When working with a hard money lender, let the lender order the appraisal. Here's why...

Question

Here's another tip for working with hard money lenders.

Let the lender order the appraisal. Don’t think by already having an appraisal it is going to speed up your loan processing. It’s typically a mistake and will ultimately cost you more money on another appraisal.

Most hard money lenders have an approved list of or use just one appraiser or appraisal company. The lender is going to want to order the appraisal from an appraiser it has already selected and or done business with. If by some chance the borrower has obtained a recent appraisal from the same appraiser or appraisal company the lender uses it might be a lucky break for the borrower.
However, most of the time the lender is going to require another appraisal meaning another appraisal cost paid for by the borrower.

Do you have hard money loan questions or tips?

Jay Hinrichs · Answer

Very few if any lenders in today's market place will allow the borrower to order the appraisal and banks don't allow it because its not legal for them to allow clients to do that.

you can have your own appraisal and most of us that are in the business may look at it for reference but we will order our own.

The main reason Account Closed is that as a lender you want to be the client who the appraiser is working for.. so you have protection vis a vi their E&O insurance.

If you accept an appraisal that the borrower ordered and paid for and they are the named client then you have no recourse at all against that appraisal if there was errors or omission claim But JJ makes a good point for sure

Account Closed · Answer

Maybe it's a local thing but the hmls I've worked with at $250K and below don't order appraisals. They do their own valuations. I've never had them send anyone to do an appraisal.

Robert Bacher · Answer

I'll have to chalk that up to "I never thought of it that way!", Thanks for tip.

Guy Gimenez · Answer

@Jay Hinrichs

I don't think "Texas Joe" got that warm and fuzzy feeling here.

Heck, I wish my appearance was closer to Brad Pitt than Shrek, but we can't always be who we want to be. And when the curtain gets pulled back we often find the wizard is isn't who he was portraying.

Darrell Shepherd · Answer

@Dustin Enright its pretty hard to make hard money work on a rental because the cost of money is too high, plus most HM loans are 6 or 12 month terms.

If you've got a stellar deal and want to use hard money to fix it up, then convert the financing its a viable thing to do, but using hard money for a long term investment usually doesn't work.

Marlon Wilson · Answer

Hey

Account Closed than you for the tip! All the best!

Jay Hinrichs · Answer

Dustin Avadar

Generally that is correct 70 to 80% of cost.. now if you lived right there and were a repeat colient etc some will get 100% of costs

Jay Hinrichs · Answer

Kristine Marie Poe

looks like Texas Joe or the other guy touting the owner finance deals might have left the bp fold.. not sure if it was voluntary or not..

Jeff S. · Answer

Agreed. If you work with a direct lender, that is one who loans their own money without the constraints of outside investors, banks, subscription agreements etc., then they can make their own lending rules (within the bounds of the law).

Many HML's, as these, do their own valuations and can often close much quicker than one who must wait for an appraisal or BPO. Always ask the HML where they get their money and if they sell their notes to (presumably more demanding) investors.

And of course don't assume; always ask if they require an appraisal as well as the associated costs and time delay. Not all do, and I know with certainty that this is not limited to CA nor to $250k.

Jay Hinrichs · Answer

Kristine Marie Poe

Depends on where they are getting their money... when I was doing my HML thing I had 5 different banks were I had credit facilities each had a different criteria.

One required appraisals on everything and full assignments recorded etc. others required nothing up to 250k 250k to 500 they wanted BPOS and above 500k 3 P appraisals and they would just take an alonge and hold the unrecorded assignment and the original note and DT in their vault.

When working with a hard money lender, let the lender order the appraisal. Here's why...

When working with a hard money lender, let the lender order the appraisal. Here's why...

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