4 Scams in Hard Money to Watch Out For

[Corey Dutton]

There are 4 well known scams in hard money lending that are throwing off both borrowers and brokers. These scams are related to trying to obtain a hard money loan and getting the run around. Trying to move quickly on a loan? Read this before engaging any hard money lenders or brokers to save yourself both time and money.

1. Upfront Fee Scam: This is the most common scam in hard money lending. It seems like everyday there’s a new scam artist with a fake website, fake address, claiming to be a hard money lender. These scammers will never provide a loan but are just in the business of collecting application fees, legal fees, or however their upfront fees are disguised.

2. Bait & Switch: These hard money lenders will give you loan terms but once you’ve eliminated all of your options, they will change the terms so you have no other choice than to accept. Some lenders won’t change the terms but they will drastically lower the loan amount and then require you to bring in more money or cross with other properties you own.

3. Bait & Ditch: These are real hard money lenders but they tend to get busy and overloaded. They will take an application fee or some other upfront fee and then forget about you. Weeks, sometimes months will go by and you won’t hear a word from them. Then all of a sudden they decide to decline your loan after you’ve wasted weeks and months, time, money, etc.

4. Too Good to Be True: These hard money lenders promise the world to get you on the hook. Once you eliminate your options you soon discover that the lenders terms aren’t much better than the other lenders who gave you a quote before. Junk fees can add up to be sometimes 1-2% of the loan amount. Sometimes when it seems too good to be true, it usually is. Always ask about “junk fees” when you are getting a quote for loan cost from a hard money lender.

Make sure you do your research on your hard money lender before you get too far down the path. Otherwise you risk both time and money wasted in the pursuit of a loan that may never happen or may not be what you bargained for in the beginning. Read more on this topic on our blog here: http://privatemoneyutah.com/top-4-scams-in-hard-money/

Posted by Corey Curwick Dutton