When using hard money, how should I draft the purchase offer?

Question

I'm beginning to speak to a few hard money lenders for the first time, but they all kind of tell me something different when it comes to the best way to draft a purchase offer. What is the same is that they will give me a Letter of Credit as POF to the seller. I am wondering when buying a listed property, would I fill out the purchase agreement with simply All Cash, and show the letter of credit as POF if asked? Or would I check that buyer needs financing and will put down X% deposit + contingent on hard money loan? Also, a real estate agent says to write All Cash and with a mention that buyer may opt to use a non-contingent hard money loan.

Any advice?

Sean Blomquist · Answer

Account Closed a HML is NOT CASH.  It works like cash in most cases, but you need to be up front with the seller and the title company about it being financing.  It is not traditional in any way, but is still financing.  Have your agent mark OTHER in the type of financing and write in either HARD MONEY or PRIVATE MONEY.  That should work for the finance part of it.  If you are putting any money down, you can put that as the % of purchase.  It will depend on your HML and the % amount they will finance.

Good luck!

Andy Davey · Answer

The title company will be surprised when you go to close if you say you are doing a cash offer when you are not (not to mention that if you are planning on financing you would be lying to the seller). If you have a good hard money lender they should be able to close very quickly so that you are "as fast as cash" compared to traditional financing methods which can take between 30 and 60 days to close.

I suggest showing your letter from your hard money lender to your seller with assurances about how you can close fast and be honest in your contract contingent upon financing.

Happy investing!

I suggest showing your letter from your hard money lender to your seller with assurances about how you can close fast and be honest in your contract contingent upon financing.

Happy investing!

Tom S. · Answer

@Daniel Garzoria  Usually it's a "draw" schedule, you pay the contractors up front and they complete the work in stages.  The lender inspects it and reimburses you.  Typically 3 draws for a rehab project, although that varies by lender.

Welcome to BP!

- Tom

Charlie Fitzgerald · Answer

Write your offer indicating you are using Private/Hard Money Funds.  Our company issues you a Letter of Intent to Fund in 24 hours from receipt of your application to submit with your offer that outlines the terms of our loan to you.  We find this is more attractive to most sellers.

Daniel Garzoria · Answer

Does a lender write the borrower a check for full amount borrowed or do they write checks to contractors with receipts given.

When using hard money, how should I draft the purchase offer?

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