Looking for Hard Money Lenders That Don't Require an Appraisal
Real Estate Investor · Las Vegas · Member since 2015 · 22 posts · 17 votes
Looking for Hard Money Lenders That Don't Require an Appraisal
Most Popular Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votesQuote from @Derrick Reyes:
I am finding that the answer to the question "Can I use HMLs to make a cash offer." is No.
The answer seems to be that HMLs are in between conventional loans and all cash and should not be sold to sellers as a "cash offer". They have advantages such as quick closing and qualifying based on the property, but often still have contingencies in place.
U can make a cash offer and simply have no contingencies for financing so you risk your EM if you dont close. But then a sophisticated seller is going to want proof of funds but most sellers are not that sophisticated.. other wise most wholesalers would never get deals. Everyone of them says they are cash buyers when in fact very few really are.
29 Replies
- Real Estate Broker · Charlotte, NC · Member since 2016 · 569 posts · 351 votes3y
Every loan has underwriting; some require more, some less. But it's all about the risk an HML is willing to take first-time investors are at higher risks, so what is it you bring to the table that the HML waives an Appraisal & contractor estimates?
- Real Estate Agent · PA · Member since 2021 · 240 posts · 131 votes3y
What is your goal?
there will be no Lender that will lend money without doing their due diligence with an appraisal and some estimates. Your best best would be working with private money or partnering with another investor.
If your trying to remove all contingencies to make the offer as enticing as possible by trying to get around the appraisal/mortgage contingency. Then you can Waive the mortgage contingency and still use hard money. If you do this then your basically saying "If I cant close in x amount of days you can keep my earnest money deposit" Higher the earnest money deposit the harder it is for the seller not to take that bet.
I'm not recommending you do this! Just simply trying to educate on another possible option for you.
you have 2 options:
1. partner with private money on your deals
2. Waive the mortgage contingency anyway and potentially lose your Earnest money deposit.
- Real Estate Agent · Knoxville, TN · Member since 2016 · 14 posts · 29 votes3y
BD CAPITOL they do an in house evolution -
- Real Estate Agent · Knoxville, TN · Member since 2016 · 14 posts · 29 votes3y
its actually called an Evalution of value , some banks do it as well if they are small enough
- Virtual Assistant · 1850 Lee Rd Ste 347 Winter Park Florida, 32789 · Member since 2023 · 45 posts · 14 votes3y
Hello! Hard money loans are often used by real estate investors, and they can be an option for those who are just starting out. However, it is worth noting that most hard money lenders will still require some form of collateral, such as an appraisal, contractor estimates, and other documentation, before they will agree to lend money. This is because hard money loans are typically considered to be higher-risk than traditional loans and lenders need to protect themselves from potential losses. That being said, "Feel free to message me, I'm sure I can give you a few options" or something to that affect
- Real Estate Agent · Knoxville, TN · Member since 2016 · 14 posts · 29 votes3y
your actually wrong you can do it without and appraisal i have two loans with no appraisal with a local bank , do your research before telling people no
- Real Estate Agent · PA · Member since 2021 · 240 posts · 131 votes3y
@Zac Gronda This is interesting. This is new to me as well. I assume they must do this before the offer is submitted. Other wise it sounds like the evaluation would be an appraisal/contingent?
- Real Estate Investor · Las Vegas · Member since 2015 · 22 posts · 17 votes3y
Thanks for your responses! Okay I understand what a lot of the responses are saying. Totally understandable all of it. I suppose I should rephrase in this way:
Common REI education resources such as David Greene's BRRRR book tell new investors like myself that hard money is an option. The messaging is usually something like "If you use a hard money lender, you can make an offer to the seller that is the same as a cash offer". I'm finding that this kind of messaging is not true however because of the contingencies. Yes, there are loan options out there for new investors that are built for BRRRR, but no, they are not the same as cash offers.
A better question might be "Can I use HMLs to make a cash offer". the reality I am experiencing is not in agreement with what I've read. - Real Estate Investor · Las Vegas · Member since 2015 · 22 posts · 17 votes3y
I am finding that the answer to the question "Can I use HMLs to make a cash offer." is No.
The answer seems to be that HMLs are in between conventional loans and all cash and should not be sold to sellers as a "cash offer". They have advantages such as quick closing and qualifying based on the property, but often still have contingencies in place. - Real Estate Agent · Knoxville, TN · Member since 2016 · 14 posts · 29 votes3y
Quote from @Austen Mueller:
@Zac Gronda This is interesting. This is new to me as well. I assume they must do this before the offer is submitted. Other wise it sounds like the evaluation would be an appraisal/contingent?
they don't necessarily have to do this prior to offer , it just has to be within a certain percentage, there is a certified evaluator/ not appraiser that looks at property and they work inhouse for the bank (if they are small) usually a credit union - its more a risk analysis and it is also 2 weeks faster, this is also specific to Tennessee
- Lender · Philadelphia, PA · Member since 2019 · 96 posts · 124 votes3y
Quote from @Derrick Reyes:
Hello! I'm a new investor getting started with BRRRR in the Detroit area. I thought I had found a couple lenders who would do fix and flip loans with new investors. However these lenders still require an appraisal, contractor estimates, etc. before closing. That means I can't use these loans to make cash offers which severely hamstrings my ability to make discounted offers. Is it possible for a new investor to get a hard money loan that doesn't require an appraisal? If so, any referrals are greatly appreciated. Thanks!
Saw that you responded to most of these. We do alternative lending which is in between hard money and a bank... still quick closing times and obviously need an appraisal. But its really how you pitch the sellers. I used to be in real estate acquisitions so feel free to connect with me if you want some help on that conversation.
Cheers brother, hope it works out.
- Lender · Member since 2018 · 617 posts · 275 votes3y
Is it possible for a new investor to get a hard money loan that doesn't require an appraisal?
In short, yes. The highest likelihood HMLs are local HMLs, as they'll have the market familiarity to be able to just obtain a BPO or even perform a desktop underwrite.
HMLs with national coverage are very likely to require full appraisals for two reasons;
1) It may be a formal stipulation in their underwriting guidelines.
2) They don't have the specific local market confidence that a lender based in that city would have.
You may want to try local REIA meetups. In addition to some HML reps, you may find a private individual lender or two, who will likely have less stringent requirements than a HML.
- 3yJay HurstBusiness MemberLender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
Quote from @Derrick Reyes:
Hello! I'm a new investor getting started with BRRRR in the Detroit area. I thought I had found a couple lenders who would do fix and flip loans with new investors. However these lenders still require an appraisal, contractor estimates, etc. before closing. That means I can't use these loans to make cash offers which severely hamstrings my ability to make discounted offers. Is it possible for a new investor to get a hard money loan that doesn't require an appraisal? If so, any referrals are greatly appreciated. Thanks!
@Derrick Reyes Understand that the appraisal and contractor estimates protect you as much as it does the lender. If you over pay or even more common these days underestimate your repair budget you can get in real trouble real fast. (especially in today market as i see investors still using comps from June to justify prices that just do not exist anymore) I see it nearly daily where an investor is stuck with a hard money loan they cannot get out of due to not knowing their costs and the value dropping. If prudent lenders will not lend on a property, they are looking our for themselves of course but maybe it is not their first rodeo and maybe it is good advice.
Hurst Real Estate, INC4.989 Reviews - Westchester, NY · Member since 2019 · 25 posts · 10 votes3y
Hi @Derrick Reyes, Kiavi is a large national HML that does their own in-house appraisals. I haven't worked with them so can't vouch, but they do a ton of deals. Good luck!
- 3yJay ThomasPro MemberReal Estate Agent · Houston, TX · Member since 2021 · 1k+ posts · 715 votes
Real estate investments can be a great way to increase your wealth and diversify your portfolio, but there are certain risks involved. Hard money loans can provide an excellent option for those who are just starting out, however it is important to remember that most hard money lenders will still need some form of collateral before they agree to lend the money. Be sure to do your research and consider all options carefully before making any decisions! Feel free to message me if you have any questions - I'm sure I can give you a few options. Good luck with your investments!
- Lender · NJ · Member since 2022 · 129 posts · 18 votes3y
Quote from @Derrick Reyes:
Thanks for your responses! Okay I understand what a lot of the responses are saying. Totally understandable all of it. I suppose I should rephrase in this way:
Common REI education resources such as David Greene's BRRRR book tell new investors like myself that hard money is an option. The messaging is usually something like "If you use a hard money lender, you can make an offer to the seller that is the same as a cash offer". I'm finding that this kind of messaging is not true however because of the contingencies. Yes, there are loan options out there for new investors that are built for BRRRR, but no, they are not the same as cash offers.
A better question might be "Can I use HMLs to make a cash offer". the reality I am experiencing is not in agreement with what I've read.Yes, I would be careful about telling the seller you are a "cash-buyer" unless you truly have the cash in the bank with the intention to close with that. If not, you'd be wise to have a financing contingency in the purchase and sale agreement. Imagine you're lending your own money on a distressed property that needs renovations. You'd need to know the ARV right? How would you obtain that without doing an appraisal with a scope of work? Work with a private lender that knows what they're doing ;)
- 3yJohn O'LearyPro MemberLender · Winter Park, FL · Member since 2021 · 737 posts · 412 votes
There are plenty of Hard Money options that only require a BPO and no cost to the borrower. This will be accompanied by a virtual inspection (photos), but you will need to give a scope of work for anyone to determine an accurate ARV. As for the contract, Hard Money is typically viewed same as cash. Some contracts give the option to mark hard money or "other". If that is not an option and you are going to mark "financing" I'd add that there are no contingencies so your offer isn't lumped in with traditional financing. If you have any other questions I'm happy to hop on a call.
Good luck!!
- 3yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Derrick Reyes:
I am finding that the answer to the question "Can I use HMLs to make a cash offer." is No.
The answer seems to be that HMLs are in between conventional loans and all cash and should not be sold to sellers as a "cash offer". They have advantages such as quick closing and qualifying based on the property, but often still have contingencies in place.
U can make a cash offer and simply have no contingencies for financing so you risk your EM if you dont close. But then a sophisticated seller is going to want proof of funds but most sellers are not that sophisticated.. other wise most wholesalers would never get deals. Everyone of them says they are cash buyers when in fact very few really are. - Investor · Omaha, NE · Member since 2021 · 244 posts · 163 votes3y
Quote from @Derrick Reyes:
I am finding that the answer to the question "Can I use HMLs to make a cash offer." is No.
The answer seems to be that HMLs are in between conventional loans and all cash and should not be sold to sellers as a "cash offer". They have advantages such as quick closing and qualifying based on the property, but often still have contingencies in place.I'd say this really depends on the HML and your relationship with them. I have private/hard money relationships where it is a "cash offer" on paper and they can close <72 hours with them funding 100% of the purchase price. It takes time/credentials to build that kind of relationship but good wholesalers/investors/flippers should always have those lending relationships (aka be well capitalized)
@Jay Hinrichs is 100% correct, most sellers/investors aren't really that savvy. If I received an offer without a proof of funds (I call these blue sky offers) it's straight up going in the bin@Owen Dashner wanna chime in on this one?
- 3yDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
@Derrick Reyes appears you've confused HMLs with Private Money Lenders (PML's) or don't fully understand the HML process.
HMLs are really lending mostly on the value of the property as opposed to lending on YOUR qualifications. So, they will always confirm value somehow.
A PML is usally someone you know, that trusts you (family or friend), and really doesn't do any underwriting on your or the property.
You could also look into getting a personal line of credit to fund a purchase.
Lastly, if you are getting actual deals under contract, consider wholesaling them to other investors to generate more funds that you can eventually use to buy cash.
Logical Property Management4.9458 Reviews - 3yStephanie P.Pro MemberWashington, DC Mortgage Lender/Broker · Member since 2016 · 4k+ posts · 2k+ votes
Quote from @Derrick Reyes:
Hello! I'm a new investor getting started with BRRRR in the Detroit area. I thought I had found a couple lenders who would do fix and flip loans with new investors. However these lenders still require an appraisal, contractor estimates, etc. before closing. That means I can't use these loans to make cash offers which severely hamstrings my ability to make discounted offers. Is it possible for a new investor to get a hard money loan that doesn't require an appraisal? If so, any referrals are greatly appreciated. Thanks!
Cash offers are cash offers, not financed hard money. I'm seeing you have found that out. Most hard money lenders require some sort of valuation; whether it's a BPO or an appraisal, they're going to want something. If you're looking for a flip, many hard money lenders want to see your proposed renovations and a budget. There's a method to their madness. They are evaluating you to see if you know what you're doing and if your numbers are feasible. Remember, they want to lend money, not own property and if you get stuck because your numbers don't work, you can walk away. Ultimately, they're the ones that get stuck. Think of their due diligence as a backstop for you. They're not going to let you do anything stupid with their money. It can be frustrating if you're not getting deals because you're getting beaten by cash offers, but keep offering. You'll get one soon.
All the best
Stephanie
- 3yStephanie P.Pro MemberWashington, DC Mortgage Lender/Broker · Member since 2016 · 4k+ posts · 2k+ votes
Quote from @Zac Gronda:
your actually wrong you can do it without and appraisal i have two loans with no appraisal with a local bank , do your research before telling people no
Zac,
Welcome to BiggerPockets.
There are two ways to address specific people on BP. One would be to use the quote box at the bottom of the post you're referencing. That way, like I did here, the specific post that I'm referencing will be added to the top of my post and the person whom I writing to will be notified. Another way is to put the @ symbol in front of their name and start typing. A list of names will pop up and then you just single click on that name and it will populate a hyper link sending a notification to the person chosen.
I'm not sure who you were referencing when you told someone that they were wrong and that they should do their research before telling people no, but I wanted to address it. EVERY lender does some sort of valuation before they lend. Whether it's a small bank or a large institutional lender. In your case, the small bank in Tennessee did what you call an "evaluation of value". Some call it a BPO or broker price opinion. Other lenders say they need an appraisal and then choose different forms like a 1007 or a 216 to accompany the Fannie Mae 1004. It depends on the specific lender. Either way, and to answer the OP's question, no one is going to lend money on a rehab without performing some sort of in house or external valuation and a cash offer is not a financed hard money loan.
All the best
Stephanie
- 3yYamila PerinPro MemberLender · Member since 2022 · 12 posts · 1 vote
@Derrick Reyes
Hey Derrick, all lenders will run a house valuation report to make sure that the loan metrics will be in good standing; However not necessarily has to be a full appraisal that takes probably 2 weeks to get the report back, SOME LENDERS have broker's opinion valuations, desktop appraisals (less than a week turn around), in house valuations, we have systems that can help us to underwrite a deal in less than 48hrs or instantly.
You should be able to get a lender that can help you with this and if they don't approve your deal could be because the numbers are not strong and it is not going to be a great deal for you either. (Remember, that is what they do for living and want your business).
Feel free to contact me if you have any questions or you need help with anything.
Have a nice day.
- 3yOwen DashnerPro MemberLender · Omaha, NE · Member since 2008 · 1k+ posts · 1k+ votes
Quote from @Sanat Bhandari:
Quote from @Derrick Reyes:
I am finding that the answer to the question "Can I use HMLs to make a cash offer." is No.
The answer seems to be that HMLs are in between conventional loans and all cash and should not be sold to sellers as a "cash offer". They have advantages such as quick closing and qualifying based on the property, but often still have contingencies in place.I'd say this really depends on the HML and your relationship with them. I have private/hard money relationships where it is a "cash offer" on paper and they can close <72 hours with them funding 100% of the purchase price. It takes time/credentials to build that kind of relationship but good wholesalers/investors/flippers should always have those lending relationships (aka be well capitalized)
@Jay Hinrichs is 100% correct, most sellers/investors aren't really that savvy. If I received an offer without a proof of funds (I call these blue sky offers) it's straight up going in the bin@Owen Dashner wanna chime in on this one?
Thanks @Sanat Bhandari. I am an owner of a hard money business in Omaha, NE. What a lot of our borrowers do is check the box of "cash", but write in "hard money" on their contract either in parentheses beside it or in an addendum. As long as you obtain a POF (proof of funds) letter from the HML, most sellers will give your offer similar weight to a cash offer. You can also select or write in "Other Financing" with further explanation on your contract, obviously still including a POF. Also, clearly state in the contract that there are no financing contingencies - this normally satisfies most seller objections.
On your question about appraisals, my company does not require an appraisal in most cases for hard money loans, we use in-house comps and/or BPO's. There are other HML's out there with similar underwriting guidelines, you just have to find them. - Member since 2023 · 14 posts · 3 votes3y
I have made hard money a thing of the past by acquiring a business LOC. Great rates, easy terms. I use my LOC for all my RE investing. It removes all these pesky items that slow the pace.
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