Construction Lending Scams Are Everywhere
In the lending world, loan scams always target the areas where loan products are scarce or simply don’t exist. Some of the biggest scams in lending right now are following construction loans for spec homes and residential development projects.
It seems that everyone who is coming to us for a hard money loan for construction has seen a lending scam targeting construction loans. But how do you know if you are looking down the barrel of a well-crafted lending scam?
There are a few characteristics that most of these lending scams seem to have in common. The first characteristic is the amount of time the company has been in business. Find out when the company first started its business operations. Most of these companies have only been around for a few years. The second characteristic is fast approvals with almost no paperwork. If you receive an approval letter right away, trust me, it’s usually too good to be true especially if you’ve been looking for a loan for awhile. And finally, the third characteristic is that most of these bogus lenders always charge upfront fees. Now that’s not to say a legit lender doesn’t charge upfront fees. Plenty of real lenders charge some kind of upfront fee for third party costs such as appraisals. But if the fee is a large and lumps a lot of misc. fees into one, it is usually an indicator that a loan scam is present.
If you are looking for loans for any kind of home construction, watch out for lending scams around every corner. Do your homework on a lender before you give any kind of upfront fee.
Posted by Corey Curwick of Private Money Utah on September 26, 2012
