More Lenders Verifying Guarantor Assets Before and After Origination 

In commercial real estate lending, the creditworthiness of a guarantor can make or break a deal—especially when market conditions are volatile. In good times, lenders may accept financial statements from guarantors with a quick glance and a signature. But as commercial real estate (CRE) valuations continue to slide, a growing number of lenders are turning to third-party firms such as SitusAMC to conduct rigorous, ongoing asset verification on loan guarantors—before and after loan origination.  

It’s a shift driven by necessity, and it's quickly becoming best practice. “Over the last few years, we’ve seen an increase in lenders requesting this service on the front end, during origination,” said Bradley Parks, Vice President, SitusAMC Financial Diligence & Forensics. “It’s a direct result of the decline in CRE valuations and increased scrutiny of credit quality. Lenders aren’t just taking balance sheets at face value anymore. They want to know the basis for those valuations.” 

Why Asset Verification Matters Now 

Lenders rely on guarantors to backstop loans in case of default. But if the guarantor’s net worth or liquidity isn’t what it seems—or has deteriorated since underwriting—then the lender may find themselves exposed when the market turns.  

This risk has become especially clear in recent years as valuations of commercial properties have declined and economic uncertainty has made asset values less predictable. A guarantor may appear solvent on paper, but if their assets are illiquid, overvalued or encumbered by other liabilities, they may not have the financial strength to support the loan. As a result, over the last three to four years, more lenders have begun proactively validating the financial standing of guarantors before loans close and continuing to monitor their status during the life of the loan. 

A Deep Dive into Verification  

The verification process begins with a detailed checklist, digging into a guarantor’s personal financial statement, real estate holdings, operating agreements, tax returns, and bank statements. 

“If a guarantor includes $600 million in real estate in their financials, it’s just a number on their balance sheet,” said Sandra Adam, Director, SitusAMC Financial Diligence & Forensics “We start to question—what’s the true value of the real estate? What’s supporting that amount?” 

To determine asset value, SitusAMC reviews property operating statements and market data. For example, if a property is being valued with a 5% cap rate in a market that realistically trades at a 7.5% cap, they’ll flag and adjust for current market conditions. Internal market experts may be called upon to provide additional insight on asset quality, geographic risk and capitalization rate trends. Verification also includes:  

• ownership confirmation through operating agreements, deed records, and tax return schedules; 
• liquidity analysis, including detailed review of bank and investment statements  and validating whether funds are held personally or within a business entity; 
• debt and liability review, cross-checking reported obligations against third-party loan statements; 
• and stress testing, to model downside asset scenarios and assess whether guarantors could realistically absorb losses. 

“If someone shows $5 million in cash and $3 million is held in a business account, that’s not straightforward liquidity,” said Parks. “We consider that as entity-held liquidity—and we flag it for the lender, pending verification of access and control.” 

Bringing Specialized Skills to the Table  

The depth and complexity of this work is a key reason why outsourcing to a specialist like SitusAMC is so valuable. Many lenders simply don’t have the internal expertise or bandwidth to conduct a full forensic review of guarantor financials—especially on a quarterly or semi-annual basis. 

“We bring accounting knowledge and underwriting expertise together,” Adam noted. “Underwriters and asset managers may not know how to analyze a financial statement. Accountants might not understand real estate valuation. We do both.”  

SitusAMC analysts review every financial component through both lenses: validating reported values and understanding how those values relate to the actual operating performance of the assets. This includes assessing whether reported ownership percentages match reality, and whether financials are up to date or accurate. Some submissions are brief balance sheets or outdated by years—raising immediate red flags. 

“There’s no consistency in guarantor reporting,” Parks explained. “We’ve seen everything from audited financials to handwritten spreadsheets with a list of numbers and no detail. Our role is to bring structure and credibility to an inconsistent reporting process.”  

Supporting Better Risk Decisions 

Guarantor asset verification is not just about identifying gaps or inconsistencies—it enables lenders to make more informed decisions. If a guarantor doesn’t meet the liquidity threshold, lenders might adjust pricing, require additional guarantees or even walk away from a deal.  

Moreover, regular reviews—especially during times of economic uncertainty—help lenders stay ahead of deteriorating financial conditions. SitusAMC typically reviews bank statements from multiple months and compares values across reporting periods to identify significant shifts.

“We’ve seen values drop millions in just six months,” Adam said. “If you’re not monitoring, you’re at risk of being blindsided.”  

Stress testing is another layer of protection. SitusAMC applies market-based adjustments to NOI and cap rates to model how assets would perform under strain—an essential step in evaluating whether a guarantor can weather a downturn. 

A Cost-Effective Path to Better Lending  

The benefit of outsourcing goes beyond risk mitigation. It’s also about resource optimization. Depending on complexity, the verification process can take 30+ hours per guarantor—time that underwriters could more effectively spend sourcing and structuring new deals. 

“It’s labor intensive,” Parks explained. “You have to get in the weeds, analyze line-by-line and then piece it together. That’s time we free up for the lender to focus on their core business.” 

In other words, outsourcing doesn’t just de-risk a loan. It increases operational efficiency and supports faster, smarter growth for lenders. 

Bringing Rigor, Expertise and Objectivity to Verification  

In today’s volatile CRE market, relying on outdated, self-reported financials is no longer tenable. Lenders need a clear, verified picture of guarantor strength—both at origination and over the life of the loan. 

Third-party specialists such as SitusAMC bring the rigor, expertise and objectivity needed to assess real-world asset values, liquidity and liability exposure. Their combination of accounting acumen and real estate insight delivers confidence that covenant thresholds are not only being met, but that they will hold under stress.  

By outsourcing guarantor asset verification, lenders gain peace of mind—and free up valuable internal resources to focus on what they do best: close good deals. As Parks put it, “Knowing that a professional has vetted the financial information—someone who understands both accounting and real estate—makes all the difference.” 
 
For more information on SitusAMC’s Financial Diligence and Forensics services, contact Sandra Adam at sandraadam@situsamc.com or visit our website. Download our free white paper, “What Looms Beneath the Surface: How Forensic Diligence Builds on CRE Asset Management to Uncover & Mitigate Deeply Hidden Risk,” here.