Evaluate lender execution risk by confirming who will fund and approve the loan, what conditions remain, what deposits pay for, and whether the schedule fits the purchase or refinance. Attractive preliminary pricing is useful only if the proposed financing can reach an actual closing on acceptable terms.
A deposit can fund appraisal, legal work, or other diligence without creating a binding loan commitment. Read the written agreement and separate an indication, term sheet, approval, commitment, and final funding. The names used in a conversation are less important than the actual obligations.
Identify each participant’s role
Determine whether the contact is the direct lender, a broker, correspondent, marketplace, or another intermediary. Ask which legal entity issues terms, receives deposits, commissions reports, approves credit, and provides funds at closing.
An intermediary can provide valuable access and coordination, but its role should be clear. A proposal passed through several parties can create uncertainty about authority, fees, timing, and who can answer material underwriting questions.
Verify identities and contact information through established channels. Confirm payment instructions independently using a trusted contact rather than relying solely on a new message. This is practical transaction administration, not a substitute for the closing team’s procedures.
Ask what approval has actually occurred
Determine whether a decision-maker has reviewed the rent roll, operating history, capital scope, sponsor information, property use, and requested timing. A high-level expression of interest may precede detailed underwriting.
Ask what can change principal, rate, reserves, recourse, or closing date. Common categories to investigate include valuation, environmental findings, title, insurance, lease review, construction pricing, sponsor information, and credit approval. The actual process varies by provider.
Record the remaining conditions and who owns each one. A condition register with deadlines is more useful than repeated assurances that the loan looks good. If the transaction becomes unconditional before key conditions can be resolved, the investor should understand that exposure.
Read the deposit agreement line by line
Identify amount, recipient, purpose, refund conditions, expenses deductible, cancellation treatment, timing of any refund, and whether funds apply to closing costs. Ask for written clarification of ambiguous terms before paying.
A refundable deposit can still be reduced by actual third-party expenses under the agreement. A nonrefundable payment may be a known at-risk cost the investor chooses to incur. The decision should be explicit rather than based on an assumption that all unused money returns automatically.
Avoid inferring approval from a payment. Paying for an appraisal starts a task; it does not establish the value, loan size, or final credit decision. The same principle applies to legal review, environmental work, and construction analysis.
A hypothetical deposit comparison
Assume Proposal A requests $25,000 for documented third-party expenses, with unused funds refundable under the written agreement. Proposal B requests $15,000 that is expressly nonrefundable and applied to specified closing fees only if the loan closes. These terms are invented for analysis.
If A incurs $12,000 of agreed expenses before the borrower cancels, the hypothetical refund is $13,000 under the stated simplified arrangement. If B does not close, the full $15,000 remains an at-risk cost under the assumed clause. The lower initial payment does not automatically mean less risk.
| Hypothetical item | Proposal A | Proposal B |
|---|---|---|
| Initial deposit | $25,000 | $15,000 |
| Assumed incurred expense on cancellation | $12,000 | Not relevant to stated nonrefundability |
| Assumed refund | $13,000 | $0 |
| Modeled cost if transaction stops | $12,000 | $15,000 |
Real agreements can have materially different terms. The point is to evaluate the actual refund mechanism and incurred-cost risk, not rank deposits by size alone.
Evaluate the proposed timeline
Map credit review, third-party reports, legal documents, title, insurance, sponsor deliveries, and funding authorization to the required closing. Identify dependencies rather than assigning every task the same completion date.
Ask when reports can be ordered, whether the lender accepts existing reports, and what updating or reliance may be required. A report obtained for another transaction is not automatically usable by the new provider. Confirm acceptance directly.
For a Chicago-area property, unresolved use, building issues, tax questions, or environmental history can require additional work. A short marketing timeline should not override the time needed to investigate the subject property responsibly.
Confirm the financing solves the actual funding need
Compare gross commitment, initial advance, deductions, reserves, and future draws. A proposal can appear to meet the requested amount while delivering less purchase cash because part is restricted to later improvements.
Reconcile sources and uses after fees and reserve requirements. If the expected initial equity rises, confirm owners can fund it. An execution failure can arise from a misunderstood draw structure even when the lender is prepared to close exactly as proposed.
The OCC handbook provides commercial underwriting context for collateral, repayment, and administration. It does not guarantee a particular provider’s execution or establish that preliminary terms are final. OCC CRE handbook
Investigate experience relevant to the subject transaction
Ask for evidence of completed transactions with similar asset, size, condition, and structure where appropriately available. Distinguish the experience of the contact from the funding entity and servicing platform.
A provider’s public filings can describe its business, funding, products, and risks. Ready Capital’s annual report is an example of a direct financing-business disclosure. It is not an endorsement or proof that any other provider can execute the same product. Ready Capital 2025 annual report
Do not substitute a logo list or an unverified funded-deal claim for actual process clarity. Experience is useful when it helps explain how the provider will address the property’s specific issues and deadlines.
Ask how servicing works after closing
Identify who handles payments, reporting, draws, approvals, reserves, assumptions, extensions, and problems. A loan that closes but cannot support the planned administrative sequence can still impair the investment.
Review response processes and contractual rights. A lender’s willingness to discuss a change is different from a documented borrower option. Ask how requests are submitted, which fees apply, and who has authority to consent.
If the business plan requires repeated draw releases or major leasing approvals, administration deserves particular attention. Record those dependencies in the acquisition plan rather than assume all post-closing actions are routine.
Preserve alternatives without misrepresenting commitments
An investor may compare several proposals and maintain a backup path, subject to actual agreements and exclusivity obligations. Understand the cost, timing, and duplicated diligence if a switch becomes necessary.
Do not assume an alternative can fund immediately because it previously expressed interest. Keep information current and identify what remains to approve. A credible backup requires its own evidence and schedule.
Also identify a decision deadline. If key conditions are unresolved, determine whether to extend the purchase contract, contribute more equity, change structure, or stop. Sunk diligence costs should not force an unsuitable closing.
Keep a transaction decision log
Record the selected provider, economic rationale, known conditions, deposits paid, reports ordered, and dates of material changes. Preserve versions of term sheets and the final comparison. This makes it possible to evaluate whether the signed loan still fits the original decision.
If proceeds or terms change, trace the cause. A smaller accepted income, lower value, reserve requirement, or different structure needs a specific response. An unexplained revised number is a reason to seek clarification before committing more capital.
Jaken’s commercial financing overview can help organize an asset-class inquiry. Confirm the provider role, actual terms, deposits, conditions, and timeline through the verified transaction channel. Jaken commercial financing
The execution test is concrete: an identified funding source, supported underwriting, a feasible timetable, understood at-risk costs, and enough equity to close under the proposed conditions. The investor should be able to explain each before paying a material deposit or allowing a critical deadline to pass.
Align the purchase deadline with financing uncertainty
Review the purchase contract with the appropriate advisers so the investor understands inspection, financing, deposit, extension, and closing obligations. A lender’s diligence process does not automatically extend a seller’s deadline or protect an earnest-money deposit. Record which decisions must occur before contractual protection ends.
If financing remains conditional near that date, quantify the exposure. Can the buyer close with additional equity? Is a documented extension available? Would a different provider have time to complete its work? A plan that depends on several unapproved events should be presented as conditional, even when every participant is optimistic.
Separate service quality from a promise to waive conditions
Clear communication and responsiveness are valuable execution signals. They do not mean the provider must disregard an adverse appraisal, environmental finding, or credit issue. A credible process identifies concerns and paths to resolution rather than assuring the borrower that every condition will be waived.
When a concern arises, ask for the specific evidence, decision authority, and next step. That response can be evaluated. A general statement that the deal is still moving provides little basis for committing more money. Preserve the issue and deadline in the transaction log until it is actually resolved.
Record which third-party reports remain reusable if the lender declines the transaction.