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What Is the Difference Between a Hard Money Lender and a Fee Collector?

15 Jan 2012 | No Comments | posted by Corey Curwick | in Success

AAs with any type of business, there are good companies and there are bad companies.  It is the same thing with private money lenders. The “bad” lenders are commonly called, “fee collectors,” and in fact aren’t really lenders at all. These are lenders that may give a loan here and there but will make most of their money from collecting upfront fees from their borrowers with no real intent to make a loan to them. (It is usually when you’ve been turned down by everyone else for a loan and a private lender suddenly comes forth with a very fast answer of ‘yes.’ If it seems too good to be true, it probably is!). These upfront fees could be called application fees, review fees, analysis fees, evaluation fees, preliminary underwriting fee, and commitment fees.

Then there are the “good” lenders that make money by giving loans, and not by collecting upfront fees from clients. A good private money lender may provide you with a Letter of Intent that sets forth the terms of the loan.  If you agree to the terms set forth in the Letter of Intent provided by the lender, then you may have to pay for a small site inspection fee or appraisal fee etc., but typically no more than $500.

If you search online, you can sometimes find out if a lender is a fee collector by simply typing in the lender’s name and then the word “scam” or “Rip off.” However, make sure you look beyond the first page of a google search to find dirt on a bad lender. Some lenders will use a trick of trying to cover up bad online press with stories or other articles that will serve to bury the bad press on the 3^rd or 4^th page of a google search. Most people don’t bother to read the search results founds on the 3^rd or 4^th page of a google search so make sure you do your homework. Read more..

How To Get Your Deals Funded Quickly

16 Mar 2009 | 1 Comment | posted by Corey Curwick | in Success

Checklist for Fast Closings of Private or Hard Money Loans.”

I found a few good items that I wanted to add to this checklist.  In an older article out of the Scotsman Guide, written by John Kutac of Western Capital, some other things jumped out at me that I wanted to add to this list.

John discusses the importance of the “initial presentation.”  With so much competition for the eyes of the lenders, you have to know how to present your deal in just the right way.  This is where an experienced broker can truly be of value because, as John wrote, quality presentation at the outset can give your deal the “best opportunity for funding.”

Another thing that jumped out at me from the article was the need to present both the strengths and weaknesses of the deal in a clear, concise fashion. Your broker should understand the points that make your deal a good deal, as well as any issues with the deal.

Posted by Corey Curwick on March 15, 2009

Checklist for Fast Closings of Private or Hard Money Loans

8 Mar 2009 | No Comments | posted by Corey Curwick | in Success

Most investors who seek private or hard money need it fairly quickly.  Reasons can include:

–Other Notes coming due

–An unexpected interruption in funding

–A quick takedown of real property being offered at a deep discount

Or, the worst, a Note being called due by the bank without advance notice.  Whatever the reason, private or hard money loans usually need to fund quickly.

One of our “preferred” lenders tells us that a loan will fund as soon as it takes them to feel “comfortable” with the deal as a whole.  For our lenders to feel “comfortable” with a deal, we must provide specific pieces of information to them which help them get to the comfort zone very quickly.

Getting your lenders to this comfort zone requires a specific checklist that both borrowers AND brokers need to keep in their back pockets.  One of the first items on this list is to identify the collateral being used for the loan. This is one of the single most important items that can stand between you and a speedy closing on the loan.

• What is the collateral or how is it classified?
• What is the value of the collateral being used?
• What is the value based on? (local comps, broker’s opinion, appraisal, etc.)
• Where is the collateral located? (Can it be readily accessed for inspection?)
• What encumbrances or liens are currently on the collateral?
• Who has Title to it?

Other important items on the checklist for speedy private or hard money closings include:

• 1. Who is the borrowing entity or individual? If borrower is an L.L.C. or corporation, who are the members? What is the contact info. for all borrowers?
• 2. Use of Funds: Lenders will need a brief but descriptive explanation for the use of the loan proceeds. If there is any cash out requested, borrowers will need to substantiate every dollar of the cash out.  This is usually shown best with a basic spreadsheet.
• 3. Basic loan application: Primary borrower will need to provide a full loan application which includes social security number, date of birth, list of assets, etc.

If you are concerned about getting your loan funded quickly, use an experienced broker that will know what other crucial items are on this checklist.  Often, borrowers will attempt to go to the lender directly, expecting a speedier route to closing.  In my experience, not only is NO time actually saved by circumventing the qualified private money broker, but all too often, unnecessary fees are paid to the lender and both money and time are lost.

Posted by Blake Reese on March 9, 2009