hard money terms

3 Replies

Hello bigger pockets I have a question regarding harmony lending terms of what's typical in the contract.

I have a closing coming up and the final terms seem different than expected. I am being told that the terms are normal. 

So biggerpockets my question Is in the terms of a hard money lending of a withdrawal of funds on a rehab. I have to make the repairs then make a request to draw on the a count.  So I am being told that they inspect and determine that it was repaired then they will fill a form and send us a check. 

The questions is that on the contract it states that they the lender may pay or not pay for the work for the repairs. Is this normal or not.

This terminology is what is worries me because whatever I spend for repair and is completed I expect reimbursement.  As the lender stated on the phone.  I make the repairs then they pay. 

So is his terminology normal or not biggerpockets?  

At the end I understand the goal is fix and refinance the property and keep it as a rental. 

I moved the thread to the financing section which is more appropriate for hard money questions 

At my company, I am the guy that goes out to manage the draw process.  I make sure that the work is on the scope, that the work has been done, and then I collect a waiver of lien to prove payment.  That is the normal process for us.

Occasionally people do work that is not on the approved scope.  Is that what they are saying they won't pay for?

Feel free to message me if you want.

At the end of the day, you're going to get that money back regardless so its not like there's any kind of incentive for a hard money lender to hold that money.

Lets say you do a deal and your purchase is 90k and rehab is 20k. Your loan is 110k total. The HML sends 90k (less his points) to the closing. The 20k is held back in a rehab escrow that he has access to.

Then lets say you do 20k in rehab and he doesn't reimburse you for any of it because he's using this "sneaky" clause.   If you sell the house or refi the house, the lender is going to then have to release that 20k money to you regardless.  Even if you did NO work. That money is yours.  They can't get 110k as a payoff AND keep your rehab escrow.

They can't get the 110k and keep the rehab escrow - not even if you didn't do a single piece of the rehab. Its not their money, its yours.  But its conditionally yours while they hold the note. Once that note is paid off (110k), then its yours uncoditionally.

So I don't see any reason whatsoever for the hard money lender not to reimburse your repairs from the rehab escrow. There's no incentive for them to do so. The only thing they're going to do is invite a lawsuite and more headache and guarantee themselves the loss of any future business from you.

I wouldn't worry about it myself.....

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