Flipper/Rehabber · Buffalo, NY · Member since 2020 · 12 posts · 1 vote
I have found a lender. But I am trying to do my due diligence on them. They asked me to fill out a application. I got an approval letter in my email with terms. They requested copy of my Id also. How does this sound so far? Are there any red flags or any I should look for before accepting the loan? Please help
@Carter Crowley well he sent me copy of drivers license. Address and when I google the address his info pops up. Some information on skip trace sites has the info on him while others are vague. But it’s like that for me so it didn’t red flag me. Again has not asked for no money up front. At least not yet, and I clearly said I will not pay any upfront money only at close. He asked how will he be sure he will get his money back so I have collateral. I replied the property is my collateral. That’s when he emailed me contract
If you're saying that HE sent YOU a copy of his driver's license, then this is a scam. Real private lenders don't do that. They don't need to. But that seems to be a fairly common ploy among scammers to convince you they're legit. (I guarantee you it's not his license he's sending you a copy of anyway.)
Also, the question he asked you "How will he be sure he will get his money back" to me is another sign that he's a scammer. A real private money lender would know the answer to this question and would not even do the loan unless they were confident in the borrower and the value of the asset they were lending on.
The above, combined with the fact that you've never even met this person, makes all of this reek of a scam.
Investor · Minneapolis, MN · Member since 2015 · 252 posts · 263 votes
6y
@Kynell Martin, most lenders are legit, but there are some scammers pertaining to be a lenders. Asking you for a driver license may be a red flag. Think about it, they collect a lot of information. Your SSN or EIN, info on bank accounts, property you own what not. If they also have a picture of your driver license - that's all they need to steal your identity .... So be careful who you send your info too. Check references. Check here, see if anybody has done business with this lender before. Look into them. Google. Check if they are licensed in your state. Make sure they are not pretending to be somebody else. I don't deal with any lender I have not met in person. Good luck.
Flipper/Rehabber · Buffalo, NY · Member since 2020 · 12 posts · 1 vote
6y
@Carter Crowley well he sent me copy of drivers license. Address and when I google the address his info pops up. Some information on skip trace sites has the info on him while others are vague. But it’s like that for me so it didn’t red flag me. Again has not asked for no money up front. At least not yet, and I clearly said I will not pay any upfront money only at close. He asked how will he be sure he will get his money back so I have collateral. I replied the property is my collateral. That’s when he emailed me contract
Flipper/Rehabber · Oshkosh, WI · Member since 2016 · 107 posts · 49 votes
6y
@Kynell Martin
There is very little to no risk. As long as you go through a title company or attorney (depends on state) for closing they will verify that he is the 1st lien holder on the property and he has a mortgage.
We normally pay 2-3 points at closing & 10% down for our hard money loans but if he is willing to do it without upfront money that is good
Specialist · Delran, NJ · Member since 2016 · 2k+ posts · 951 votes
6y
I would generally not advise ever working with a non-institutional private lender you found online, especially if you don't have experience. The due diligence that you need to do on that lender is more than you would on an institutional lender and you both may not even know what that entails. When you say he sent you a contract, what was in it? Is it a terms sheet? If he is asking you how he is going to get his money back that's a huge red flag to me, as any lender should understand how collateralization works and the documents and procedures he'll need to go through with you and the title company for that all to work properly. Ask him how the process will unfold once you sign his terms sheet (he shouldn't need your ID until that point), who his title company and attorney are and what his stip package include. If he's a rookie lender and doesn't have answers to these questions, and you're a rookie investor I would back out now.
@Carter Crowley well he sent me copy of drivers license. Address and when I google the address his info pops up. Some information on skip trace sites has the info on him while others are vague. But it’s like that for me so it didn’t red flag me. Again has not asked for no money up front. At least not yet, and I clearly said I will not pay any upfront money only at close. He asked how will he be sure he will get his money back so I have collateral. I replied the property is my collateral. That’s when he emailed me contract
If you're saying that HE sent YOU a copy of his driver's license, then this is a scam. Real private lenders don't do that. They don't need to. But that seems to be a fairly common ploy among scammers to convince you they're legit. (I guarantee you it's not his license he's sending you a copy of anyway.)
Also, the question he asked you "How will he be sure he will get his money back" to me is another sign that he's a scammer. A real private money lender would know the answer to this question and would not even do the loan unless they were confident in the borrower and the value of the asset they were lending on.
The above, combined with the fact that you've never even met this person, makes all of this reek of a scam.
I have found a lender. But I am trying to do my due diligence on them. They asked me to fill out a application. I got an approval letter in my email with terms. They requested copy of my Id also. How does this sound so far? Are there any red flags or any I should look for before accepting the loan? Please help
If it's a lender I've never met with, don't know and can't verify through another party I'd proceed as follows: I would have a 3rd party, either an attorney or a title company act as the go-between myself and the lender. That 3rd party would hold all funds, any funds the lender may require from me and funds of the lender. There's a little more to it than what I've laid out here but you get the picture. Trust but verify.... The 3rd party is your verification. If the lender is unable or refuses to execute then you know he's not legit.
Real Estate Investor · Burlington, VT · Member since 2010 · 2k+ posts · 1k+ votes
6y
@Kynell Martin You should also be able to tell if he ran your credit. I assume you have credit monitoring (and should if you don't). If he sent a pre-approval but your credit was never run, then definitely a scam.