Tired of Being Bait and Switched on Flip Financing

[Sean Richway]

Too many companies out there in the fix and flip financing world get you in the door with false pretenses or over promising on what they can deliver.  It is a major problem with the lending marketplace in general.  Especially when it comes to less seasoned investors that do not know how to spot an oversell or properly vet these lenders.  I have so many deals that come across my desk with 1 week from closing and a horror story about another lender that dropped them days or a week before closing.  These companies are not held accountable and they continue to do this to borrowers over and over.  Some even charge large deposits upfront that can exceed $700+.  Not saying we are perfect as a lender either but we hold ourselves to a higher standard.  Over the years I have come to realize that following tips or tricks can be helpful when trying to poke holes in an over promising and under delivering lender:

• Ask for 3 previous closing references and reach out to them.  The question you have to ask, "Did the lender close at the original structure they offered you?"
• Ask what the As is value and After Repaired Value will impact your loan. Too many lenders do not properly differentiate between LTV and LTC. They are NOT the same. Be on the lookout for As Is based lenders when purchasing a property. Valuing a distressed asset on the current value is notorious for coming in lower than PP or at PP. If your lender is basing their loan off of this spread, chances are you have a slight chance in getting to closing at the original structure being offered. LTV - Loan To Value in which is the ratio of your loan amount over the future repaired value. Also LTV As Is is typically a ratio of your purchase loan (initial advance) over you as is value.
• Do not pay for an appraisal or allow credit to be pulled until you fully understand how they are evaluating your deal and how that impacts the structure.  I have had so many borrowers come to me saying they felt trapped due to a hard pull or paying a deposit and appraisal but feeling as they had to close or they would be back to square one and out $1,000 or more.  A borrower should never be forced to close a deal out of desperation.  Any loan closed under is most likely going to be doomed or have issues the entire way.

Feel free to reach out with any concerns or questions any borrowers may have on a previous offer or lender.  We are not only a direct lender but we are here to help clean up the name, "Hard Money Lender" from its previous negative tone.  We strive to help borrowers and be upfront with everyone.