Appraisal when buying from a wholesaler using hard money

8 Replies

Trying to buy a wholesale deal using hard money.

Hard money lenders require appraisal.  

Wholesalers that I have looked at, do not seem to allow or like the idea of appraisal.  Interestingly, they say you can use hard money to buy deals from them....

How do you resolve this gap? What has been your experience?  I sure don't want to sign a contract and then lose my earnest money because the deal can't close!  Thanks in advance.

@Radin Mirshahi most lenders will require an appraisal. Otherwise, how will they know if the property is worth lending on. If the wholesaler wont allow an appraisal, you'll likely not be able to use any type of financing

I work for a wholesale brokerage and our in house hard money lender REQUIRES an appraisal. Without it, they will not lend. I would be very weary of any lender, hard money or not, who does not order an appraisal. 

Originally posted by @Abby Ruppert :

I work for a wholesale brokerage and our in house hard money lender REQUIRES an appraisal. Without it, they will not lend. I would be very weary of any lender, hard money or not, who does not order an appraisal. 

 probably what Is happening is that the wholesaler has not told the seller whats happening  IE I am a cash buyer when I really am not.

Some of the most dangerous words you can throw around are "always" and "never" (or other definitive words).  I want to clear up some of the misinformation in this thread.  As you know, the hard money and commercial lending space is highly unregulated, and it's usually the lenders that make up their own rules, although a lot of it is driven by their cost of capital and requirements of the secondary market (if they sell their loans).

There are hard money lenders out there that do not require a BPO or appraisal, but the majority of them do.  I know because I've used them before.  Most of it is very localized; i.e. a local lender knows their area well and knows how to do comps without relying on third parties to determine valuation.  So you may have to find a local lender for this; I don't know of any national lenders that do not require appraisals/BPOs.

There are some other lenders that do require them, but they can push it post-closing.  They will only do this for experienced investors who they believe know how to evaluate deals.  The reason they still need to do it after closing is so they can check off a box and be able to sell the loan.

This is hit or miss in Phoenix, although I'd say all the big players do not require an appraisal. I have heard of them ordering a BPO for a tough comp, but typically they seem to just comp the property themselves and then lend 80 to 90% of purchase price depending on what they see.