The Hard Money Lender Presentation

[Jon Bachman]

I'm very interested in obtaining some hard money in the near future, but I'm unsure of something. I have a question in regards to show #9 with @Ann Bellamy, when she says that included in your presentation to obtain a hard money loan, one should include a purchase agreement. I thought the proper order of events entailed bringing a prospective property to the lender and showing what the end goal looked like (ARV, rehab costs, purchase price, exit strategies, etc.). After an green light is given, you then make an offer.

Is she saying that I need to first make an offer with a contingency stating "offer valid upon approval from lender", or something along these lines?

[Ann Bellamy]

Well, @Jon Bachman, in reality, that's not what happens most of the time.  Think of it this way:

When you are buying a house to live in, you get preapproved by a lender based on income, dti, credit score, etc. (Hard money lenders don't often look at these)  Then you go find a house, but when you put in an actual application, the LAST thing that you are waiting on is the appraisal.  So the value of the property happens at the end.

With a hard money loan, we don't look at the soft criteria such as credit score, so the primary driver is your experience, and the deal itself (the value of the property as is and as completed) with accompanying plan for the deal (what you are going to do to the property).

Since it can take dozens and dozens of offers before you actually have a contract, can you imagine calling a lender for each one of those offers before you make it?  And switch sides for a moment, and imagine being that lender, with bunches of borrowers asking the lender to to review each one of their offers?  It boggles my mind.  :-)

But what we can do is review a few for you to give you an idea of how the process works (if you are looking in our area), and when you are closing in on contracting for a property, definitely call ahead of time.  In fact, if you are borrowing in MA, there is a process listed on my website under PreApproval.  This is rhetorical, of course, since we don't lend in CT.  If you find a lender just starting out lending, you may find someone who has the time to review all the properties before you offer on them, but in general, I wouldn't expect that to happen.    

I know it's hard when you start out, you are assumed to know a bunch more than you already do know, but keep at it, it will come together.  Looking at zillions of deals is part of the learning process.  Don't focus on one at a time.  Because few of them will come together.