisers and title and escrow companies creating processing delays that in some cases are causing deals to fall through. Although no figures are available specifically for the San Fernando Valley, such companies report seeing as much as a 60 percent increase in business this year over last. “We are stretched to capacity,” said Chris Pettersen, a vice president with the Bank of Commerce in Glendale, which relies on Valley-based businesses for half its loan activity. “We’re working six days a week instead of five, and we’re taking work home with us. I went to bed at midnight yesterday.” In addition to the strong uptick in real estate sales, continued low interest rates are driving a lot of refinancing, said Martin Evans, owner of Gateway Title Co. in Burbank. In some cases, lenders are refusing to handle loans smaller than $500,000 because they are too busy, added Dennis Dishaw, president of ACI Capital Commercial, a mortgage-banking company in Encino. “I’ve got someone who needs a $375,000 loan, and I’m hard pressed to get him a good loan at a good rate. I have to take him to a tertiary lender,” said Dishaw. From the time a deal is cut, there may be as many as seven different parties involved in the lending process, including buyer, seller, engineers, appraisers, inspectors and title, escrow and loan officers. With the increases in business, particularly over the last six months, any one or several of these points in the process can get bogged down, creating a chain reaction as the deal moves through the pipeline. As a result, a large loan which may have taken three to six months to close a year ago, could take as long as eight months now. In some cases, sellers are refusing to offer extensions, so they can entertain higher offers from other buyers. “They’re getting backup offers, and if they don’t close (the initial offer) within a certain time, the lender may not extend the escrow, so you’ve got anxious buyers,” said Bob Gonzales, regional manager for California Statewide CDC, a Glendale based provider of SBA loans. The pressure is even more intense on larger deals. “Over the course of six or eight months, they’re getting offered more money than what they sold the property for,” said Nick Pappas, division president of Stewart Title of California in Glendale. “Obviously, the seller is going to hope they (the buyer) can’t perform especially if someone has offered them $200,000 or $300,000 more.” In some cases, companies are turning away business. “I was doing a deal with a company that wanted to use a particular escrow company, and when I called, they said, ‘We won’t accept any more business. We’re too busy,'” said Mark Wilhelm, vice president and area manager at Wells Fargo Bank. Commercial and industrial real estate transactions, complex under the best of circumstances, are all the more affected by the burst in business. Unlike the residential real estate market, C & I;, as it is called, requires a great deal more hands-on experience to process loans, appraise values, conduct the necessary environmental and other investigations and provide title insurance. Many companies laid off workers when the market dried up in the early 1990s, and those employees have since moved on to other careers. “It’s not like I can go out and hire additional staff to do the work,” said Pappas, of Stewart Title. “I can’t even find the staff.” Some companies have managed to steal away title officers, appraisers and others from competitors, but because of the shortage of skilled workers, many are resorting to more creative recruiting approaches. Pat Crouch, vice president, director of sales at Old Republic Title Co. in Glendale, has hired on former Realtors to act as company representatives. The office of about 140-150 employees added about 35 new people in the past six months, Crouch said. Though interest rates have remained stable, borrowers are worried that they can increase any day. That’s especially true in the commercial and industrial market, where lenders do not lock in rates, even for a limited time period, at the start of the process. And even if interest rates remain unchanged, property values are increasing. “Absolutely people are getting nervous,” said Nona Thavaj, vice president, advisory title officer at First American Title Co. in Glendale. “I think everybody’s trying not to miss the boat. They want to get it all done in time.”

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