Hard Money loan default

[Ziad Agarwal]

I have heard stories about hard money lenders taking a house that's in default. I am assuming that is not in a judicial foreclosure state that has to be auctioned off and gives the homeowner time to sell it. Although it isn't considered a residential property, they still have to go through a sheriff sale process in Pennsylvania, for example, which takes several months. Has anyone heard of something else happening?

[Ronald Isgate]

Pennsylvania Real Estate and Hard Money Lender Attorney Here. Make sure to check your loan documents. There are provisions that can shortcut some (or all) of the foreclosure process. You may have a confession of judgment provision - which allows the lender to get a judgment without a trial (but they still have to take it to Sheriff Sale). If the borrower signed a deed in lieu of foreclosure at the time of obtaining the loan, that would allow the lender to simply take the property back by filing the deed. If the borrower was a LLC, they could have pledged shares of the LLC as collateral - which the lender could simply "take" and therefore own the LLC (and own the property). So there are always possibilities around the standard foreclosure process. Review your docs to see exactly what the Lender's execution options are.