What is a T-12 in real estate?

A T-12 (Trailing Twelve Months) is an operating statement showing the last 12 months of income and expenses for a property. Lenders use it to calculate Net Operating Income (NOI) and determine loan amounts. Bhumi provides forensic T-12 audits that reconcile every line item to bank statements.

How long does a T-12 audit take?

Bhumi delivers a complete, lender-ready T-12 package within 48 hours of receiving your documents. Full forensic reconstruction typically takes 1-2 weeks. Deal closing support runs approximately 30 days.

What size multifamily portfolios does Bhumi work with?

Bhumi specializes in $500K to $5M multifamily portfolios with 5-50 units. This is the sweet spot where institutional lenders require documentation but owners often lack institutional-grade bookkeeping - too complex for most accountants, too small for institutional advisors.

What documents do I need to start a T-12 audit?

To start, Bhumi needs three things: 12 months of bank statements for all accounts touching the property, a current rent roll showing units, tenants, and rent amounts, and your most recent tax return or Schedule E for the property.

How much does a T-12 audit cost?

Bhumi charges a flat fee based on portfolio complexity - number of units, bank accounts, and document condition. No hourly billing surprises. Contact for a specific quote based on your situation.

What lenders does Bhumi work with?

Bhumi is lender-agnostic and has prepared packages for Freddie Mac Small Balance Loans, Fannie Mae Small Loans, regional banks, credit unions, and private lenders. The documentation standards are tailored to each lender's requirements.

What is NOI variance and why does it matter?

NOI variance is the gap between what your T-12 operating statement shows and what your bank deposits prove. Lenders require zero variance for loan approval. Bhumi's forensic reconciliation traces every dollar of revenue to a specific bank deposit, eliminating phantom income and protecting your loan amount.

Can Bhumi help with inherited real estate portfolios?

Yes. Bhumi specializes in inherited portfolios where the previous generation ran operations manually. We've handled portfolios with Venmo payments, cash deposits with no paper trail, commingled personal and business expenses, and decades of accumulated documentation gaps.

What is a loan commitment letter in multifamily financing?

A loan commitment letter is a formal document from the lender stating they will fund your loan under specified terms and conditions. Unlike an application or term sheet, the commitment letter creates a binding obligation—the lender must fund if you satisfy all conditions precedent. However, it's not unconditional: the commitment includes 'outs' that protect the lender if circumstances change materially.

When do I receive the commitment letter in the Freddie Mac process?

You receive the commitment letter after the lender completes underwriting and Freddie Mac approves the deal. The typical timeline is 45-60 days from application to commitment. The commitment letter follows the term sheet (non-binding) and precedes rate lock. You'll have a window (usually 30-60 days) to satisfy conditions precedent before the commitment expires.

What conditions in the commitment letter can I negotiate?

You can negotiate: timeline extensions for conditions precedent, reduction of good faith deposit, removal of unnecessary conditions (if you can demonstrate they're already satisfied), and clarification of vague language. You generally cannot negotiate: interest rate (set by market), core underwriting terms (LTV, DSCR), Freddie Mac Guide requirements, or material adverse change clauses.

What happens if I miss a condition precedent deadline?

Missing a condition precedent deadline gives the lender the right to terminate the commitment and retain your good faith deposit. However, most lenders will grant extensions if you communicate proactively and the delay is reasonable. The key is early communication—don't wait until the deadline passes to ask for more time.

Can the lender walk away after issuing a commitment letter?

Yes, through specific 'outs' in the commitment. Common outs include: Material Adverse Change (MAC) clauses covering the property, market, or borrower; failure to satisfy conditions precedent; discovery of misrepresentation in the application; title defects; environmental issues; or changes in borrower's financial condition. The commitment is binding, but not unconditional.

The Commitment Letter: Reading Between the Lines

Definition

Commitment Letter: A binding document from the lender agreeing to fund your loan under specified terms, subject to satisfaction of conditions precedent and the absence of material adverse changes.

The term sheet got you excited. The commitment letter determines whether you actually close. This document transforms a lender's interest into a legal obligation—but that obligation comes with conditions, deadlines, and escape hatches that can still derail your deal at the finish line.

What Is a Commitment Letter?

A commitment letter is the lender's formal promise to fund your loan. Unlike a term sheet (which is non-binding), the commitment letter creates legal obligations on both sides: the lender must fund if you perform, and you must satisfy conditions or forfeit your deposit.

In Freddie Mac SBL transactions, the commitment letter typically runs 15-25 pages and includes:

Loan terms: Amount, rate, term, amortization, prepayment structure
Conditions precedent: What you must deliver before closing
Conditions subsequent: What you must deliver after closing
Representations and warranties: What you're certifying as true
Material adverse change clauses: The lender's exit ramps
Good faith deposit requirements: Your skin in the game

Commitment Letter vs. Term Sheet vs. Application

Document	Binding?	Deposit Required?	Lender Obligation
Application	No	Sometimes (refundable)	None—just agreeing to underwrite
Term Sheet	No	Sometimes	None—indication of interest only
Commitment Letter	Yes	Yes (at risk)	Must fund if conditions met

The Anatomy of a Commitment Letter

1. Loan Terms Section

This section memorializes everything from the term sheet, now in binding form:

Loan amount (may be subject to final appraisal)
Interest rate or rate lock terms
Loan term and amortization period
Prepayment provisions (yield maintenance, defeasance)
Recourse provisions
Reserve requirements

Key Point

The loan amount in the commitment is often stated as "up to" a maximum, subject to final appraisal and underwriting. A low appraisal can reduce your proceeds even after commitment.

2. Conditions Precedent

Conditions precedent are requirements you must satisfy before the lender will fund. These typically include:

Category	Typical Requirements	Common Issues
Title	Clean title commitment, survey	Boundary disputes, easement issues
Insurance	Evidence of coverage per Guide requirements	Inadequate limits, wrong named insured
Entity	Formation docs, good standing, organizational chart	Missing authorizations, ownership discrepancies
Property	Final rent roll, estoppels, lease amendments	Tenant disputes, undisclosed concessions
Third-Party Reports	PCA, Phase I, appraisal	Environmental issues, deferred maintenance
Legal	Opinion letters, UCC searches	Prior liens, judgment liens

Warning

Review conditions precedent immediately upon receiving the commitment. Some require third-party involvement (title companies, attorneys, insurance agents) with their own timelines. Start these processes before the commitment arrives.

3. Conditions Subsequent

Conditions subsequent are requirements you must satisfy after closing, typically within 30-90 days. Common examples:

Recorded deed and mortgage
Final title policy
As-built survey (if construction involved)
Evidence of completed repairs from PCA
Final estoppels from all tenants

Failure to satisfy conditions subsequent can trigger a default under the loan documents, so track these carefully post-closing.

4. Material Adverse Change (MAC) Clauses

MAC clauses are the lender's escape hatches. They allow termination if something material changes between commitment and closing:

MAC Category	What It Covers	Example Trigger
Property MAC	Physical condition, occupancy, income	Major tenant vacates, fire damage
Borrower MAC	Financial condition, creditworthiness	Bankruptcy filing, judgment lien
Market MAC	Economic conditions, interest rates	Financial crisis, rate spike
Regulatory MAC	Legal/regulatory changes	Zoning change, new compliance requirement

Key Point

Market MAC clauses are the most dangerous because they're often broadly drafted. A significant rate spike between commitment and closing could give the lender an out—even if your property is unchanged.

5. Good Faith Deposit

The commitment letter requires a good faith deposit—typically 1-2% of the loan amount. This deposit is:

At risk if you fail to satisfy conditions precedent
Refundable if the lender exercises a MAC clause
Applied to closing costs if the deal closes

On a $5M loan with a 1% deposit, you're putting $50,000 at risk. This creates real consequences for failed conditions.

How to Read the Commitment Letter

Step 1: Verify the Numbers

Compare every number to your term sheet and application:

Loan amount matches expectations
Interest rate or spread matches term sheet
Prepayment terms match (yield maintenance vs. defeasance)
Reserve requirements match underwriting

Step 2: Calendar the Deadlines

Create a closing checklist with every deadline:

Commitment expiration date
Rate lock deadline (if not yet locked)
Conditions precedent due dates
Closing date
Conditions subsequent due dates

Step 3: Identify the Risks

Flag any condition that's not yet satisfied or could be difficult:

Title issues you're aware of
Tenant estoppels not yet signed
Insurance requirements you haven't confirmed
PCA repairs not yet completed

Step 4: Review MAC Clauses

Understand exactly what could trigger a MAC:

How is "material" defined?
What occupancy drop triggers the property MAC?
Is the market MAC limited to catastrophic events?

What You Can (and Can't) Negotiate

Negotiable	Usually Not Negotiable
Timeline extensions for conditions	Interest rate (market-driven)
Good faith deposit amount	LTV and DSCR requirements
Removal of satisfied conditions	Freddie Mac Guide requirements
Clarification of vague language	MAC clause existence (only scope)
Waiver of specific representations	Reserve requirements

Warning

Don't over-negotiate. Pushing back on standard terms signals inexperience and can damage the lender relationship. Focus negotiations on items that create real risk or are genuinely unreasonable.

The Rate Lock Decision

Most commitment letters give you a window to lock your rate. Key considerations:

Lock early if rates are rising or you're confident in closing timeline
Float if rates are falling and you can tolerate the risk
Lock period should match realistic closing timeline (with buffer)
Extension costs can be significant—typically 0.125% per week

Remember: once locked, you pay breakage fees if you don't close. Only lock when you're confident conditions precedent will be satisfied.

When Commitments Fall Through

Deals die after commitment for several reasons:

Failure Reason	Deposit at Risk?	Prevention Strategy
Borrower can't satisfy conditions	Yes	Review conditions before signing
Property MAC triggered	No (usually)	Maintain property, communicate issues early
Borrower MAC triggered	Depends	Avoid major financial changes pre-closing
Market MAC triggered	No	Lock rate early if concerned
Title issues discovered	Depends	Order title work early

Insider Terminology

Conditions Precedent (CPs)

Requirements that must be satisfied before the lender will fund. Failure to satisfy = commitment terminated, deposit at risk.

Conditions Subsequent

Requirements that must be satisfied after closing. Failure to satisfy = potential loan default.

Material Adverse Change (MAC)

Significant negative change to property, borrower, or market that allows lender to terminate commitment without penalty.

Good Faith Deposit

Borrower's deposit (1-2% of loan) that's at risk if borrower fails to close. Applied to closing costs if deal funds.

Rate Lock Agreement

Separate agreement fixing the interest rate for a specified period. Triggers breakage fee obligations if deal doesn't close.

Key Takeaways

Bottom Line

Commitment ≠ Closing: Conditions and MAC clauses can still kill the deal
Read every word: Terms may differ from the term sheet
Calendar everything: Missed deadlines forfeit deposits
Start conditions early: Many require third-party involvement
Communicate proactively: Problems get solved; surprises kill deals