Top 3 Reasons a Hard Money Lender Will Turn Down Your Real Estate Deal

I recently did a survey of all of the hard / private money lenders I know in the industry. I also posted the survey on LinkedIn to get answers from the hard/private money lenders I don’t know. The question I asked these lenders was pretty simple:

What are the top 3 reasons you decline a real estate deal when the numbers make sense?”

 Although I received a lot of different answers to this question, there were 3 top reasons that kept appearing from the majority of the hard money / private money lenders I surveyed.

1. Neighborhood: The property is located in a high crime or extremely distressed area. Sometimes this is where the good rehab properties are found, but if a lender is afraid to get out of his car without a gun when he/she does the site inspection, you most likely won’t get a hard money loan on it.

2. Location: The property is located outside of a major metropolitan area in a rural location where there are no sold comparables within 2 miles of the subject property. Hard money and private money lenders prefer to lend in major metropolitan areas over rural locations. Although a real estate deal in a rural area may look good on paper, if there aren’t sold comps nearby to support value, a hard money lender may turn it down. Also, smaller market, smaller pool of buyers. There are exceptions of course.

3. Borrower’s Cash Reserves: Particularly on a rehab loan, a borrower who seems to be grossly undercapitalized is a sure decline. Lenders want to make sure a borrower can cover any shortages in construction, or in case of a low appraisal for the refinance.

If you are a borrower who has been turned down for a hard money loan on a deal that penciled on paper, please share your experience. If you are a hard money lender reading this, please share your own top reasons for declining a real estate loan where the numbers made sense.

 

About the author

Corey Curwick Dutton Corey Curwick Dutton, MBA Park City, Utah - 2005 MBA Graduate with 10 years experience in Business Management including International Management. Corey is a Private Money Lender and Loan Officer. In her spare time Corey enjoys writing on topics in the private money lending industry. She also enjoys hobbies such as mountain biking and skiing in the great outdoors of Utah. Google

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