Conservative lending practices are creating a financing gap in Brooklyn and Queens industrial real estate, pushing more transactions toward seller financing and all-cash deals as buyers struggle to secure traditional loans.
Eitan Hakami, a licensed associate broker at Greiner-Maltz Real Estate specializing in Brooklyn-Queens industrial properties, reports that a consistent pattern of low bank appraisals is undermining the financing process. He says buyers are frequently promised a certain loan amount based on standard loan-to-value ratios, only to have the bank’s appraisal come in far below the agreed purchase price. “Banks promise $750,000, but after the appraisal, they’ll only lend $500,000,” Hakami says. He describes this as a systemic issue rather than an occasional setback, noting that appraisals are “constantly coming in way below the value of the purchase.”
Hakami emphasizes that this trend is not limited to a handful of transactions. “Banks are constantly under-appraising properties, even when we provide comparable sales,” he explains. “They use their own criteria, and it’s happening with almost every bank we deal with.” This consistent undervaluation is changing how industrial properties are bought and sold in the region.
Faced with a persistent appraisal gap, buyers and sellers are increasingly structuring deals to avoid traditional lenders altogether. Rather than lowering prices or abandoning deals, they are turning to seller financing as a practical solution.
Hakami notes that a significant portion of his recent sales have involved seller financing. In these arrangements, the seller acts as the lender for a set period, allowing the buyer to purchase the property without relying on a bank loan. This approach benefits both parties: sellers defer some capital gains by receiving payments over time, and buyers secure more favorable terms than banks currently offer.
Beyond enabling deals, seller financing also provides greater certainty. Sellers are now reluctant to accept contracts with financing contingencies, which allow buyers to back out if they cannot secure a loan. “Sellers are staying away from contracts with financing contingencies because you never know if the deal will close,” Hakami explains. “Waiting three months for a loan approval could mean losing valuable time and opportunity if the deal falls through.”
This marks a shift from prior norms, under which sellers routinely allowed buyers time to obtain mortgages. “In the past, giving buyers time to find a mortgage was standard. Now, sellers are moving away from that,” Hakami says.
Aside from seller financing, Hakami finds that the only buyers consistently closing industrial deals are those paying all cash or using 1031 exchanges. “The only people who can buy are those selling another property and doing a 1031 exchange, or buyers with cash,” he says.
This has narrowed the pool of active buyers and shifted the market dynamic. Traditional bank financing, once a driver of industrial transactions, now acts as a barrier when appraisals fall short, and interest rates remain elevated. Hakami notes that higher rates have made properties less affordable and further restricted access to credit. “When interest rates go up, everything becomes less affordable, so buyers can’t really use the banks to finance their property,” he says.
As a result, a two-tiered market has emerged. Properties that attract all-cash buyers or can be structured with seller financing continue to change hands, while listings dependent on traditional loans linger or require price cuts.
The move away from bank financing may have broader consequences for the Brooklyn-Queens industrial market. When more deals are structured as seller-financed or all-cash transactions, the market loses some of the price discovery that comes from standardized bank appraisals. This could reduce pricing transparency and make it harder for both buyers and sellers to gauge fair market value.
Hakami’s observations suggest that banks are applying stricter appraisal standards than local market participants consider justified, even when presented with comparable sales data. Whether this reflects prudent risk management or an overly cautious stance by lenders remains unresolved.
For now, the Brooklyn-Queens industrial market is adapting by finding workarounds to conservative lending. Seller financing and all-cash transactions have become essential tools for closing deals, replacing the once-standard reliance on traditional bank loans.
Whether these alternative structures remain common depends on how long banks maintain their current appraisal practices and whether interest rates continue to limit credit access. If lending standards loosen or rates fall, traditional financing could regain its role. Until then, buyers and sellers must approach each deal with flexibility and creativity to keep transactions moving.
Deals are still closing in Brooklyn and Queens industrial real estate, but they now require more inventive solutions than when bank financing was readily available at expected loan-to-value ratios.
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