Date Acquired

Definition of Date Acquired

In the context of commercial mortgages, the Date Acquired refers to the specific calendar day on which a borrower officially takes legal title and ownership of a commercial real estate asset. This date is established when the deed is signed, delivered, and typically recorded in the public records of the jurisdiction where the property is located. For lenders, this date marks the beginning of the borrower's "holding period."

Significance in Commercial Lending

The Date Acquired is a critical data point used by commercial underwriters to determine risk, equity, and loan eligibility. It serves several primary functions in the mortgage process:

• Seasoning Requirements: Most commercial lenders require a property to be owned for a specific period (often 6 to 12 months) before the borrower can qualify for a cash-out refinance. This is known as "title seasoning."
• Value Basis vs. Appraised Value: If the Date Acquired is recent (usually within the last 12 months), a lender may base the loan-to-value (LTV) ratio on the original purchase price plus documented improvements, rather than a new, higher appraised value.
• Operational History: The acquisition date helps lenders understand how long the current management has been in place to stabilize the property’s Net Operating Income (NOI).

Impact on Refinancing and Cash-Outs

The Date Acquired determines whether a transaction is classified as a "rate and term" refinance or a "cash-out" refinance. For properties acquired very recently, lenders are often hesitant to allow borrowers to pull equity out of the deal until the borrower has proven they have added value to the asset over a sufficient period. If the Date Acquired is less than one year ago, the lender may "cap" the loan amount at the borrower's actual cost basis.

Verification and Documentation

To confirm the Date Acquired, commercial mortgage brokers and lenders will request specific legal documentation. Accuracy is essential, as any discrepancy can delay the closing of a new loan. Verification typically involves:

• The Settlement Statement (HUD-1 or ALTA): This document provides the exact financial breakdown and date the transaction was finalized.
• The Recorded Deed: A copy of the deed stamped by the county recorder’s office confirms when the legal transfer of title occurred.
• Title Insurance Policy: The effective date of the owner's title insurance policy acts as secondary verification of the ownership start date.

Accounting and Tax Implications

Beyond the mortgage itself, the Date Acquired is the anchor for the property’s depreciation schedule. Under IRS guidelines, the recovery period for commercial structures begins on the date the property is "placed in service," which usually aligns with the acquisition date. It also dictates the holding period for Capital Gains tax treatment, distinguishing between short-term and long-term gains upon the eventual sale of the asset.