Avoiding fraud from internet private lenders
Member since 2019 · 5 posts · 1 vote
Avoiding fraud from internet private lenders
Most Popular Reply
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
3y@Roger Mills
1. If email is Gmail,Hotmail, aol etc run
2. If they don’t get on a zoom runs
3. If they won’t Use an escrow company run
4. If they want $ upfront run
7e investments53 Reviews
27 Replies
- Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes3y
Quote from @Roger Mills:
I have been communicating with a "private Lender" who is willing to lend me funds for a particular project. Having never met him, I'm looking for advise as to how to check him out for legitimacy. He sent me a copy of his driver's license, but I'm still a bit skeptical. I would really like to avoid "Identity theft" or any other "who knows what". Any advice would be highly appreciated. Thank you, in advance
Roger Mills
Reno, Nevada
You don't mention where he is located, so if you can't meet, do a Zoom or Facetime call and get to know him a little bit. Anyone can fake a driver's license but a call with his bank to verify identity and funds can be very useful. Just don't ever, never, ever, send funds in advance "for processing", "for good faith" or for any reason.
If you do, one of two things will happen, you will never hear from him again or you will be asked for more funds (since you're a sucker) to handle "underwriting" or "rate buydown" or something else. A legitimate lender will have you open escrow at the office of your choice and everything will be done through escrow. All of your fees will be written down and explained.And yes, everytime you send personal information by email or by text, there is the potential for fraud. You can always check Ripoffreport.com to see if anyone has said anything negative about him or his company. That isn't proof he is legit, it just shows if there are recorded bad experiences. References from other investors is the best way.
- Member since 2019 · 5 posts · 1 vote3y
Thank you, Mike. That's exactly the kind of advice I was looking for. He's located in Arizona (according to DL), but who knows. Anyway I can't meet with him physically. What concerns me is that on the application he's asking for SS#. I'm reluctant to give that out, but I think he would need it to check Credit. What's your thoughts?
- 3yAlex FiccoPro MemberFlipper/Rehabber · Reno, NV · Member since 2017 · 110 posts · 78 votes
Sounds super sketch. I've raised a lot of PM for flips here in Reno from individuals and not once has anyone asked for my social (unless you're dealing with a firm like kiavi, civic, anchor, etc, but it doesn't sound like that's your question).
They want to see your track record and proof that you're an experienced operator that isn't going to lose their capital... but every time I've never once thought to myself "is this guy legit or trying to scam me?" It's the other way around. The conversations are always "how does this work, what's the return, send me a copy of the documents you use, where can I see your past projects, send me info on the deal" and that's about it. - 3yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
here are some things to consider.
1. Private lender offering terms that are far better than any of the the big known lenders such as the lenders mentioned above by @Alex Ficco Although I believe Civic has been bought or closed and Anchor might have as well.. But Kiavi is a very good one to check out they are very transparent on their pricing and experience necessary .
2. Offering to show drivers license to you NO lender does that ..
3. sending you copy of LLC registration same thing No lender is going to do that.
4. As mentioned any up front fee's red flag pass full stop.
5. Too quick to say your approved.
6. Website if they have one is only 2 months old or so.
7. boasting of doing thousands of loans there is a very short list of lenders that have done thousands of loans .
8. Poor English
9. They reach out to you on social media
All of these things 95% of the time or more your dealing with a fake lender in what we call pump and dump due diligence scammers.
for more detailed info on these scams google Ingrid Robinson Remington financial and American Greed episode on American Greed these guys were the kings of pump and dump. Majority of those doing it now are doing it from off shore ergo the bad English.
- Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes3y
@Roger Mills
1. If email is Gmail,Hotmail, aol etc run
2. If they don’t get on a zoom runs
3. If they won’t Use an escrow company run
4. If they want $ upfront run
7e investments53 Reviews - Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes3yI'm in Arizona, DM me with the name of the company and his name and if I know anything, I'll let you know.
Quote from @Roger Mills:
Thank you, Mike. That's exactly the kind of advice I was looking for. He's located in Arizona (according to DL), but who knows. Anyway I can't meet with him physically. What concerns me is that on the application he's asking for SS#. I'm reluctant to give that out, but I think he would need it to check Credit. What's your thoughts?
- Real Estate Lender · Littleton, CO · Member since 2012 · 32 posts · 15 votes3y
There is some good advice in the answers provided above. Personally, I wouldn't do business if you can't meet in person. Identity theft and advanced fee scams are big risks. You are prudent to be concerned.
Here is an excerpt from an older related post on avoiding lender scams (slightly modified and with a few typo corrections. I don't know how to link to the older post. I will look into that):
- Meet with the lender representative in person. In-person meetings mean the scammers (or agents) must be physically present, which often they would prefer to avoid or simply can’t do because they are not in the state or the USA. Additionally, scammers often want to stay far away from personal meetings where his/her picture could be taken. Real private hard money lenders usually (in my experience) want to meet the borrower and see the properties in person to understand the property/project and confirm the borrower is legitimate and likely to succeed. This also gives you a chance to speak with and get a sense of the character of the lender or their representative.
- Be very skeptical and cautious of unsolicited email offers, action demands, or information requests, even when they come from banks or other companies you know or have a relationship with. Often the scam emails will look as though they are legitimate and from a source you know. Scammers may indicate there is a problem with an invoice, a need for updated payment information, to contact them because someone has used your account or your account has been locked out, or that they are offering free things or you something you want, like a loan.
- Check for misspellings or slight changes in lender names and website and email addresses. Is the name singular where it should be plural? Has an extra word like ‘of’ been added? Call the phone number listed on the website of the company. Independently find the website and don’t just rely on emailed links or phone numbers.
- DON’T make big up-front payments (“up-front” meaning paid before the loan funds are wired from the lender). We currently don’t charge any application fees, nor do we charge any other upfront fees. Any upfront fees totaling more than $200, should be a huge warning sign. Scammers may charge large application fees or after a loan has been “approved” charge some sort of “release fee” or require a deposit.
- Verify the company is registered with the secretary of state where they represent they operate. Does the BBB has the same contact information that you have (including phone domain/website?. This is different than verifying NMLS registration, as that has its own issues discussed below. Check that the business is registered with the secretary of state (or other government agency responsible for tracking registrations of businesses in the state). Often scammers don’t register their fake company because it involves a credit card transaction that can be traced back to an individual. This is not foolproof, as a scammer could pretend to be someone else (but more effective when used with calling the company at a phone number on the website and verified as listed on the BBB or other trusted agency website).
- Check that the Lender makes loans. This is easy. You can ask the title company you have chosen if the lender has made loans or check for public records of mortgages or deeds of trust (pay attention to subtle spelling differences or name changes). In Colorado, you can often check online with a county clerk and recorder. Keep in mind that some lenders and brokers use a different name when recording public documents. The Secretary of State (or other state authority) tracks registered tradenames(aka DBAs or aliases) associated with a registered business.
- Check references other than those supplied by the lender. If the buyer or seller chose the title company, you can ask the title company if they have worked with the lender before and if the contact information matches. If you ask the lender, scammers could provide phone or email information to someone they are working with to scam you. If you don't know anyone personally, you can often find borrowers listed in the recorded deeds of trusts or mortgage documents and contact them. Often an LLC will be the borrower, but the person signing for the borrower will be a member of BiggerPockets.com or LinkedIn.com, etc. Contacting borrowers has other benefits as well. You can learn how the lender treated the borrowers, etc.
- Verify the Lender’s address. If the Lender uses a virtual office, you can verify who holds the virtual office with the virtual office company and check the principal office address listed with the state is connected with the person or company you are speaking with.
- Lock/Freeze your credit to lower the risk of someone opening accounts in your name (FTC info on credit freezes https://www.consumer.ftc.gov/articles/0497-credit-freeze-faqs). This means when you do want to get credit, you may need to temporarily unlock your credit.
The above steps don’t provide guarantees and are not comprehensive or exhaustive, but collectively they can substantially lessen risk.
---End of Excerpt
I hope the above content (the “Content”) is helpful. It is intended for educational and entertainment purposes only. I am neither an attorney nor a legal or tax expert. The Content is provided “as is” and should be considered potentially flawed personal opinion without warranties and may not be complete, accurate, appropriate, or applicable to all circumstances. It is not a substitute for professional advice; before making decisions based on the Content, you should consult knowledgeable professionals about your specific circumstances. You should not rely on the Content.
- 3yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Account Closed:
I'm in Arizona, DM me with the name of the company and his name and if I know anything, I'll let you know.Quote from @Roger Mills:
Thank you, Mike. That's exactly the kind of advice I was looking for. He's located in Arizona (according to DL), but who knows. Anyway I can't meet with him physically. What concerns me is that on the application he's asking for SS#. I'm reluctant to give that out, but I think he would need it to check Credit. What's your thoughts?
U also need a MLO license and NMLS registration to loan money in AZ.. that's another huge re flag saying they loan money in states that require licensure and they have no license. - 3yDoug SmithPro MemberLender · Tampa, FL · Member since 2013 · 2k+ posts · 2k+ votes
With institutional lenders like us and others that have chimed in, it's pretty easy to check us out. You technically don't need a license in most jurisdictions to do fix-n-flip loans like your seeking, but most of us do have NMLS licenses anyway that you can check out. Ask for a list of a handful of deals that they have done and head to that county's clerk's office to search for the mortgage/deed of trust to make sure they are a lender. I don't want to repeat what others have said, but never, never, ever send a lender an application fee up front. We do have borrowers pay licensed third-party appraisers directly, but we're never paid until you've closed and the loan has funded. If you can't find info on a lender out there, I would choose another lender. Good luck with your venture.
- Residential Real Estate Broker · Sedona, AZ · Member since 2017 · 751 posts · 504 votes3y
Quote from @Jay Hinrichs:
here are some things to consider.
1. Private lender offering terms that are far better than any of the the big known lenders such as the lenders mentioned above by @Alex Ficco Although I believe Civic has been bought or closed and Anchor might have as well.. But Kiavi is a very good one to check out they are very transparent on their pricing and experience necessary .
2. Offering to show drivers license to you NO lender does that ..
3. sending you copy of LLC registration same thing No lender is going to do that.
4. As mentioned any up front fee's red flag pass full stop.
5. Too quick to say your approved.
6. Website if they have one is only 2 months old or so.
7. boasting of doing thousands of loans there is a very short list of lenders that have done thousands of loans .
8. Poor English
9. They reach out to you on social media
All of these things 95% of the time or more your dealing with a fake lender in what we call pump and dump due diligence scammers.
for more detailed info on these scams google Ingrid Robinson Remington financial and American Greed episode on American Greed these guys were the kings of pump and dump. Majority of those doing it now are doing it from off shore ergo the bad English.
@Roger Mills:
I do not agree with any of these points. I close a lot of business with private lenders (hard money) and have done so for over 20 years. Hard money lenders, when just 1-2 people, rather than a company with more employees, is often a different feel and much more casual.
I would recommend you go through a title company, so you have extra protection through this process. - 3yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Chad McMahan:
Quote from @Jay Hinrichs:
here are some things to consider.
1. Private lender offering terms that are far better than any of the the big known lenders such as the lenders mentioned above by @Alex Ficco Although I believe Civic has been bought or closed and Anchor might have as well.. But Kiavi is a very good one to check out they are very transparent on their pricing and experience necessary .
2. Offering to show drivers license to you NO lender does that ..
3. sending you copy of LLC registration same thing No lender is going to do that.
4. As mentioned any up front fee's red flag pass full stop.
5. Too quick to say your approved.
6. Website if they have one is only 2 months old or so.
7. boasting of doing thousands of loans there is a very short list of lenders that have done thousands of loans .
8. Poor English
9. They reach out to you on social media
All of these things 95% of the time or more your dealing with a fake lender in what we call pump and dump due diligence scammers.
for more detailed info on these scams google Ingrid Robinson Remington financial and American Greed episode on American Greed these guys were the kings of pump and dump. Majority of those doing it now are doing it from off shore ergo the bad English.
@Roger Mills:
I do not agree with any of these points. I close a lot of business with private lenders (hard money) and have done so for over 20 years. Hard money lenders, when just 1-2 people, rather than a company with more employees, is often a different feel and much more casual.
I would recommend you go through a title company, so you have extra protection through this process.
have you ever met any of these private lenders in person have these private lenders personally viewed the collateral ? IE did a drive by with you ? - Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes3y
@Chad McMahan
So by disagreeing you are saying you will pay an upfront fee or trust someone who doesn’t speak English and sends you a drivers license?
7e investments53 Reviews - Member since 2019 · 5 posts · 1 vote3y
Thanks for that. I appreciate alternative points of view and experience
- Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes3y
This is for everyone on this forum who has asked this question. Stop working with lenders you don’t know. If someone you know has not use them, skip all the headache and use someone legit.
- 3yAndrew PostellPro MemberLender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
@Roger Mills thanks for posting. This is always a good topic to speak about on this site. Lots of good comments above as well. I wrote a big post on this topic that you can find HERE. Well, maybe it's not EXACTLY on this specific topic...but it's similar enough to use many of the same concepts to guide on you using a "private" lender too. Anyway, check it out if you would like and maybe it will help in some way. Thanks!
- Residential Real Estate Broker · Sedona, AZ · Member since 2017 · 751 posts · 504 votes3yGosh, it's amazing how often I see people such as yourself that are so quick to try to start a fight. Let's keep this helpful, supportive and professional, rather than attacking, shall we?
Quote from @Chris Seveney:
@Chad McMahan
So by disagreeing you are saying you will pay an upfront fee or trust someone who doesn’t speak English and sends you a drivers license?
I definitely don't know it all, but I have extensive experience working with small and large private lenders(hard money), as well as larger and more conventional residential and commercial lenders. Before I was a real estate agent, I got my start as an investor via hard money, as I didn't have the experience, dti or credit requirements for something more conventional, where they needed to be. I only had my resourcefulness, hard work and "can-do" mentality. Hard money got me in the game, when other lenders wouldn't give me the time of day. I was able to carefully build a portfolio and my net worth. Even now that I can easily get conventional financing and go more traditional routes, hard money still solves many issues requiring a rapid close, properties with more problems, etc. And many times per year I help investors that don't quite qualify for typical financing to buy with hard money and then refi with better terms. We absolutely all need to be careful when pursuing hard money and forming new partnerships, but I firmly believe we should not auto label someone as a scammer or fraud because they don't speak English well, can finance/approve quickly, try to reach out to you and demonstrate who they are, etc. However, there definitely are some things I quickly walk away from, once I verify the problem. As an example, if I verify they are lying to me about anything, I'm gone.
English is not a prerequisite for me working with someone, no. FYI- this says "poor English" Not NO English. I would simply be extra careful to make sure communication is thorough and effective, and I read everything very carefully, before signing. I'd recommend others have an attorney review docs.
I'm fine with upfront points at COE if it's handled through a title company. Loan origination, aka upfront fees held by a title company until COE is 100% fine and is totally normal, even for conventional sources. Directly paying money to a lender before COE is not fine. Big difference. For anyone considering bypassing a title company and just recording directly with county- you will want to only use reputable lenders you can trust- and honestly, without a title company it's quite a bit of extra risk, all around, so beware. Bear in mind, I say this as someone who has purchased many properties this way- just beware.
How is sending evidence of their identification a bad thing? This is not a red flag to me- it's just something you never see from more conventional lenders, and usually not from private lenders, as well. This is an attempt from an individual running a 1 person operation, albeit awkward, to put someone at ease. When working with a small (1-2 person) private lender, it's actually more of a partnership. They need to feel good about working with you, and you need to feel good about working with them. If I feel the lender is going to be a pain in the neck, I'll move on- as you may talk with them quite a bit, through the course of things- and after you purchase, as well. I do quite a bit of research on private lenders before I pull the trigger. If something feels off to me, I ask very direct questions, even if it may offend them.
If they have a website that is only 2 months old, I would ask them about their business and see if they lie about it. If you ever think something is a lie, ask them- don't just walk away, as there may very well be a good explanation. The prerequisite for being a hard money lender is simply having money and does not require being in business for a long time. I've worked with hard money lenders that *just* started, which makes them more eager and flexible for more ambitious projects, which I love. It can give you an opportunity to grow with them and build a relationship in the early stages. I have even partnered on a couple of purchases with hard money lenders that- first I purchased a few properties with their funds, we got along extremely well and trusted eachother and decided to buy properties together with a slightly different model, and we both made money.
I hope everyone's takeaway from my comments is not to trust everyone and just proceed. It's actually to be cautious and verify the details that matter. I believe in seeking relationships and partnerships that will benefit all involved parties. We do live in a world with a lot of scammers and frauds and it can be difficult to tell when someone is legit. Usually I can determine this quickly. But If my "Spidey" sense is going off, telling me there *may* be an issue, but I don't know what the issue is, I run it by another person- usually my wife. - Specialist · NJ · Member since 2022 · 1k+ posts · 650 votes3y
Hi Roger, yes, it can definitely be leery to deal with people online over very sensitive information.
I have a couple questions for you:
1) Where did you find them? From a reputable resource or on a google search?
2) What does the application look like? You can tell the phonies from the real guys with their app usually
3) Are they giving you too good to be true terms? That's another tell tale sign of a fraud. What are they quoting you? I'll tell you if it is in line with the current status of the market.
- Member since 2022 · 405 posts · 455 votes3y
I would suggest using one of the BP-recommended lenders. You can find them in Build Your Team at the top left of your screen. As most everyone above has said, this does not sound like a legitimate lender for multiple reasons.
- 3yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votesI know your answering Chris.. but I was the one who said bad English and you did not answer my question if you ever actually meet these solo one off lenders and go drive the properties together?
Quote from @Chad McMahan:
Gosh, it's amazing how often I see people such as yourself that are so quick to try to start a fight. Let's keep this helpful, supportive and professional, rather than attacking, shall we?Quote from @Chris Seveney:
@Chad McMahan
So by disagreeing you are saying you will pay an upfront fee or trust someone who doesn’t speak English and sends you a drivers license?
I definitely don't know it all, but I have extensive experience working with small and large private lenders(hard money), as well as larger and more conventional residential and commercial lenders. Before I was a real estate agent, I got my start as an investor via hard money, as I didn't have the experience, dti or credit requirements for something more conventional, where they needed to be. I only had my resourcefulness, hard work and "can-do" mentality. Hard money got me in the game, when other lenders wouldn't give me the time of day. I was able to carefully build a portfolio and my net worth. Even now that I can easily get conventional financing and go more traditional routes, hard money still solves many issues requiring a rapid close, properties with more problems, etc. And many times per year I help investors that don't quite qualify for typical financing to buy with hard money and then refi with better terms. We absolutely all need to be careful when pursuing hard money and forming new partnerships, but I firmly believe we should not auto label someone as a scammer or fraud because they don't speak English well, can finance/approve quickly, try to reach out to you and demonstrate who they are, etc. However, there definitely are some things I quickly walk away from, once I verify the problem. As an example, if I verify they are lying to me about anything, I'm gone.
English is not a prerequisite for me working with someone, no. FYI- this says "poor English" Not NO English. I would simply be extra careful to make sure communication is thorough and effective, and I read everything very carefully, before signing. I'd recommend others have an attorney review docs.
I'm fine with upfront points at COE if it's handled through a title company. Loan origination, aka upfront fees held by a title company until COE is 100% fine and is totally normal, even for conventional sources. Directly paying money to a lender before COE is not fine. Big difference. For anyone considering bypassing a title company and just recording directly with county- you will want to only use reputable lenders you can trust- and honestly, without a title company it's quite a bit of extra risk, all around, so beware. Bear in mind, I say this as someone who has purchased many properties this way- just beware.
How is sending evidence of their identification a bad thing? This is not a red flag to me- it's just something you never see from more conventional lenders, and usually not from private lenders, as well. This is an attempt from an individual running a 1 person operation, albeit awkward, to put someone at ease. When working with a small (1-2 person) private lender, it's actually more of a partnership. They need to feel good about working with you, and you need to feel good about working with them. If I feel the lender is going to be a pain in the neck, I'll move on- as you may talk with them quite a bit, through the course of things- and after you purchase, as well. I do quite a bit of research on private lenders before I pull the trigger. If something feels off to me, I ask very direct questions, even if it may offend them.
If they have a website that is only 2 months old, I would ask them about their business and see if they lie about it. If you ever think something is a lie, ask them- don't just walk away, as there may very well be a good explanation. The prerequisite for being a hard money lender is simply having money and does not require being in business for a long time. I've worked with hard money lenders that *just* started, which makes them more eager and flexible for more ambitious projects, which I love. It can give you an opportunity to grow with them and build a relationship in the early stages. I have even partnered on a couple of purchases with hard money lenders that- first I purchased a few properties with their funds, we got along extremely well and trusted eachother and decided to buy properties together with a slightly different model, and we both made money.
I hope everyone's takeaway from my comments is not to trust everyone and just proceed. It's actually to be cautious and verify the details that matter. I believe in seeking relationships and partnerships that will benefit all involved parties. We do live in a world with a lot of scammers and frauds and it can be difficult to tell when someone is legit. Usually I can determine this quickly. But If my "Spidey" sense is going off, telling me there *may* be an issue, but I don't know what the issue is, I run it by another person- usually my wife.
The advice given on this thread is not for someone like you with a lot of experience. The folks that are getting Hammered by these fake lenders in the real world are basically new investors who have never done private money or HML and simply don't know what they don't know.
The scammers know this that's why they send things like a drivers license which means absolutely nothing to the ability to fund. Like you I have decades of experience being a lender and borrowing from all sorts of HML banks and private individuals. As a borrower I have a credentials package I send along to anyone considering lending me money or investing in one of my projects.
coming out of the GFC I came close to losing 10k to Remington financial out of Scottsdale. Thats the HML that American Greed did the episode on and Indgrid Robinson brought them down its really worth a watch to anyone who is looking for private money.. These guys and they spoke great English were in bizz for 20 plus years worked out of A class offices.. But their business was to simply bring in 5 to 10k in up front due diligence fee's ( due diligence pump and dump) and come up with BS reason why they could not fund.. It was established they did this thousands of times and over the decades did no more than 12 loans.. principles got major prison time. So thats what happened to me they were way to quick to approve a funding model i created out of the GFC just send 10k .. I passed as I felt they approved me to easily and too quickly. But those who dont have the experience send in the dough and lose it. Not only the deposits they send in but many times the EMD they put up believing they have a legit lender who is going to fund along with other costs associated with the loan process.
My favorite one from fake lenders is PMI from some company in Thailand I saw that one time and we all know there is no PMI for HML or private lenders.. but beginners hear it on conventional loans and fall for it.. they charge 5k up front for that non existent service. One of my clients was all excited about this lender who was obviously off shore and had this PMI.. I told her flat out its a scammer if she had not talked to me she would have lost who knows how much.
So not trying to blow anyone out of the game or the water but what we described is real and its how the scammers work.. Your not going to get scammed your experienced borrower many on BP like I said are not and simply do not know what they don't know and come here for opinions. Which of course we all have them. - Member since 2023 · 348 posts · 190 votes3y
Hey Roger, im glad you are aware of all of the fraud going on in the investment world. Especially via Facebook. Has he asked you for any upfront fees?
- Residential Real Estate Broker · Sedona, AZ · Member since 2017 · 751 posts · 504 votes3yWell said, Jay. Thank you for clarifying. And you're absolutely right that there are many scammers out there- which is infuriating.
Quote from @Jay Hinrichs:
I know your answering Chris.. but I was the one who said bad English and you did not answer my question if you ever actually meet these solo one off lenders and go drive the properties together?Quote from @Chad McMahan:
Gosh, it's amazing how often I see people such as yourself that are so quick to try to start a fight. Let's keep this helpful, supportive and professional, rather than attacking, shall we?Quote from @Chris Seveney:
@Chad McMahan
So by disagreeing you are saying you will pay an upfront fee or trust someone who doesn’t speak English and sends you a drivers license?
I definitely don't know it all, but I have extensive experience working with small and large private lenders(hard money), as well as larger and more conventional residential and commercial lenders. Before I was a real estate agent, I got my start as an investor via hard money, as I didn't have the experience, dti or credit requirements for something more conventional, where they needed to be. I only had my resourcefulness, hard work and "can-do" mentality. Hard money got me in the game, when other lenders wouldn't give me the time of day. I was able to carefully build a portfolio and my net worth. Even now that I can easily get conventional financing and go more traditional routes, hard money still solves many issues requiring a rapid close, properties with more problems, etc. And many times per year I help investors that don't quite qualify for typical financing to buy with hard money and then refi with better terms. We absolutely all need to be careful when pursuing hard money and forming new partnerships, but I firmly believe we should not auto label someone as a scammer or fraud because they don't speak English well, can finance/approve quickly, try to reach out to you and demonstrate who they are, etc. However, there definitely are some things I quickly walk away from, once I verify the problem. As an example, if I verify they are lying to me about anything, I'm gone.
English is not a prerequisite for me working with someone, no. FYI- this says "poor English" Not NO English. I would simply be extra careful to make sure communication is thorough and effective, and I read everything very carefully, before signing. I'd recommend others have an attorney review docs.
I'm fine with upfront points at COE if it's handled through a title company. Loan origination, aka upfront fees held by a title company until COE is 100% fine and is totally normal, even for conventional sources. Directly paying money to a lender before COE is not fine. Big difference. For anyone considering bypassing a title company and just recording directly with county- you will want to only use reputable lenders you can trust- and honestly, without a title company it's quite a bit of extra risk, all around, so beware. Bear in mind, I say this as someone who has purchased many properties this way- just beware.
How is sending evidence of their identification a bad thing? This is not a red flag to me- it's just something you never see from more conventional lenders, and usually not from private lenders, as well. This is an attempt from an individual running a 1 person operation, albeit awkward, to put someone at ease. When working with a small (1-2 person) private lender, it's actually more of a partnership. They need to feel good about working with you, and you need to feel good about working with them. If I feel the lender is going to be a pain in the neck, I'll move on- as you may talk with them quite a bit, through the course of things- and after you purchase, as well. I do quite a bit of research on private lenders before I pull the trigger. If something feels off to me, I ask very direct questions, even if it may offend them.
If they have a website that is only 2 months old, I would ask them about their business and see if they lie about it. If you ever think something is a lie, ask them- don't just walk away, as there may very well be a good explanation. The prerequisite for being a hard money lender is simply having money and does not require being in business for a long time. I've worked with hard money lenders that *just* started, which makes them more eager and flexible for more ambitious projects, which I love. It can give you an opportunity to grow with them and build a relationship in the early stages. I have even partnered on a couple of purchases with hard money lenders that- first I purchased a few properties with their funds, we got along extremely well and trusted eachother and decided to buy properties together with a slightly different model, and we both made money.
I hope everyone's takeaway from my comments is not to trust everyone and just proceed. It's actually to be cautious and verify the details that matter. I believe in seeking relationships and partnerships that will benefit all involved parties. We do live in a world with a lot of scammers and frauds and it can be difficult to tell when someone is legit. Usually I can determine this quickly. But If my "Spidey" sense is going off, telling me there *may* be an issue, but I don't know what the issue is, I run it by another person- usually my wife.
The advice given on this thread is not for someone like you with a lot of experience. The folks that are getting Hammered by these fake lenders in the real world are basically new investors who have never done private money or HML and simply don't know what they don't know.
The scammers know this that's why they send things like a drivers license which means absolutely nothing to the ability to fund. Like you I have decades of experience being a lender and borrowing from all sorts of HML banks and private individuals. As a borrower I have a credentials package I send along to anyone considering lending me money or investing in one of my projects.
coming out of the GFC I came close to losing 10k to Remington financial out of Scottsdale. Thats the HML that American Greed did the episode on and Indgrid Robinson brought them down its really worth a watch to anyone who is looking for private money.. These guys and they spoke great English were in bizz for 20 plus years worked out of A class offices.. But their business was to simply bring in 5 to 10k in up front due diligence fee's ( due diligence pump and dump) and come up with BS reason why they could not fund.. It was established they did this thousands of times and over the decades did no more than 12 loans.. principles got major prison time. So thats what happened to me they were way to quick to approve a funding model i created out of the GFC just send 10k .. I passed as I felt they approved me to easily and too quickly. But those who dont have the experience send in the dough and lose it. Not only the deposits they send in but many times the EMD they put up believing they have a legit lender who is going to fund along with other costs associated with the loan process.
My favorite one from fake lenders is PMI from some company in Thailand I saw that one time and we all know there is no PMI for HML or private lenders.. but beginners hear it on conventional loans and fall for it.. they charge 5k up front for that non existent service. One of my clients was all excited about this lender who was obviously off shore and had this PMI.. I told her flat out its a scammer if she had not talked to me she would have lost who knows how much.
So not trying to blow anyone out of the game or the water but what we described is real and its how the scammers work.. Your not going to get scammed your experienced borrower many on BP like I said are not and simply do not know what they don't know and come here for opinions. Which of course we all have them. - Investor · Menifee, CA · Member since 2008 · 78 posts · 20 votes3y
Wow, that's different. A private lender (possible scammer) sent you his driver license? Check DMV records perhaps? Do a credit check or skip trace on him based on info from the driver license. If he's legitimate, I'd like to meet him.
- Wholesaler, Rehabber and Landlord · San Antonio, TX · Member since 2014 · 2k+ posts · 2k+ votes3y
@Susan V. the drivers license is probably from someone that they scammed last week. It does not belong to the scammer!! If I scammed you last week and got your SS# and drivers license, I am now going to portray myself as Susan V. Now if they look for me(Susan) they can see that Susan is a legit person, its just not the person who is going to continue to scam people. It is almost like they are stealing an identity to commit fraud on others. Crazy.
- Investor · Menifee, CA · Member since 2008 · 78 posts · 20 votes3y
@Rick Pozos, yep, too crazy. Legit people need to stick together :)
Join the conversationCreate a free account to reply, vote on answers and follow this thread.