Hard Money Lender

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Judth Felker
Real Estate Entrepeneur · Minneapolis, MN · Member since 2015 · 9 posts · 37 votes
11y

Hard Money Lenders do NOT ask for fees upfront.

Scammers do.

Hang up and delete.

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  • Michael Noto
    Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
    11y

    @Bill Peters I do not know anything about the website and company you are referring to, but here are the costs associated with my hard money lender who is a local lender here in Connecticut, not national.

    • 20% down payment on the purchase price
    • 12% interest only loan payment, term 1-year
    • 3 points on the loan amount + rehab costs due at closing

    No upfront fees just to do business with them.

    0Reply
  • Judth Felker
    Real Estate Entrepeneur · Minneapolis, MN · Member since 2015 · 9 posts · 37 votes
    11y

    Hard Money Lenders do NOT ask for fees upfront.

    Scammers do.

    Hang up and delete.

    11Reply
  • Rita Bautista
    CEO · Chicago, IL · Member since 2015 · 108 posts · 20 votes
    11y

    I agree, they do not ask for money up front.

    3Reply
  • Neil Aggarwal
    Lender · Richardson, TX · Member since 2014 · 537 posts · 228 votes
    11y

    I think he may be referring to points.  Those are paid when the loan originates which he may be calling "up front".

    2Reply
  • Bill Peters
    OP
    West Berlin, NJ · Member since 2014 · 6 posts · 4 votes
    11y

    Thanks for responding, no there is 2,000.00 fee for the approval letter witch you get back when you pay the loan back. There was $ 4,000.00 for points and no payments you pay the loan off when you sell the house on a 5 month loan $ 9,000.00 for interest on 150,500.00 deal. The deal is in N.J.

    1Reply
  • Bill Peters
    OP
    West Berlin, NJ · Member since 2014 · 6 posts · 4 votes
    11y

    I got the company from the Bigger Pockets Resources

    0Reply
  • Judth Felker
    Real Estate Entrepeneur · Minneapolis, MN · Member since 2015 · 9 posts · 37 votes
    11y

    If "upfront fees" are requested as a condition upon which they will fund your deal, it's a scam.  If points are required, when the money for the deal is put in your title company's escrow account, the points will be taken out, and then you will get "draws" from the account as the work gets done. The lender will want proof that the work is being done before allowing each "draw" because their money, when released from escrow, is at risk.

    If you don't make payments as agreed upon, the lender can foreclose because the property secures their loan.

    It's important that you DO NOT send any money to a lender until they've approved the loan and a contract has been drawn up by an attorney and signed by both parties (let your attorney look at it before you sign it). 

    Others could answer this question better than I, but I know so many people have sent money to someone saying they're a lender, then sending more money, then more, until the poor borrower finally realizes they'll never get any money from that "lender", scammer.  

    8Reply
  • Ibrahim Hughes
    Real Estate Consultant · Bloomfield, NJ · Member since 2010 · 2k+ posts · 1k+ votes
    11y

    I would never pay a lender up front fees of any kind. Red flag if they ask imo. Perhaps @Brandon Turner or someone else from BP can chime in since they are listed as a BP resource?

    3Reply
  • Karin Crompton
    Rehabber · Niantic, CT · Member since 2012 · 443 posts · 150 votes
    11y

    I would also add that 5 months is an awfully short loan term. Are you rehabbing the property? That doesn't leave you much wiggle room to rehab, put the house on the market, get it under contract and then close. The standard term we've run across is a year (though other terms are available depending on the product; I'm talking about a typical flip).

    I agree with others that the 2k upfront is, at best, unusual. There are tons of hard money lenders. Speak with a few others and then see how this one looks.

    1Reply
  • Darren Eady
    Rental Property Investor · Lindon, UT · Member since 2015 · 862 posts · 438 votes
    11y

    Yep, hard money lenders like me do not ask for fees upfront. If there is a cost on a BPO, CMA or appraisal, they let you pay for that item, they shouldn't collect the money from you. I don't.

    2Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    11y

    @Bill Peters

      Up front fee's like this as others have stated are not the norm and generally these companies make a large amount of their revenue from these fee's without ever funding a loan.

    I have asked also why a company like this Is allowed to advertise on BP as when I brought it up before a lot of folks were very negative on the company.. I don't know them personally

    But as a HML in my day we would only charge for 3P appraisal... nothing else

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    1Reply
  • Ray Slack
    Investor · White Haven PA · Member since 2014 · 362 posts · 221 votes
    11y

    $2,000 for an approval letter?  I say RUN!!!   The only upfront fee that is reasonable for a lender to charge is an appraisal fee ($250-$500) and Maybe a small credit report fee <$50

    2Reply
  • Bill Peters
    OP
    West Berlin, NJ · Member since 2014 · 6 posts · 4 votes
    11y

    Thanks to everyone for there input, this is not my first flip I have done multiple  deals but everything has been out of pocket till this point but I want to do more deals so I was looking into HM lenders in the N.J. area I am currently taking to another guy from Philadelphia so we should be able to get this deal done.

    THANKS AGAIN! 

    1Reply
  • Jeff Rabinowitz
    Investor/Landlord · Farmington Hills, MI · Member since 2011 · 1k+ posts · 1k+ votes
    11y

    @Jay Hinrichs, what response did you get when you asked BP why this company is allowed to advertise here? Who did you ask? This does not seem appropriate to me either.

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    11y

    @Jeff Rabinowitz

    I did not ask BP specifically I just commented in the last thread... when I was new to BP I just looked at the HML section.. Being a HML of some repute I wanted to see if I knew any of the companies.. and when I popped on this one's website I was leary personally so I made a post any one do business with these guys and there were a bunch of negative responses.. and again I am NOT HML per se ' today.. but I used to do a lot of volume in the space 25 to 40 loans a month would go out of my shop... We only charged for 3P apprasials.

    And of course being around HML for almost 35 years.. I have seen my share of Due Dilignece shops... Like these that promise the moon... newbies get excited because they don't know any better and they send in 2 to 5k for DD or pre approvals only to never get a loan funded because some falls through... there are Definitly HML out there that do this and so called Loan companies that make the majority of their revenue duping people out of up front fee's.

    There is a post right now on Marketplace.. very common  IE we make 5 to 50 million dollar loans Blah blah blah... you read through and its 15 to 20k for Due diligence.. those companies thrive on DD fee's and those that have no chance in hell of borrowing multi millions but have a project they get sucked into the dream !

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    2Reply
  • Jeff Rabinowitz
    Investor/Landlord · Farmington Hills, MI · Member since 2011 · 1k+ posts · 1k+ votes
    11y

    @Jay Hinrichs, you are very active here. Does BP have a process for removing this type of company? If not they should. 

    @Brandon Turner , is there a process?

    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    11y

    @Jeff Rabinowitz

      I am active on the boards but really have zero interaction for know the inner workings of the company...

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    0Reply
  • Account Closed
    Investor · Downers Grove, IL · Member since 2015 · 135 posts · 55 votes
    11y

    @Bill Peters - I would suggest being VERY cautious in working with people who request fees up front to simply complete an application, receive a pre-approval or do anything else.  If you are working with a professional/reputable lender, there should be no upfront fees prior to receiving a pre-approval or a commitment letter, other than a pass through of third party fees (e.g, appraisal costs).

    1Reply
  • Account Closed
    Investor · Vancouver, WA · Member since 2013 · 315 posts · 63 votes
    11y

    @Mark Callazzo,

    Do you offer your products for properties in Oregon and Washington?

    0Reply
  • Account Closed
    Investor · Kansas City, MO · Member since 2010 · 239 posts · 110 votes
    11y

    I would be extremely cautious about any upfront fees before a commitment letter is signed, at least on most traditional fix/flip loans.

    @Account Closed  says it well

    0Reply
  • Todd Pigott
    Lender · Fresno, CA · Member since 2011 · 6 posts · 0 votes
    11y

    Appraisal should be the only fee upfront.

    0Reply
  • Bill Peters
    OP
    West Berlin, NJ · Member since 2014 · 6 posts · 4 votes
    11y

    I don't understand how they are allowed to advertise on BP if there not a legitimate lender, just so you guy's know I would never give anybody money up front I'am not new to this game, thanks for the feed back.

    0Reply
  • Jacque Fairbourn
    Hard Money Lender · West Jordan, UT · Member since 2015 · 105 posts · 75 votes
    10y

    Disclosure - I am Director of PR for Do Hard Money

    There are some misunderstandings about our business here in this thread we'd like to address. We do not claim to be the best solution for every investor, we'd always recommend that before doing a deal you look at the entire cost of the deal. 

    At DoHardMoney we do things a little different than most Hard Money Lenders and as a result we’ve disrupted things in a way that competitors feel the need to raise doubts and concerns about our systematic approach and our business model. In addition, we occasionally get individuals that “know someone” that’s done business with us and because of the unique approach new investors can get confused on the process we follow.

    So here’s a breakdown of questions and concerns that frequently come up.

    • 1.First and foremost, if you are a customer and you’ve had an experience that’s caused you any frustration we’d invite you to contact us directly and give us an opportunity to resolve your concerns.
    • 2.Most Hard Money Lenders require 10-20% Down, decent credit and some experience. We have no down payment requirements. If you have 10-20% down we might not be the best option for you, but for the individual that's looking at a high ROI by not having to bring a lot of money to the table we might be your best option. Also, we work with investors that have bad credit and we don't require past experience.
    • 3.Our Interest Rate is 15-18% as an Annualized Rate. Our standard loan is a 5-month term which puts the effective rate at 6.25% - 7.5%. So a loan of $100K would have an interest rate of $6,250 to $7,500. Compared to a loan with a 12% interest rate you’re looking at a difference of $1,250 - $2500.
    • 4.Each property does go through an evaluation process where we send out 2-3 local independent evaluators to the property to determine the After Repair Value of the property. They are local licensed real estate agents that are active in the local community. They pull 3 active and 3 sold comps in addition to completing an interior evaluation of the property with an initial breakdown of needed repairs to get the property in resalable condition. The evaluation process does require $650.
    • 5.In part, with the evaluation process, you are paying for a quick turn time. Our Evaluators will be out to the property within 24-48 hours of us reviewing your loan application with you. If the initial numbers look good there’s no time to waste and we understand the need to get the results of the evaluation back to you ask quickly as possible.
    • 6.The draw back to an appraisal, you’re hanging your hat on one individual’s opinion, the turn time is 5-10 business days, appraisers’ expertise is in establishing the As-Is Value not the After Repair Value.
    • 7.We do require a $2500 deposit to get access to 100% Financing. We will finance up to 70% of the ARV with no required down payment. If you're purchase, rehab and closing costs are 70% or less you will bring nothing to the table. In addition to this, the deposit gives you access to the following:
    • a.Advanced Deal Analysis Software – enter the purchase price, rehab costs and After Repair Value and we’ll give you a comprehensive break down including costs, net profit, and potential cash to close.
    • b.Access to Proof of Funds – 24/7
    • c.Contracts and Checklists
    • d.Additional Tools & Resources to help you avoid common pit falls in evaluating, rehabbing, negotiating and reselling the property.
    • e.Your first evaluation is covered with the deposit.
    • f.If the needed funding is more than 70% but it’s still a profitable deal, we’ll work with you to potentially wholesale the property and still make money on the deal.
    • g.The remaining $1850 is rebated back to you once you resale your first property.
    • 8.Just like every other Hard Money Lender, one of the biggest challenges is helping new investors get dialed in on establishing accurate After Repair Values. Most complaints on bigger pockets are customers that are frustrated with the After Repair Value that’s established by our local evaluators. It can be disheartening when the values don’t come back as high as hoped. This frequently is a case of overly optimistic investors looking at a deal from a best case scenario. When there are disagreements with the potential borrower we do provide a dispute process allowing the customer to have us take a second look at the evaluations.

    We’re not pretending to be something we’re not. For a lot of new investors with limited options we are often times the only viable option they have. We’re more than happy to give you a comparable breakdown of how our costs and cash to close compare to other Hard Money Lenders

    1Reply
  • Lou Kaggia
    Philadelphia, PA · Member since 2015 · 2 posts · 0 votes
    10y

    @Bill Peters

    I am looking for a hard money lender in Philadelphia. How did the HML you were talking to in Philadelphia work out for you. Would you recommend them?

    0Reply
  • Mark Scott
    Investor · Fayetteville, NC · Member since 2016 · 24 posts · 6 votes
    10y

    @Jacque Fairbourn What happens to the $2500 if the ARV comes in too low and the loan is not approved, because the 70% LTV is not enough to cover purchase price and rehab? I believe the balance of $1850 would go back to the applicant. If someone did a second or third loan with you, do they have to pay the $2500 each time or just the evaluation charge?

    0Reply
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