When Oscar Wilde wrote the words, “Man can believe the impossible, but man can never believe the improbable,” he had something in mind other than the demising events of Enron and Lehman Brothers.
One of the risky habits developed by many buyers during the real estate bubble was that financing contingencies were conditional solely on receiving a "commitment letter" from a bank. The commercial real estate industry’s new norm was for buyers to bear the risk of a bank being able and/or willing to fund at closing.
The reality of the capital markets is that banks may fail or withdraw financing even after a commitment is issued. Industry experts predict approximately 100 bank failures this year. A leading commercial real estate brokerage firm recently had the sale process of an office building imperiled when the bank providing loan commitments for this potential transaction collapsed.
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