Is this private money loan legit?

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Is this private money loan legit?

Greg Newson
Member since 2019 · 16 posts · 3 votes

I've been asked to pay $1,365.00 for Appraisal fee, loan origination and processing fees before loan can be sent to underwriting. It's a 6 month fix and flip loan at 8.65% plus 3 points in and 2 out. It's my first deal,I know I'll pay more now then this time next year, but I wanted to ask experienced investors if this sounds common before I send that check tomorrow.

What makes me Leary is, it has to be sent as a ACH or a money transfer, they won't take a c/c.... Am I just worried for nothing?

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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y

SCAM SCAM SCAM   this is not private money private money are people you know.. not a company or someone off the internet.. No fee's paid in advance.. other than appraisal. Is industry norm. 

this is called an advance fee scam.. you send that in then they will keep digging you for more then when they figure out they bleed you .. they then ghost you..

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Scott Wolf:

    @Greg Newson, check BP's HML list, or as I said in my previous post, ask a donor to give the money for the flip as a donation, or lend it at a low rate.

    BP HML list has some questionable lenders on it.. i would not recommend that like lenders on BP list are vetted they are not.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Nate Marshall:

    Some lenders have started doing application fees. Usually $199.00. It's mostly to deter to tire kickers. They have to pay their loan officers, underwriters and processors so this helps. They also use it as an incentive. If you apply this week we will waive the application fee. 

    But you can also verify these lenders with the SEC, they're well known and have a solid presence.

     Lending home has been 199.00  for a long time I even had to pay it.. LOL...  but they are easy to verify. most of the sammers just have simple website with no mention of an individual.. no license ext.  

    license alone is not a deal breaker since only 12 states require licenses to loan on non owner occ 1 to 4.  

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  • Tchaka Owen
    Real Estate Agent · Merritt Island, FL · Member since 2017 · 974 posts · 1k+ votes
    7y
    Originally posted by @Mark Safrin:
    Originally posted by @Kevin M Finley:

    I have never paid an advance fee on a hard money loan, and I've used some crappy lenders. 

    Also any HML requiring an appraisal is going to be a pain in the ***.

    I'm curious about the aversion to an appraisal. HMLs usually offer asset guaranteed loans, usually offering a percentage of LTV. Have you used a HML that lends on current value without requiring an appraisal to determine the property's as is value?

    If you're ok with appraisals and all the other jazz, what's the purpose of hard money? Go find some bank product and pay 5%.

    Hard money lenders are asset based. They will likely check your credit scores and often verify you have money in the bank for whatever you're going to need. That's it. No paystubs, taxes or any other items.....unless things appear questionable at which they may ask a bit more. Why? Asset based. 

    HML don't want the headache of FC'ing on you, but if they're lending you $100k on a property that you're going to spend $30k on and sell for $200k, they're comfortable lending to you at 10-15%. If you can't pay, they'll be ok. With today's software, they don't need a full appraisal. Too many tools out there to help. So let's say the house truly comps out at $195k...….so what, the numbers still work. Some HMLs will have a drive-by inspection just to make sure it's there and they'll charge you $100 for it. That's fair. But not a standard appraisal that costs $400-500. And any number higher than that is certainly lining someone's pockets.

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  • Mark Safrin
    Lender · Lakewood, NJ · Member since 2019 · 247 posts · 101 votes
    7y

    We use an 3rd party appraisal company, usually Appraisal Nation. We might, possibly, be OK with a drive by if really warranted by circumstance. Either way we as lenders don't make a cent on the appraisal and the client pays the appraisal company directly. 

    And no. If the client does not want a formal appraisal that usually costs them around $525 then we probably don't want them as borrowers. Other lenders might have different policies of course.

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  • Greg Newson
    OP
    Member since 2019 · 16 posts · 3 votes
    7y

    Very much so

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  • Kim Tucker
    Flipper/Rehabber · Kansas City, MO · Member since 2011 · 2k+ posts · 712 votes
    7y

    So private money is with people you know and not usually any points.  They often charge the interest rate you negotiate or partner on the profits or both.

    There are legit hard money lenders and you can usually find those by talking to other investors in your area - the local REIA group meetings - at our monthly meeting we have a minimum of 4 Hard Money Lenders who host a vendor table, usually 3 more hard money lenders networking quietly at the back of the room and 20 or so private lenders that you have to find and build a relationship with.

    Not a one has an advanced fee . . . one Hard Money lender does sometimes - its a $30 or $35 fee to run your credit and get you a pre-approval letter.  Then your fees are paid at closing or wrapped into the loan.

    And with a private lender, there are not usually any fees, no appraisal, no points, maybe a doc fee (I charge $300 for a doc fee - that covers my costs for the docs and to get the money in and out of my IRA) And its not up front, but deducted from the amount wired in for the loan.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Mark Safrin:
    Originally posted by @Kevin M Finley:

    I have never paid an advance fee on a hard money loan, and I've used some crappy lenders. 

    Also any HML requiring an appraisal is going to be a pain in the ***.

    I'm curious about the aversion to an appraisal. HMLs usually offer asset guaranteed loans, usually offering a percentage of LTV. Have you used a HML that lends on current value without requiring an appraisal to determine the property's as is value?

    Many HML do in house valuations.. Lendinghome Iron Bridge just to name a few off the top of my head.. Lima one at least when I do a new construction loan they do hire a 3p appraiser and I pay them direct.. I can see 100 to 200 to cut the wheat from the chaff but charging 1000 or more.. that's over the top and a money grab or its a scheme in my personal opinion.

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  • Nate Marshall
    Real Estate Consultant · Evergreen, CO · Member since 2018 · 1k+ posts · 729 votes
    7y

    @Greg Newson Paying for an appraisal is legit if you are paying the Appraisal company direct. Legit lenders will often send you a link for that. Paying a small application fee is legit. Paying anything else is not. 

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