Lender Scams and Warning Signs: Beware & Protect Yourself!
Joshua D.Pro Member
BiggerPockets Founder · HI · Member since 2008 · 16k+ posts · 5k+ votesLender Scams and Warning Signs: Beware & Protect Yourself!
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Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
15yThere are many red flags. Basically as Charles mentioned, if you get a feeling a lender (broker, HML) is telling you what you want to hear before your pay the application fees, taht's the first red flag.
You need a B.S. Meter in this business. The better something sounds that is contrary to the norm, your BS Meter should sound off and light up. While everyone, to a degree has a BS Meter (most people get one in junior highschool and it is developed with common sence over time) some have units that need to be calibrated.
The best way to calibrate your BS Meter is to study the subject in a conventional manner. The best way to do that is study real estate financing rules and regualtions, really boring stuff, but that's the way it is. Just because someone says they have a degree in finance or they passed a mortgage brokerage exam or even a bar exam, does not give them credibility in real estate financing. The subject is not taught in depth in any formal educational program.
Pay particular attention to what is known as "prudent lending practices". These are the conventionally accepted norms ofoperations that any prudent lender would follow in making a real estate loan. If someone says they can get financing under terms or conditions that do not follow these guidelines (which is possible) expect to pay more in fees and interest rates to compensate for the additional risks associated with these variances from the norm.
What would you do if you were a lender? Would you make a loan like the one being described to you?
Those who usually get ripped off are those who are desperate. They have poor credit or insufficient capital, maybe both. But the biggest reason people get ripped off is because they don't know any better! They are willing to trust those who tell them what they want to hear. They turn their BS Meter off.
There is an old saying: Financing is the key to real estate that opens doors for you. And, if you really don't understand real estate financing then you really can't understand real estate!
The biggest problem I see for many investors is that begin by listening to guru programs orfollowing the advice of other investors as they insist on skipping the basics and diving straight into something they see as having a profit potential. They fail to accomplish any due diligence with themselves. As fast as rules, regulations and laws are changing today, following the advice of another investor might just take you down a road to make the same mistakes that investor makes and your mentor may not know the difference. What I'm saying is that it is up to you to calibrate your BS Meter.
Your BS Meter should go off as any lender presents something that varies from the norm, they further away they get, the louder it should be blasting in your head!
Some (not all) of the indicators could be:
Up front loan fees that are outside the norm for the type and loan amount you are seeking; and
Not providing a loan committment in a timely manner. This means a good committment that is not contingent on verifications or committee reviews!
Only having one qualified appraiser to appraise a property. If the applicant is paying for an appraisal, there should not be an "in-house" appraiser. And,
Loan fees should be estimated at the time of application, even in commercial deals!!!!! If that lender has been making SBA loans, they know about what an environmental report will cost. They will know what bond fees will be and what underwriting fees will be by the investor.
Residential properties (owner or non-owner occupied) may vary widely from one region to another. Brokers are nowrequired to disclose premiums received as well as all other loan costs in a Good Faith Estimate of Loan Costs.
I have seen people call foul when the per diem interest was estimated at some two digit figure and then end up being in the high three digits. This is not a scam, it depends on the actual closing takes place. Lenders should be using 15 or 30 days.
Borrowers need to get a signed estimate of costs at the time of application.
Borrowers should give brokers or lenders instructions, that all verifications and credit should be approved prior to spending moneyon any appriasal, but often schedules won't allow this as it could be weeks before an appraisal is completed. If the borrower is aware that there are credit problems, credit should be viewed first before spending other loan fees.
Loan scams are usually found by big name lenders who provide loans on line. Quicken Loans runs a shaddy practice.
They require you to submit a credit card number to pay for the fees before speaking with a loan originator. The originator is pretty much a sales person to "get the ball rolling". People have called back within minutes of the on line application to stop the process and the originator did not stop anything. You have a ding on your credit card for $500.00 which is non-refundable. Even after being assured your loan request is terminated or cancelled, a few days later you might see someone stop in front of the property and take a picture from their car. You just had your property appraised!
As to the BBB, that is absolutely worthless. The BBB only tells you if anyone has filed a complaint, not that the company is in good standing. The clerk at the BBB may not even tell you the truth either, especially if ABC Bank is amember and provides hefty contributions to the office party! Pure politics!
Call the Attorney General's Office and the local prosecutors office and see if they have any actions against them. Call the local police department and ask for the fraud division and ask them if thatname has crossed their desk! They are not to discuss any ongoing investigations, but many times a detective will say something like "I wouldn't go there if it were me". Check court records by name. Now, in fairness, a large bank or lender may have several cases so you have to consider the amount of business they conduct and understand that if they file a floreclosure action, the borrower may have filed a counter suit. But not finding your lender there might be a good thing.
But the best way to no when you are dealing with pure BS, is knowing what is definitely not BS, that would be programs that sound like they conform to prudent lending practices, rules, regulations and laws!
Sorry it's so long!
107 Replies
- Real Estate Agent · Pompano Beach, FL · Member since 2015 · 249 posts · 73 votes10y
If it sounds too good to be true....Than it is. Last I checked bigger pockets has a page with recommended lenders no?
- Pasadena, CA · Member since 2016 · 41 posts · 9 votes10y
Hi @Trevon Peracca - Did you ever figure out your dilemma regarding whether to go into the joint venture deal or to purchase your primary residence?
If not, my vote is for you to focus on securing your primary residents FIRST. However, you should do this by purchasing a multiplex in which you will live in one unit as your primary residence (house hacking) and rent out the others. A multiplex will allow you to better qualify for legitimate (less complicated) loans for higher amounts taking into consideration the income from the rentals. It will also help build your credit and allow you to hold while you build equity that you can use to engage in a joint venture at a later time.
I also suggest you research 203k loans, which allow you to borrow an amount over the property purchase price to include repair cost. The loan will be based on the after repair value (ARV). This way you can buy the multiplex at a lower cost, and rehab it with necessary repairs and upgrades, which adds value and further increases your equity.
There is plenty of information in the BP education area about 203k loans and multiplex purchasing that can guide you in making your decision. I hope all is well with you and I hope to get an update on your progress.
- Wholesaler · Chicago, IL · Member since 2015 · 245 posts · 102 votes10y
Originally posted by @Charlotte Moore:
Hi @Trevon Peracca - Did you ever figure out your dilemma regarding whether to go into the joint venture deal or to purchase your primary residence?
If not, my vote is for you to focus on securing your primary residents FIRST. However, you should do this by purchasing a multiplex in which you will live in one unit as your primary residence (house hacking) and rent out the others. A multiplex will allow you to better qualify for legitimate (less complicated) loans for higher amounts taking into consideration the income from the rentals. It will also help build your credit and allow you to hold while you build equity that you can use to engage in a joint venture at a later time.
I also suggest you research 203k loans, which allow you to borrow an amount over the property purchase price to include repair cost. The loan will be based on the after repair value (ARV). This way you can buy the multiplex at a lower cost, and rehab it with necessary repairs and upgrades, which adds value and further increases your equity.
There is plenty of information in the BP education area about 203k loans and multiplex purchasing that can guide you in making your decision. I hope all is well with you and I hope to get an update on your progress.
Yes I actually closed on my primary residence back in DEC 2015. I wasn't a fan of the way that other gentlemen did business.
@Trevon Peracca Do you remember the company that tried to get you the different lines? I recently opened up lines of credit with 5 different banks with Midwest Corporate Credit out of Oak Brook. It was a referral from a BP member here.
They charged me 8% fee instead of 10%, since I was a referral. You're right in regards to the hit to your personal credit score. My credit was over 800 when I went forward with them, and now it is under 800. But they did get me lines of about $65K.
Now, do I think it is based on their relationships with the banks? maybe. I know at least 1 of is. But they certainly know the process very well, and were very helpful along the process.
The biggest issue for me is since these are credit cards, you can't really write checks from them. I called all 5 banks looking for "transfer balance" checks and only 1 of them will send me those checks. The other one has to do it online. So I have to think of creative ways to "unlock" these lines of credit. I was planning to use these to pay off my HELOC so I can acquire another property. But I am still spinning my wheels.
Perhaps when I establish my history with these banks, I will get higher lines in the future. But I have to say these lines have not been very helpful in my business so far. And I had to pay over $5000 for their services. which incidentally I can charge on 1 of these cards as well.
For a flipper, these lines will definitely make sense when you deal with businesses that can accept credit cards.
- Rental Property Investor · brooklyn, NY · Member since 2015 · 70 posts · 16 votes10y
hey guys thanks in waves . all day i been tracking down a (no money lender) . this guy contacted me on BP with a 5% hard money loan for upto 20 years. told me he was on all the business sites. i checked and to my surprise his name was there. but in three different places his picture was different. when i texted 2 of them and told them to send the info to my lawyer. one told me he doesn't do deal with a third party...uh my lawyer works for my company. smh (randy phillip hinkle) check this name out and see what i see. i love BP cause of you guys. the best way to meet lenders is from investor in your areas. i have went out and met some good guys that are helping me do my first deal.
One guy introduced me to MCC as well i did the credit card line of credit and had to pay 10% hindsight i feel i could have done the search. i put the card in my business name i took the hit on my credit. i have a partner that is going to use her credit to do the closing,. so we have extra cash to do the rehab
- Real Estate Investor · Anchorage, AK · Member since 2015 · 117 posts · 42 votes10y
Would you mind posting that link again? I was unable to get to that forum thread.
I was also contacted by John Batros from JNB Finance. When I called him to talk about a loan he referred me to Lazard Kisel with Joinville Finance. Lazard was willing to pretty much lend me as much money as I wanted, but I needed to wire the deposit to him. As I have realized, it looks like I was referred by one scammer to another!
Also, thanks for the info @Jeanne Victor!
- 10yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Steve S. boy you seem to be running into a bunch of questionable folks were are you finding them .. getting sucked into the too good to be true rate and term guys ?
- Flint, MI · Member since 2013 · 106 posts · 38 votes10y
I was contacted by Kevin Harrison on BP, who said he is a "financial agent" who works with several private lenders. He referred me to a private lender in Texas named Lazard Kisel with Joinville Finance, Inc. He offered a loan of 7.5% with 3 points, which is very reasonable. Then he sent me a contract that said I would need to send a wire to his title company, JM Investor Title Agency in NY, for the 3 points, that they require the 3 points prior to closing. In this case that was $5700.
I marked up his agreement and indicated I would send the funds to my title company who would verify the legitimacy of his title company and the existence of the closing funds then wire the points to him at closing. He sent an angry-toned email back saying I shouldn't have "canceled the agreement by writing on it" and that I should look for another lender. Look out for this guy!
- Flipper · Indianapolis, IN · Member since 2016 · 33 posts · 4 votes10y
@Scott McMahan I got contacted by the same person not too long ago. I called Lazard and during our conversation, there were so many red flags that I could not go through with it. I googled the name of the company and couldn't find much information about it.
- Contractor · Magnolia, TX · Member since 2016 · 279 posts · 155 votes10y
@Connor Maloney, @Scott McMahan, I wish I'd thought to check this thread before I did something stupid. I, too, was scammed by Kevin Harrison and Lazard Kisel. I fell for the "appraisal fee" and "due diligence" fee, but my Spidey sense went to 11 when he said if I used his personal title company business then I would "guarantee 100% appraisal funding" or something similar. I immediately replied that there was no way in hell that was going to happen, and he's since gone dark, both via text and email.
I'm going to go after him in small claims court to see if I can get my fees back, but I'm not hopeful. What's weird is that I had a family friend who is an officer of the court do a background check on the guy (Kisel) and nothing funky came up. The only odd thing she noted was that she couldn't find a driver's license number for him.
- Real Estate Investor · Anchorage, AK · Member since 2015 · 117 posts · 42 votes10y
I am very sorry to hear that you got scammed by Lazard. I did a lot of research on him, but the only thing I could determine was that he might be hiding behind a legitimate LLC of Joinville Finance to make people think he is the real deal. I called the state of Texas to verify that Joinville Finance, LLC was real and they confirmed it. The officer for the LLC is something like Paula Kisel. It might be worth contacting the TX and reporting the LLC. Also, I contacted a Sarah Kisel One time that I talked to him, he said he had a farm in Shiner, TX. It was probably BS, but just trying to give you more information. Good luck finding the guy!
I just did some quick research and here is his website: http://joinvillefinances.com/. It was under construction when I was talking with him.
I'll keep trying to mess with this guy. That is really messed up that he think he can just take advantage of people.
-Connor
- Lender · Los Angeles, CA · Member since 2015 · 283 posts · 79 votes10y
The Best way to know whether a Lender will Perform is asking their Past Clients.
- Real Estate Agent · Cape Coral, FL · Member since 2016 · 29 posts · 8 votes10y
Hello Bigger Pockets friends!! I just received a friend request over Facebook from Harry James who portrays himself as a private lender. THIS IS A SCAM!! He sent an email with all the conditions which I will share with you. There is no such company in NY. The address he gives is a Wall Street address that I could not cross reference. I would stay away. I also found other posts throughout the internet that shared the same info just with different letters and addresses given to them. Click on Financing Scam in order to view the letter.
- Professional · Valley Springs, CA · Member since 2016 · 6 posts · 0 votes10y
Anyone have experience using LendingClub? It's an Experian company.
- Chicago, IL · Member since 2016 · 67 posts · 4 votes10y
I created propertygo.com to get rid of a lot of scams. We are a common application to apply to a select network of the leading hard money, bridge, and bank lenders. All of our lenders are established in the industry.
PropertyGo is free to use for borrowers. Lenders pay us to be apart of the network. We have lenders like Bank of America and CitiBank, all the way to hedge funds and private equity debt funds like Thorofare Capital. Applying on PropertyGo creates a direct application to these firms.
Check it out, avoid the lender scams!
- Property Manager · Baton Rouge, LA · Member since 2014 · 2k+ posts · 195 votes10y
I think up front fees of any kind is outside of the norm. Legitimate lenders deduct fees from the amount of money granted ...Your thought?
- Saint Johns, FL · Member since 2016 · 6 posts · 1 vote10y
Thanks..
I am a newbie learning the ropes..
- Houston, TX · Member since 2016 · 7 posts · 4 votes9y
I am a newbie, so I definitely appreciate all of the great information given on this thread. I would just like to warn everyone about using Priority One Title Company and Spirit of Texas Bank (which use to be Texas Community Bank). About 5 or 6 years ago, I was introduced to a "business partner" and decided to put a mortgage on my house to help supplement his funds. Although my house was worth double the amount of the loan, I didn't realize that the president signed as the Trustee and the agent. To make a long story short, no matter what we did the bank did not adhere to releasing the draws in a timely fashion and ended up foreclosing on my house. There was about $11,000 missing as of the closing date that the bank and title company claimed the other had. I did file a law suit, but had to fight pro se due to the fact that I couldn't find a lawyer who was willing to go against the 2 entities. The lawyers that I did find said they take the case in exchange for my house and give me $75,000. The last judge we appeared in front of told the bank that she couldn't legally allow me to accept their offer, even if I wanted to (which I didn't)...her court had no authority to judge the fraud, and by then I was too exhausted to refile the lawsuit. I hope I don't ever meet snakes with venom like that again, and I hope no one has to experience what I have in the past. I'm not sure to this day if the business partner was part of the scam or a victim, which is why I did not type his name or the name of his company...I will never do business with him again though.
- Investor · Elgin, IL · Member since 2016 · 6 posts · 12 votes9y
As a former Residential and Commercial Loan Officer I suggest going to www.Scotsmanguide.com and go to the lender search page. Choose either residential or commercial. There will be parameters that you can select in regards to the loan size, property type, location(state), etc. There will be a list of lenders displayed on the page and you can research these lenders. Check the BBB(not always reliable) and attorney general's office in that state. I strongly recommend using direct lenders only and stay away from brokers. Only utilize mortgage brokers that you personally know and trust, meaning you know they are reputable; they have actually closed deals in the past. Also be very careful if you are looking for commercial loans. I cannot stress this enough. Residential lenders are bound by lending laws such as RESPA, Truth-In-Lending and others that require the borrower to receive the loan terms in writing including an estimate of all fees charged. There are no requirements like these in commercial lending so loan terms and fees will vary in commercial. Lastly, never, ever give upfront money for a loan application unless you don't mind kissing that money goodbye. Also when applying for a loan, it's recommended that you apply with 3 different lenders and then you will be able to select the lender with the best terms.
I remember years ago probably 9 years. I was introduced to a so call angel investor from a forum. Long story short he wanted up front fees. He sent me a statement along with his company logo address and etc.. Company did not exist, address was in rural area.. pure scam..
Also maybe 4 years ago I came across this private seller on Craigslist and he introduced me to a private lender and that lender had fake credentials as well.. wanted a deposit for lawyer fees, appraisal etc.. and wired to a personal account.. so sketchy.. I think the private seller was in on it too..
The worst is those text messages saying your paypal account needs updating and you log in to a fake interface with a scamsters finding out your log in details.. My friend almost got scammed but caught the scammer in the act..
- 9yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Hai Loc for those reasons I will never have a pay pal account or EVER use a debit card.
- Gilberts, IL · Member since 2015 · 29 posts · 66 votes9y
I agree with Jean Norton. Don't trust anyone and why? Because I was scammed.
10 Steps to follow to Avoid Getting Scammed in Real Estate
True Story of How my First Real Estate Investment was a Scam
- Flipper/Rehabber · Austin, TX · Member since 2009 · 405 posts · 168 votes9y
Thanks for the mention @Sylvia!
After a email or two, before you give out too much info...Call them. You'd be surprised how many Lenders (according to their facebook page) are born & raised in American States but have thick South African, South American & foreign accents!!
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