private money lending scams

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private money lending scams

Shequann Burrwell

Wholesaler/rehabber · Arcadia, FL · Member since 2013 · 341 posts · 22 votes

I am on the search for a new lender to fund my rehabbing efforts in my area. I found a post on LinkedIn simply stating this person was working with new investors who are allowing him to lend there money out to fund deals. so i commented on it and got a reply. found some deals i needed funded and even sent over a analysis of a few deals to show him the profit potential in the deals I found. so emailed back and forth about his process and how much he could lend me. We settled on a number for a smaller deal I had in the works. then he started talking about me sending him the fee for loan insurance and he could have the money transferred today to one of my accounts. the amount was a little over $600 bucks which was fine. but then i started to think if this could be a scam that i would lose my money in. i looked it up and come to find out that this is a common way to get scammed out of your money. i don't know any one who has used this guy before but he has gotten a lot of comments on his post on linkedin. should i seek out a diffrent private money lender? or is there a way i can vet this gentleman so i know he is genuine and move forward?

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Realtor · Charlotte, NC · Member since 2014 · 935 posts · 467 votes

@Shequann Burrwell You do not understand what a private lender is. A PL is someone you personally know who may be willing to lend or invest with you on a project based on a personal relationship and the merit of the deal.

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Diana Astilla
Flipper · Houston, TX · Member since 2016 · 11 posts · 1 vote
9y
So what actions do you take after you already got scammed? Do you file a complaint somewhere or sue at small claims court?
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Dawn AnastasiPro Member
Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
9y
Originally posted by @Diana Astilla:

So what actions do you take after you already got scammed? Do you file a complaint somewhere or sue at small claims court?
Can you even find the person? And if you do, would the court costs and attorneys fees be more than the few hundred you were scammed out of?
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George Taylor
Wholesaler · Myrtle Beach, SC · Member since 2017 · 276 posts · 80 votes
9y
I'd like to chime in on this subject a little if I may. I've been working for a HML for the past 5 months with a limited amount of programs and in a limited amount of states. We didn't charge any upfront such as processing or "loan insurance". Because of their criteria, I have had to pass on funding at least 30 loans totaling around 20MM. Long story short, I work a LOT for free and continue to do that to this day, as I actually love the industry and what I do.
As this moment I'm transitioning to a commercial brokerage that has partners nationwide. This brokerage does charge a $550 underwriting and due diligence fee credited back at closing. They never make a promise to fund within 24 hours but can almost guarantee at least a LOI from a lender in 24 hours of receiving all required loan documents.
Anyone who has been in the lending side knows how it feels to work on at least 1 loan, throughout their career for 2 months and then the borrower going somewhere else and the deal being killed. With this in mind, I've accepted that this $550 fee is absolutely acceptable to ask for as not only a commitment from the borrower but also as the borrower giving us the correct information on them and the deal and not falsifying information. Time is money in this industry and if hourly processors and title companies and due diligence is being performed then we would need a commitment that we aren't going to waste our time.
Like I said, the fee is credited back at closing and the only way the borrower would not receive it back is if their information given to us is false, which is in black and white in the fee agreement. Picture it the same way as a Realtor works. They require an exclusive agreement to package all of the information you give them on the property you are selling. They in turn, have to pay desk fees, marketing, and other fees to work and if they market your home to buyers they expect to have a full commitment from you.
I'm not brand new and I'm not seasoned with 20 years but as I've vetted this company they are legit and I'm working on several big deals with them as we speak. I welcome all kinds of comments and questions on this subject. No one likes to work for free and personally I would like to be able to offer a ton more programs in a ton more locations to my clients to get their deals funded. If it takes them a $550 refundable deposit to fund a 6.7M deal that they need to get done then they are good with that. Again, we don't promise to fund within 24 hours and our HML close between 5-12 days and conforming 45-90.
Thanks everyone for your time on this and I look forward to hearing the responses.
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Kenneth GarrettPro Member
Investor · Florida Panhandle/Illinois · Member since 2016 · 4k+ posts · 3k+ votes
9y
Private lending is done through relationship building. Not through an email scam. Private lending takes time to build relationships and trust. It is one on one contact with an individual. I see a lot of offers via email and mail. Usually to good to be true. Attend REIA meetings, meetups and the like to meet people to create relationship building. The ease of the internet has created so much scamming. Unfortunately, when something is legitimate you don't know whether to trust it. I build relationships with local bankers and private lenders. Unless you are referred by a trusted individual stay local. Don't get caught with a deal that needs funding immediately. Start networking now so you don't make an uniformed hasty decision that costs you money and worst your credibility.
Good Luck Everyone.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y
@George Taylor word of caution.. borrowers looking for 6.7 million dollar loans if they are truly bankable do not go looking for them with these types of companies. or pay a silly 500 dollar fee.
the only lender I know that is legit and charges up front is Lendinghome they charge 200.00
other wise its only credit and appraisal up front.
if your open for suggestions you may want to look to broker for Colony or B 2R or those types of companies.. you can broker for Lendinghome and they are for real.. realty shares has a broker program most of these guys do and they are for real lenders.
up front 500 fee whats that going to do for you.. and its not yours right it goes to the company.
And your dead on accurate that when you try to broker deals for deal makers there is no loyalty if they find a better fit your out.. and whats 500 bucks they don't care..
on a 6mil loan a real lender usually charges 5 to 20k up front.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y
@George Taylor one thing I forgot to mention most of these companies that do pay broker referrals will require you to be registered with the NMLS and that requires a state license.. regardless if licensure is required for the loan.. I think this is their way of weeding out bad actors.. because to get NMLS licensed you have to pass FBI background and of course pass a test. that proves you actually know something about lending and state and federal laws.. I have my NMLS its inactive right now.. but if I activate it I can broker for all those companies.. they call me all the time.. LOL
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George Taylor
Wholesaler · Myrtle Beach, SC · Member since 2017 · 276 posts · 80 votes
9y
@Jay Hinrichs I appreciate all of the advice. I will for sure look into these other companies as they seem to be battle tested as I've head their names before quite a bit. Out of the $550 fee I actually get half for my time, more as a draw on commission type of structure. My real incentive isn't $225 for originating a loan but to get the deal closed to where there client gets funded and I can do a lot larger loans.
The 6.7M deal I was referring to was a group that I've been trying to work with for the past several months on different types of deals and we finally came across one that looks like it will work as they only want a purchase HML at this point. When they decide to switch to a conforming loan then we will have lenders for that as well. If anyone would like to take a look at icsloans.com and give me any kind of feedback on it I'm all ears.
I have another few smaller deals with them I'm going to lock up this Monday so I'll see how legit they are with those first. Then I'll look at making a different move if I have to. Good info on the NMLS info as well, I wasn't aware of that in a commercial lending requirement for brokering as I've only worked for a direct HML since being in this part of the industry.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y
@George Taylor NMLS is not required for commercial loans that are not 1 to 4 units..
in 11 states 1 to 4 units and its required.. many companies get caught off guard on this one.
these lenders as I stated I think they make that a requirement to weed out wanna bee brokers who don't want to take the time and effort to get licensed.. at least that's my thought on it.
but just go to lendinghome's website and click on the broker referral tab you will see
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y
@Account Closed trust me John they are for real.. I have borrowed multi millions from them personally. 200 includes your background check and valuation of the property.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y
@Account Closed standard operating procedure in these day and age... with many companies. company like lendinghome is getting their money via the crowd and via hedge fund new York backers.. its in their SOP's they tell their investors.. plus its just smart business.
I am not up that early its 9:25 AM here I think you think I live in Hawaii or something LOL
when I was HML I did not do a back ground I did credit but I also had a accurant fraud detection product that is available to lenders I ran them through that..
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George Taylor
Wholesaler · Myrtle Beach, SC · Member since 2017 · 276 posts · 80 votes
9y
@Account Closed We always run credit/background checks. Comes in handy for that one guy out there with several financial related convictions on his record that almost slips by and gets a blanket loan (Feb 2016). lol
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George Taylor
Wholesaler · Myrtle Beach, SC · Member since 2017 · 276 posts · 80 votes
9y
@Account Closed Your correct, I thought we were still talking about the HML's still.
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David Benton
Investor · Charleston, SC · Member since 2015 · 113 posts · 50 votes
9y
Wouldn't it make sense to set up an escrow with your title company and have all funds held in escrow? The only legitimate expense a private lender could require to be paid outside of escrow would be for an appraisal and possibly credit app.
Some private lenders will require an appraisal and will pull credit at your expense. If this is the case you could request the contact info of their preferred appraisal and pay him directly and pay the credit report directly.
Still a loss but no gain to a scammer if paid directly to the providers. This would still be funds at risk but only $400 for appraisal and $25 for credit and nothing going to the lender.
A way to vet the lender is to get their information to check them out. If they have money they probably own their own home. Get their name, address, DOB and social. If a private lender has issues providing this information I would ask why. They are vetting you so of course, I'm going to vet them as well.
At minimum search county records for the address and verify the name matches. If not I would ask them why.
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Diana Astilla
Flipper · Houston, TX · Member since 2016 · 11 posts · 1 vote
9y
@Dawn Anastasi
Yes I have the person's contact info, copy of his driver's license and his LLC article of incorporation docs, and signed contracts. I do not mind paying legal fees after the moneys is recovered and even pursuing a claim at small claims court. Intent: report him and get him out of the business, and prevent someone else from being a victim. :)
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Ayodeji Kuponiyi
Investor · King of Prussia, PA · Member since 2014 · 1k+ posts · 339 votes
9y
Avoid Michael Gladysz, he's another scammer!
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Ayodeji Kuponiyi
Investor · King of Prussia, PA · Member since 2014 · 1k+ posts · 339 votes
9y
@Diana Astilla were you able to recover your money back?
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Brian To
Lender · Houston, TX · Member since 2017 · 1 post · 0 votes
8y
I didn't realize it was unconventional for lenders to get some security up front. As a lender myself, I don't do any work until my borrower shows me that they are serious. I require a $1,000 earnest money deposit to cover the appraisal and attorney fees. I started this because a borrower came to me asking for a loan so I ordered the appraisal and submitted the paper work to my attorney. The borrower backed out at the end and went with another lender leaving me with a $450 bill to the appraiser and $600 to my attorney.
What are other lenders doing to protect themselves from getting screwed over at the last second? And do you not charge a fee for your time and effort in analyzing the deal, doing due diligence, and running background/credit reports?
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Jay Statzer
Landlord · Buchanan, MI · Member since 2016 · 57 posts · 24 votes
8y
Is payment of a app fee by wire only, categorically a sign of fraud?
I have a par-for-the-course personal loan offer. None of the fake fees mentioned above. Just 1.5% on the loan. Picture matches the face, no advertising or web presence beyond company registry, home office checks out with name but some reports indicate it being bank owned. I usually screen out offers that arrive in my email or txt full of broken English. Am I being a xenophobe?
PS
Personal lenders can and do make their own rules and often prefer not to advertise, so are all the red flags always red flags. It's apples and oranges to comment from the institutional lending perspective on guys that just want to invest their personal funds and make paper.
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Armindo Gonzalez Jr
Bradenton, FL · Member since 2017 · 19 posts · 3 votes
8y
Anytime someone asked for a fee upfront is likely a scam. These guys are Nigeria scammers and they post a lot in Facebook as well. I’d personally knew someone who got scam out over $3K!
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Frank Y.
Lender · Philadelphia, PA · Member since 2017 · 225 posts · 72 votes
8y
For me that is for sure a scam. Don’t pay upfront money!!!
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Wanda I Rivera
Member since 2018 · 1 post · 0 votes
8y
I have a question about being a private money lender. So I invested $35,000 as a private money lender last September. We didn’t sign any paperwork or anything but I have no idea what’s going on with my money or even how I make my money and when. What do I do in this case? Do I just ask?
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Steve Babiak
Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
8y
Originally posted by @Wanda I Rivera:

I have a question about being a private money lender. So I invested $35,000 as a private money lender last September. We didn’t sign any paperwork or anything but I have no idea what’s going on with my money or even how I make my money and when. What do I do in this case? Do I just ask?
Sounds like you at best made an unsecured loan, but sounds more like a "gift" because there is no promise to pay in writing AKA promissory note.
I tell people to read what's in this next link for a more formal and proper way to lend privately:
https://www.biggerpockets.com/forums/49/topics/555...
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Nehemiah Smith
Rental Property Investor · Atlanta, GA · Member since 2019 · 21 posts · 7 votes
7y
This is what an apparent lender responded to me after I asked for references and a NMLS # so I could look him up and also know who Im borrowing from... He said his name is Larry White; says he's a direct lender and the ceo of Alliance Premium Finance llc. Uses his own cash. The loan is for 180k 2yrs 5%. Let me know what ya'll think. I'm having a hard time believing that this isn't a scam.

Below are some clients who I recently funded for you to contact and verify.
Also, attached below is my ID and my LLC document for your review.
Name: Lin Bruce Levy
City: Apex
State: NC
Amount received: Deal Closing - $900,000 thousand loan on a 4-unit apartment property.
Email: ************
Phone:*************

Name: Nicholas Smith,
State: KY
City: Covington
Amount received: Deal Closing - $510,000 Debt consolidation
Email: *******
Cell: (2************

Thanks

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Allan C.
Rental Property Investor · Member since 2018 · 826 posts · 810 votes
7y
@Brian To I request that borrowers pay the legal fees directly to my lawyer. This avoids out of pocket fees on my end while establishing credibility of the transition since I use lawyers with credentials that are easy to verify.
1 Reply
Jhon Smith
Member since 2023 · 1 post · 0 votes
3y
A private mortgage lender is a private entity—such as a friend, family member or business—that provides funds for a home loan and earns a profit on the investment by charging interest. Unlike traditional mortgage lenders that follow borrowing guidelines set by the federal government or government-sponsored entities, private mortgage lenders or private commercial lender determine their own lending criteria and underwriting processes.

private commercial lender
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