I have a private lender up front fee is it a scam ?

Private Lending & Conventional Mortgage Advice

I have a private lender up front fee is it a scam ?

Chicago iL · Member since 2014 · 20 posts · 1 vote

I have a private lender who is loaning $80,000 at 4% interest paid back at $266 a month for six months with the $80,000 paid back at the end he's charging $800 origination fee is this a scam ?

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Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

I will buy everyone who replied on this thread a steak dinner in Chicago if this is a for real lender

@Jon Holdman no one lends at 4% unless its your aunt milly or your parents.. there simply is not enough revenue coming form this to make it worth any one's while.

Private lenders don't advertise they usually don't charge points and they don't put their money out that cheap.. crazy risky and simply not real.

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Carlos Zapata
Investor · Miami, FL · Member since 2015 · 363 posts · 143 votes
8y
Originally posted by @Mark Crutcher:

I have a private lender who is loaning $80,000 at 4% interest paid back at $266 a month for six months with the $80,000 paid back at the end he's charging $800 origination fee is this a scam ?
Too good to be true, ask for referrals and do your due diligence first,
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Ian WalshBusiness Member
Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
8y
Is the origination fee paid up front or at closing? Normally that is at closing. Are they a broker or direct lender?
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Michael Noto
Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
8y
I do not see how with the scenario you laid out how there is even money for the lender to be made on this deal. Major red flags. You were smart to check on here before pulling the trigger.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y
Originally posted by @Alex Corral:

Mark Crutcher did you see this on Facebook? Some guy Hassan from Capital Holdings? If so, I replied to his ad too. He emailed me a weird contract with all kinds of typographical errors. No thank you!
facebook is full of fake lenders.. .just like fake news.. last place on earth I would do business in real estate is facebook but that's just me.. at least in the lending end of it.. bottom line is these guys that advertise loans at these rates that are less than gov mit backed loans today are just frauds plane and simple.. and no private lender advertise's the second you do your a HML and in the business.. don't fall for any of this Alex..
HML just look at the bigger companies in your area that have nice websites and brick and motor and pick one they are for real.
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Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
8y
Even if a so called lender said the fee was refundable good luck getting it back for someone saying 4% interest rate on the loan.
In the past I have seen buyers NOT give a deposit/fees to the lender or their mortgage contact. Instead the buyer attorney/legal counsel holds the money in an escrow account. The attorney provides a letter showing the funds are allocated there. Any services ordered those companies are paid directly from the attorney escrow account after various levels of validation and not given to some unknown person with a new relationship.
Watch what the possible scammers say when you tell them that............ : )
Occasionally and it is very rare you will see a lender having an unusual type loan not seen in the market for awhile. They are trying to get competitive to win business. I have heard in CA hard money there can go down to 6 or 7 percent versus other states.
The key is you must verify all conditions of the loan. Most will tell you anything over the phone as generally verbal might be legal in some states but not enforceable in a court a law. Get them on a video Skype or similar so you have a real picture of them. Most scammers know anything under 1,000 the scammed party will not want to spend way more than that to chase them in court to try and recover the money. Also some parties are not lenders they are just point takers and upfront fees. They have no clue and are sometimes sucked in by these so called lenders. All the mortgage people I work with on big loans take no fee for themselves until closing.
So if the loan is 2 million they make 1 point usually so 20,000. When they take fees at closing then the onus is on them to make sure the lender can perform. If they do not the mortgage person does not get paid. Now some trying to be slick will say that they take a retainer because so many buyers do not do what they say they will and they waste time. That is not your problem as a buyer.
On the commercial real estate side I could charge a large retainer but I do not for real estate transactions. I do not do loans but the real estate broker working with buyers and sellers. I do have a system I have developed over 14 years in the business to know if the buyer can follow directions and how they will behave in a transaction. So if you get 10 inquires but only 4 lead to closings it is the cost of doing business.
Read all pages of any contracts before you sign. Read every word and look for mention of numbers of paragraphs that are not there. Often a scammer will try to slip in pages later on. If you sign with date and initial each page instead of just at the end that can help fend off some of that.
No legal advice given.
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Gene Chandler
Investor · Elkhart, IN · Member since 2014 · 36 posts · 32 votes
8y
Simple... Tell them you are ready willing and able to close. Then ask what Title Company they are sending the documents to. You will be told they don't use a third party. Insists and offer to pay the closing fee because that is how it will be done. You will put the $800 in the Title Companys escrow account and send him the verification from the Title Company. That will be the end of it!
It's really fun if you get them to do a 110% loan and get them down to 3% on a 40year amo.
If you have the time... GC
I'm sorry, Not really!
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Tom S.
Real Estate Investor · Burlington, VT · Member since 2010 · 2k+ posts · 1k+ votes
8y
@Mark Crutcher Any update on this - what did the lender say? Or did you just move on?
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Cynthia Hairston
Lender · Austin, TX · Member since 2017 · 38 posts · 11 votes
8y
The only thing I know of upfront would maybe a$150 application processing fee that is non-refundable but if the loan closes, will be credited to HUD statement. Other than that EVERYTHING is settled a close and YOU choose the title company you want to use!
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Jon Holdman
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
8y
Originally posted by @Cynthia Hairston:

The only thing I know of upfront would maybe a$150 application processing fee that is non-refundable but if the loan closes, will be credited to HUD statement. Other than that EVERYTHING is settled a close and YOU choose the title company you want to use!
Whether its $800 or $150 any sort of non-refundable fee just to get the process started is HIGHLY suspect.
1 Reply
Jill F.
Investor · Akron, OH · Member since 2016 · 2k+ posts · 4k+ votes
8y
That's significantly cheaper than my bank. Also replying just in case-- I like steak ;)
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Matt K.
Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes
8y
Would you lend me money cheaper than the bank, me some total stranger that you have no idea of who I am nor my track record w/ investing...... probably not. It's also probably safe to assume some stranger is going to lend you money either.... and if they do it'll be at prices far higher than the bank.
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Tom GimerBusiness Member
DMV · Member since 2017 · 3k+ posts · 3k+ votes
8y
Originally posted by @Patrice Penda:

JUST based on those numbers. I don't see why it would a scam
These are very reasonable lending terms, in my opinion.
If I was trying to raise money from a private lender, I would go for it.
No doubt!
Patrice... that's the point.
Scammers have infiltrated every single industry. This is just the same grift with a different spin geared toward lending. Any way to separate you from a little bit of up-front cash while you are busy imagining all the benefits of the larger transaction... which of course will never happen.
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Patrice Penda
Investor · Hoboken, NJ · Member since 2016 · 464 posts · 179 votes
8y
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Brent Coombs
Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
8y
@Mark Crutcher, "Bueller?... Bueller?"...
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Paresh Patel
Investor · Litchfield County, CT · Member since 2017 · 54 posts · 9 votes
8y
While charging points up front is not at all uncommon, the rest of your scenario sounds highly suspicious.
In private lending, I've seen 1-2 points up-front (paid at the closing table) as well as an additional 1 - 2.5 points paid on the back-end, upon final repayment of the loan.
What I've never seen is a rate so ludicrously low, from strangers on the internet no less, for this specific type of risk-profile. The rate simply doesn't match the risk.
Reading your profile, you appear to have limited RE borrowing/investing experience.
Caution: Usually, if it sounds too good to be true, it is.
Good Luck
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Mark Crutcher
OP
Chicago iL · Member since 2014 · 20 posts · 1 vote
8y
Hello: and thank you everyone i decided to not go for this as i asked them 1. website address. answer no. 2. they claim to be private lender but no referrals - scam alert was my gut instinct. also they asked for fee up front that are refundable yea right, i don't no you dude/ scammers are all over. so i didn't fall for this, again thank you guys i have deals need a private lender partner with cash no strings attached cash buyers. let me know no tire kickers.....
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Mark Crutcher
OP
Chicago iL · Member since 2014 · 20 posts · 1 vote
8y
Hello: and thank you everyone i decided to not go for this as i asked them 1. website address. answer no. 2. they claim to be private lender but no referrals - scam alert was my gut instinct. also they asked for fee up front that are refundable yea right, i don't no you dude/ scammers are all over. so i didn't fall for this, again thank you guys i have deals need a private lender partner with cash no strings attached cash buyers. let me know no tire kickers.....
0 Reply
Sam Shueh
Real Estate Agent · Cupertino, CA · Member since 2016 · 4k+ posts · 1k+ votes
8y
How reputable is he?
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Steve HodgdonPro Member
Investor · Novato, CA · Member since 2015 · 433 posts · 321 votes
8y
Why do WE continue to think the internet is a safe place to do business. Face to face has plenty of scammers, no need to go seeking out new ones. Make them work to steal your money!
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Tom GimerBusiness Member
DMV · Member since 2017 · 3k+ posts · 3k+ votes
8y
Originally posted by @Sam Shueh:
How reputable is he?
He is highly regarded ... 100% success rate taking deposits.
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