very basic hard money question here

4 Replies

I have not used hard money yet. So far, just used my own cash. But I miss a number of good deals because they are just out of reach. What usually happens here in Michigan with a good REO deal, is that it will list one day, get 5-7 offers, go over asking price to the person with cash buying as-is. You have to have proof of funds and submit the offer on day one.

So how does this work with hard money? I've seen the websites where they say you get funded in 5-7 days. But still, you have to submit a breakdown of expenses, and show you have the contract. This seems like a catch 22. Can't get the deal without the money, can't get the money without the deal. So how does that work with putting in offers? How do you show proof of funds? Thanks

Buy with your own cash and refi out with a hard money lender. I have worked with individuals in your situation. If you have any questions feel free to contact me. Hard money is a great tool.

With HM it is a financed offer, so you won't be showing POF. If you've met with a HML and talked about the type of deal and terms you would be looking at then he should be able to provide a pre-approval that you can submit with your offer. Now you will have the property under contract and can work on getting DD done and your final commitment from him.

I agree with Matt but it often depends, as different banks have different requirements when offering on their REOs. I have found that many banks will request a loan approval letter specific to the property, where others will only require a standard pre-approval letter. In addition, some banks request a POF for any down-payments, while others do not. If you have a good relationship with a HML, it shouldn't take much time for them to provide you with a specific letter, as long as you aren't submitting a bunch of low-ball offers that are not getting accepted.

I have found that in California, usually when I wanted pre-approval from a HMB, they wanted to see the deal first. I use to get a POF letter from one of the many Transactional Financing providers or a bank statement, self-directed retirement account, securities account, or something liquid to show with my offer to the bank (and often an explanation) Once I got it under contract, I would bring it to the HMB.

That being said, that was not recent, and if you can find a HMB to work with, ahead of time, that would be preferable.

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