Hard Money Lender Scams

16 Replies

Hi there,

So, I am new to investing. In the past 6 weeks, I've been able to buy property from motivated sellers and sell it for a very large profit. AS a result, I applied for private funding with willie stevens with posh realty investors. I was able to be approved for $100,000 based on an executive summary, my drivers license, and copy of my utility bill. NO bank statements, or proof of my business financials were required. I got approved for 100k and he is offering me 5% interest rate. Pay back within 1 year. The paperwork looks legitimate. ITs 3 pages long that outlines the terms. It is going to cost me $3,900 which is an up-front loan processing fee.

Does this funding seem legitimate? I don't want to be scammed into someone getting me to wire them $3,900 to their bank account. What are other signs for private money scammers? 

You already have most of the signs, low interest,upfront fees,  add little or no down payment, no lenders license, no physical office or presence  , easy approval , and impossible to find investors in your area that you can verify by property deed of trust or mortgage. Run Run away @Alexis Monroe

Thanks for the feedback. I requested proof of lenders license and he emailed immediately.  He also sent me his drivers license. I also verified his company is registered with state. Could it still be a scam with this documentation? What are realistic terms for private lenders? 

5% interest is not a legit rate for someone you don't know. I've never heard of him, and have no personal experience with him. However, upfront lending fees are highly unusual for legitimate lenders and very common for scammers.

Originally posted by @Alexis Monroe :

Thanks for the feedback. I requested proof of lenders license and he emailed immediately.  He also sent me his drivers license. I also verified his company is registered with state. Could it still be a scam with this documentation? What are realistic terms for private lenders? 

this is standard response by Scammers and crooks..  NO LENDER sends U his or her drivers license that's just BS.. anyone can register a company for 50 bucks again just to win you over and give an air to legitimacy.  Lenders license photo shopped or just not real.. 

Go to NMLS registry google it its easy put his name and company name in if he is state licensed he should be registered and for fun put my name in and see what happens.. 

NO ONE lends for 5% period.. and NO one charges up front money other than Do hard money and they couch it as buying their how to flip property manuals.. so they are selling you something. in exchange for the up front 3k which is mandatory to get a loan from them.. and then the rates are what they are.

standard rates for hard money is 2 and 10 for great borrower and experience to 5 and 15 for someone with little to no expirence and everything in between.. 

the next thing they will hit you with is insurance..  you pay this insurance in case you cant make payments.. that is also fraudulent there is NO insurance for private loans does not exist.. so they just try to suck as much money out of you as they can.. then either go dark or come up with excuses why your deal cant fund.. 

to to Lendinghome .com and look at what a real lender charges.

 

@Alexis Monroe

I just got hit up on BP with a HML proposal with all the red flags mentioned in this post, then he deleted his account shortly after. I'm new to the game but definitely triple check individuals who reach out to me by asking for referrals, company name (so I can search BBB and other reputable review sources). People be scamming. Told me he could give me up to 5m 😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂

run. run. run. Do you know a network of local investors? If so I'd start there

Thank you guys soo much!! I did a background/asset check on that guy with lexisnexis and found he had filed bankruptcy twice in the past 2 years and a foreclosure. I also couldn’t find him on the NMLS registry. Wow kind of disappointed! It’s really hard to find a cash lender that will loan me cash to bid in auctions smh 

Originally posted by @Anthony Porembski :

@Alexis Monroe

I just got hit up on BP with a HML proposal with all the red flags mentioned in this post, then he deleted his account shortly after. I'm new to the game but definitely triple check individuals who reach out to me by asking for referrals, company name (so I can search BBB and other reputable review sources). People be scamming. Told me he could give me up to 5m 😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂

real lenders will NEVER reach out to you on BP or any other medium.. they wait for you to contact them from their advertisements. 

 

Originally posted by @Alexis Monroe :

Thank you guys soo much!! I did a background/asset check on that guy with lexisnexis and found he had filed bankruptcy twice in the past 2 years and a foreclosure. I also couldn’t find him on the NMLS registry. Wow kind of disappointed! It’s really hard to find a cash lender that will loan me cash to bid in auctions smh

yes that product does not exist unless from people you actually personally know.. there are HML in the pac nor west that do provide bid money and i provide bid money but i dont advertise it and its only for those i know i would never do that for someone i met on line.. end of that story. to risky.

 

Originally posted by @Alexis Monroe :

Thanks for the feedback. I requested proof of lenders license and he emailed immediately.  He also sent me his drivers license. I also verified his company is registered with state. Could it still be a scam with this documentation? What are realistic terms for private lenders?  

When a company supposedly offers you a rate that is not available to anyone anywhere, and asks you to give them money upfront so that you can borrow money from them its a scam.  You do not need to go any further.

But since you did, an copy of a driver's license means nothing.  My little brother had several since he was about 14, first saying he was 16 and had a license to drive babe's cars, and then when he was 16 saying he was 18 to break curfew in our city, then when he was 17 to say he was 21 so he could drink and buy alcohol.  He got away with a lot!  His fakes looked good too.  People have made pretty good fake driver's license for decades.  They mean nothing.  And even less when its a copy e-mailed.

Business licenses, well, anyone can say they are any business.  Heck, I could even say I am Jay H. the money lender, give you a fake copy of a driver's license and his business license.  You would not know that I am someone else, and Jay H. has no idea I even exist and definitely knows nothing about me using his license.  

It happens a lot with contractors too.  Some scammer using a legitimate contractor's license to do work.  The legitimate contractor has no idea someone is working saying they are him, and using his license.

When checking a license, you do need to find a phone number off a legitimate site, like state licensing, and call that number to see if you are dealing with the real company.

Originally posted by @Victor Vella :

@Jay Hinrichs

Bid money? Can you clarify - never heard the term.

Monies used to buy foreclosures at sherrif sales.. in many markets you have to bid the full ask price at the sale and present a cashiers check at the time U bid.. u actually have to proof up your cash before you bid.. so in our area were opening bids tend to be 250 to 700k or more. its hard for the average investor to have that kind of cash.. so there are HML in our market that will get you pre approved and help you in the process and will even bid for you.. so lets say your honing in on a 400k prop.. you have to deposit 80k into their account before the auction then they take their 320k and your 80k and bid for you.. if you win they get equitable interest in the bid receipt which is then converted to a standard loan once the trustee's deed or sherrifs deed is recorded.. Its a genius business model for the HML and one I would have loved to emulate on the west coast.. but that did not work out for us.

So what I do is provide bid money in other markets that are much cheaper IE IN OH TN AL MS PA etc.. In some states you only have to put 5k or so down then when the sale in confirmed you need the balance.. but again the HML don't have a way to secure their funds via mortgage so there is a huge gap in funding available for court house steps bidders. And in a small way for my teams I provide those funds.

 

Up front fees are always a major red flag. All fees should be included in the loan and transferred to an escrow account at closing. When people don't require bank statements, information about the property, or basically ask any questions but somehow you're approved...don't do it! New folks almost always get high interest rates and lots of points. Anyone saying 5% interest, no points and doc fees are due up front...run and report!

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