Hard money lender wants a $2k DD fee & $5k appraisal

Specialist · Memphis, TN · Member since 2018 · 30 posts · 12 votes

My client is looking for hard money. I am not very familiar with their processes. They want him to pay a $2k due diligence fee up front and pay for an appraisal of $5 up front with no guarantee of funding. Keep in mind he has already paid for an appraisal with another company and they didn't fund because he was 25k short of liquid funds. He has 2 other properties that is paid for.

My question is...is this normal dealing with hard money lenders? Wanting so much up front and not guaranteeing funding.

2 Reply

63 views

Most Popular Reply

James Wise

Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes

Originally posted by @Natalie Brown:

@James Wise 10 units

$5k to appraise a 10 unit building is waaaay high. Couple that with $2k due dilligence fee I suspect a large portion of this lender's revenue is collecting fees for deals that they do not fund.

14 Reply

See this reply in the discussion

44 Replies

Jump to latestLatest

Sort by

Sam Grooms
Investor · Phoenix, AZ · Member since 2017 · 583 posts · 919 votes
7y
Yes, this is typical. This also happens with bridge loans from large, institutional debt funds. We actually have to give the lender a $50,000 deposit towards these expenses before they'll get started. The fees end up pretty close to that $50,000, whether we close or not.
0 Reply
Natalie Brown
OP
Specialist · Memphis, TN · Member since 2018 · 30 posts · 12 votes
7y
@Sam Grooms wow. Thank you!
0 Reply
Kim Tucker
Flipper/Rehabber · Kansas City, MO · Member since 2011 · 2k+ posts · 712 votes
7y
is this for a big commercial loan?
0 Reply
James Wise
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes
7y
Originally posted by @Natalie Brown:

My client is looking for hard money. I am not very familiar with their processes. They want him to pay a $2k due diligence fee up front and pay for an appraisal of $5 up front with no guarantee of funding. Keep in mind he has already paid for an appraisal with another company and they didn't fund because he was 25k short of liquid funds. He has 2 other properties that is paid for.
My question is...is this normal dealing with hard money lenders? Wanting so much up front and not guaranteeing funding.
How many units is the property?
0 Reply
John Thedford
Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
7y
What type of property? What are their terms? 2K DD sounds high and may NOT be typical depending upon the loan and type of property. Who is the lender?
0 Reply
Natalie Brown
OP
Specialist · Memphis, TN · Member since 2018 · 30 posts · 12 votes
7y
@Kim Tucker just 10 units here in Memphis.
0 Reply
Natalie Brown
OP
Specialist · Memphis, TN · Member since 2018 · 30 posts · 12 votes
7y
@James Wise 10 units
0 Reply
Natalie Brown
OP
Specialist · Memphis, TN · Member since 2018 · 30 posts · 12 votes
7y
@John Thedford I'm not sure the lender. Its 10 units pretty much full gut rehab been vacant for years. We can get the acquisition low and that seems to be the problem. Because the renovations are so high
0 Reply
James Wise
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes
7y
Originally posted by @Natalie Brown:
@James Wise 10 units
$5k to appraise a 10 unit building is waaaay high. Couple that with $2k due dilligence fee I suspect a large portion of this lender's revenue is collecting fees for deals that they do not fund.
14 Reply
Kim Tucker
Flipper/Rehabber · Kansas City, MO · Member since 2011 · 2k+ posts · 712 votes
7y
ah I see now, I get key word alerts and they don't tell me where the post is, I see now that this is in the Multi Family form. My apologies.
1 Reply
Natalie Brown
OP
Specialist · Memphis, TN · Member since 2018 · 30 posts · 12 votes
7y
@James Wise and we already paid for an appraisal in December with another company that was $5k. This is before the acquisition is even in his name.
0 Reply
John Thedford
Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
7y
2K DD may not be out of line. How much money is buyer putting down? How large is the loan?
0 Reply
Natalie Brown
OP
Specialist · Memphis, TN · Member since 2018 · 30 posts · 12 votes
7y
@John Thedford the loan amount is $488k...100k down
0 Reply
John Thedford
Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
7y
@Jay Hinrichs may have some insight.
0 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
Originally posted by @James Wise:

Originally posted by @Natalie Brown:

@James Wise 10 units
$5k to appraise a 10 unit building is waaaay high. Couple that with $2k due dilligence fee I suspect a large portion of this lender's revenue is collecting fees for deals that they do not fund.
yup would be my thought I would look at that for free. and do my own valuation..
Podcast Guest on Show #222
JLH Capital Partners51 Review
Website View Page
3 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
Originally posted by @Natalie Brown:

@John Thedford the loan amount is $488k...100k down
I suspect you may have a fake lender there.
and on top of that your borrower maybe week if they cant go to a local brick and mortor lender
but have them try these guys.
Lending home
limaone
Visio
Peak
any of these can do the deal .. now it takes a special license to legally lend in TN so do check that out.. if these companies are not licensed there then you know for sure your dealing with frauds.
Podcast Guest on Show #222
JLH Capital Partners51 Review
Website View Page
2 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
Originally posted by @James Wise:

Originally posted by @Natalie Brown:

@James Wise 10 units
$5k to appraise a 10 unit building is waaaay high. Couple that with $2k due dilligence fee I suspect a large portion of this lender's revenue is collecting fees for deals that they do not fund.
Jim TN requires a special license to lend in that state.. first thing one should check.
Podcast Guest on Show #222
JLH Capital Partners51 Review
Website View Page
4 Reply
John Thedford
Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
7y
@Jay Hinrichs thanks for the input/ I don't want to see these people get screwed for 2k AND when in doubt I ask THE expert:)
0 Reply
Shaun Weekes
Loan Officer / Processor / Life & Health Agent · Rancho Cucamonga, CA · Member since 2014 · 1k+ posts · 757 votes
7y
Originally posted by @Natalie Brown:

My client is looking for hard money. I am not very familiar with their processes. They want him to pay a $2k due diligence fee up front and pay for an appraisal of $5 up front with no guarantee of funding. Keep in mind he has already paid for an appraisal with another company and they didn't fund because he was 25k short of liquid funds. He has 2 other properties that is paid for.
My question is...is this normal dealing with hard money lenders? Wanting so much up front and not guaranteeing funding.
I don't do much commercial but the lender I use doesn't charge a fee up front. You can find many HM lenders that won't ask for this. And before the appraisal is ordered reserves should be finalized. No reason to find out you're short after the appraisal has been paid for. Your client is being taken for a ride and if the company is legit being charged wayyyy too much.
2 Reply
Steve Vaughan
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
7y
Originally posted by @Natalie Brown:

@James Wise and we already paid for an appraisal in December with another company that was $5k. This is before the acquisition is even in his name.
Because the winter market in general is slower, I'd require them to accept this Dec appraisal. Not much has changed. Was it done correctly in your opinion?
On principal, high costs and pain like this keep me from placing debt on my commercial assets. Stick to your guns. I'll pay the $2k DD fee, but you will accept the 100 day old appraisal. Then be willing to walk.
0 Reply
Natalie Brown
OP
Specialist · Memphis, TN · Member since 2018 · 30 posts · 12 votes
7y
@Steve Vaughan great. Thank you. The appraisal is legit.
0 Reply
Natalie Brown
OP
Specialist · Memphis, TN · Member since 2018 · 30 posts · 12 votes
7y
@Jay Hinrichs thank you! I was thinking the same. The buyer is strong. We had a bank here in Memphis come out and they said they don't invest in that location after having the address for 3 weeks and ran his credit.
0 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
Originally posted by @Natalie Brown:

@Jay Hinrichs thank you! I was thinking the same. The buyer is strong. We had a bank here in Memphis come out and they said they don't invest in that location after having the address for 3 weeks and ran his credit.
local commercial banks have every right to RED Line..
Podcast Guest on Show #222
JLH Capital Partners51 Review
Website View Page
1 Reply
Caleb Heimsoth
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
7y
@Natalie Brown. If it’s in a bad area maybe it’s a blessing in disguise for your buyer. Is the buyer local?
1 Reply
Brian Ploszay
Investor · Chicago, IL · Member since 2009 · 1k+ posts · 1k+ votes
7y
I have used hard money lenders only twice. I went with a well known, highly recommended local group. The size of this deal suggests that fee is not correct.
1 Reply

Join the conversationCreate a free account to reply, vote on answers and follow this thread.