BiggerPockets

You should just post the questions... then BP Nation can have a chance to answer them. You can always go to a SC attorney foir answers but for sure the general questions that we can answer for you here will save you time/money when you talk to an attorney.

You could lodge a complaint with your state attorney general and/or your Office of the Commissioner of Banking. You may have some support from these SC offices if, for instance, the NY company isn't registered as a foreign (to SC) entity with the secretary of state. I don't know SC law, but some AG offices are more aggressive than others in addressing consumer protection cases/complaints.

My guess is that you are probably screwed with little recourse... but I am not an attorney. Contacting the above SC resources will just cost you some time and energy... and may make your decision on if you should go forward with legal action a little easier. My 2 cents.

There are several "hard money lenders" in NY who make a business from the deposits, not the loans. Sounds like you found one of them.

To your question - most hard money lenders are not licensed, because most of the reputable ones work with real estate investors who run a business. In order to lend to individuals, under the new SAFE act, they must be licensed. Licensing includes requirements such as working as a loan originator doing residential lending for 5 years, or other requirements particular to a state. Therefore, most "national hard money lenders" lend to companies only. Even local hard money lenders follow that protocal. So you will likely find that they are not licensed.

You can file a complaint with the Attorney general of your state or the Banking Commission, as Chris says. But is is likely that the cost of recouping your loss will exceed the loss. Therefore, you are probably screwed, in a practical sense.

Going forward:
1. Always google a person or company, to find the complaints before you plunk down your money
2. Ask around at the local REIA or your other real estate investing buddies (you now have a bunch of them on Bigger Pockets) for references to local hard money lenders
3. It is not unusual to have SOME up front fees. In my case, we charge a deposit ($1000) for the attorney and title work. If you don't close, someone has to pay for that work, so the fees are applied to that. You get anything back that isn't used.

I am so tired of hearing people getting screwed by these people.

6,500 on a 160k purchase price is outrageous.A residential appraisal should cost about 300 to 400 bucks at market value for most hard money purchases unless it is a really big house.

Now commercial appraisals DO run about 3,000 to 5,000 dollars depending on the asset type and size.

The New York company sounds like they don't want to tie up there money just collect the fee.

Unfortunately I know of another situation on a commercial loan where a few hundred k is involved.This lender change the loan programs on their website 6 times in the last 4 months.

The FBI,attorney general,and a whole bunch of other parties are investigating this lender and going after them.

This lender has been in business for over 7 years and they have a bunch of connections.When a lender holds a large due diligence fee they have little motivation
to finish your file to get paid.

If you talk to commercial investors who have completed a bunch of deals they will NEVER EVER pay upfront fees.They tell the lender to go spin.

If the lender you pay upfront fees too wants to do your loan and even if you pay due diligence fees the lender will sometimes drag their feet.

The reason is they might have 10 of the 20 million dollar loans they are making more money on the points on and then they will get around to your little loan later.

You don't know their escrow company and it could be a shell corp and they are in it together.

Tell the lender you will have YOUR ATTORNEY hold funds in escrow.Your attorney will pay the appraiser directly the fee after they have been vetted.

Lenders who have nothing to hide-hide nothing.If they are full of BS you will here a bunch of excuses as to why you can't do this.

I just don't know how these people can go to sleep at night knowing they do these things to people.

I don't think winning is the biggest issue, it's collecting.

While there are legitimate reasons for a lender to charge a fee upfront, the whole practice leads to so much client dissatisfaction that when I started my hard money lending business 11 years ago I decided to never collect any fees upfront. I provide a list of approved MAI appraisers, the borrower (or his mortgage broker) contacts the appraisal firm directly, negotiates the fee, and pays them directly. I inspect the property in question at my own cost, don't charge legal fees until closing, and have the borrower contact the title company and pay any costs directly.

This method of business has proved totally satisfactory. My expenses run about 3% of my income (I work out of home) and inform the borrower that either he or I am free to pull out of the financing prior to closing should circumstances change. I have never pulled out of a committed closing unless I discovered negative information unknown to me at the time of the committment (usually purposefully withheld by the borrower) and have had borrowers close in excess of 90% of the transactions on which they accepted our terms sheet.

All of my lending is on commercial properties; perhaps the financing of houses is a different ballgame and different approach is needed.