Hardmoney Upfront Fees
Man, have I ignored this blog for a while or what?! It's possible nobody even noticed because they don't check in, but in case you did notice, I'm sorry!!
There was a thread a few days back about hard money lending and their upfront fees. It reminded me of a time when I was desperate for funding, surrounded by good deals with not enough capital to invest. I had about 10-12k in my bank account at the time, but was bartending, so I didn't have the best tax returns, although I was making decent money. I was 22 years old, had little experience, serious determination, and a 4 unit under contract for 54,500. The emails below are copy and pasted from my Gmail. This was a conversation I had with a broker who said he representend hard money lenders....
Sorry it took so long to get this to you. I lost your email address, then obviously I found it.
In response to our conversation, here are the items you will need to get to me for your purchase in NC..........
1. 1003 Application filled out and signed (attached)
2. Last two years tax returns and w-2 forms
3. Last two paystubs (if any)
4. Last two bank Statements
5. A copy of a recent Credit Report with Scores
6. A subject to appraisal (To be ordered later)
7. The last Statement for any investments you have (Stocks, mutual funds, retirement plan)
Please get me those items. As far as the app fee, I am also attaching an authorization form for you to fill out and send back to me. As soon as the card clears, I will submit your docs to the lender and get you the best deal,
The quicker you get this to me, the sooner I can get this done. If you have any questions, don't hesitate to call.
thanks for your help so far ...a few quick questions...i always thought income wasn't so crucial as a deciding factor for hard money loans..i could put my actual income, but i would not be able to prove it with tax returns..what do you suggest i do? also, i'm curious about the 299 upfront fee..i don't mind paying it as long as i do get the funding i need..what happens if after the investors see my low income if they do not want to fund my deal?? if i don't receive the funding i need, do i get my 299 dollars back?? ---bryan
Based upon the income you told me about on your bank statements, this is a doable deal. They are more concerend about reserves. Plus the fact you have the pre-approval from your bank as an exit strategy gives them peace of mind that you can get out of this deal.
If you have any others questions, feel free to ask. Thanks.
I don't mind paying the 299 as long as I get the money, but that's a good chunk of money to give away if for some reason I do not get my funding. What happens to the 299 if I dont get the funding I need? Is it returned to me?? Thanks--Bryan
As you requested, let me explain the $299 refundable app fee. This is a fee my lenders require to make sure borrowers are for real and serious. The fee is refundable, as the authorization states, if I do not perform my duties as consultant or the loan is turned down for disclosable reasons. Such as your income or reserves.
I hope this helps you out. Please let me know what you want to do. Thanks.
RIGHT AFTER SENDING THIS EMAIL, DAVE CALLED ME TO FURTHER EXPLAIN THAT THE 299 WAS JUST TO SHOW THAT I'M SERIOUS. HE WENT ON TO SAY THAT IF I WASN'T WILLING TO PUT UP THE 299, THEN I OBVIOUSLY WASN'T A SERIOUS INVESTOR AND THEREFORE, COULDN'T POSSIBLY UNDERSTAND THE INTRICACIES OF PRIVATE LENDING.
2 DAYS WENT BY AS I THOUGHT, "DO I WANT TO LOSE MY 299 BUCKS?"....
What have you decided to do?
I talked to other hard money lenders today. You were the only one wanting to charge a consulting fee or any sort of application fee. Please understand, I do not think you are trying to take advantage of me for a measly 300 bucks. On the other hand, I am indeed serious about my business, and that is why I have to question every single expense. I'll be more than happy to pay you if you can get me my funds. But I'm not looking to pay someone before they deliver. If we can get creative and you will allow me to pay the money at the closing table, I am in the deal, and ready to do business, but I have to make sure my money is being used properly. Are you willing to work something out?? Thanks-Bryan
I suggest you go with others. I will back out of this deal. Thanks.
No problem, thanks for your time. --Bryan
When you find others can't do your deal, remember I could have. You are the type of people my investors want me to stay away from because they feel if you can't afford the $299, you can't afford the loan. That is why they stick to that rule. If I could, I would love to help you. You seegim like a good guy. But I am always reminded by my guys this simple truth. When you go to the grocery store, do you tell the cashier you are taking the groceries home and then you will be back after you eat them and pay? That is what they remind me about whenever I want to help someone like you. Bryan you will spin your wheels and end up with nothing. Good luck.
I had several great responses to Dave's last email, but in the end, I decided it wasn't worth my time. Now, was he trying to scam me? Maybe yes, and maybe no. In the end however, I used this as motivation to go on BiggerPockets and find a hard money lender to get a deal done. I private messaged anyone who mentioned there were brokering hard money loans or lending hard money. Finally, I came across a lender who was honest and upfront. So far, he has lent me hard money on 4 deals. Not only that, but he has also been a great reference for me to two other private lenders. If you ever feel something is sketchy in your guy, stay away!! I'd love to email this guy back, and tell him how I've done since we last talked, but it's not worth it. It just makes me smile every time I read it because of how far I've come.
Now on to the meat of this blog post---if you're out there looking for money, a deal, buyers, sellers, etc. Whatever it is, don't give up if it's your passion and you truly want to do it!! I was ready to give up, but I perservered, and the rest is history.