Hardmoney and Private Lenders: How to trust them?

Question

A couple of weeks ago I saw an email in my box from a company offering to loan me hard money/private money . After speaking with them and giving them a brief description of my goals, they wanted me to send bank statements income tax statements  copy  social security card drivers license, the whole 9 is this normal? I thought the determining factor was how good the deal was your working on.

Jo-Ann Lapin · Answer

There license number is the best resource and also ask them if they members of nay trade organizations. I think that speaks miles on their professionalism. Linked in too is a wonderful resource too.

Michael Lee · Answer

Hello and welcome to BP!  If I were you I would ask them who they have worked for and I would talk to them.  I would talk to their refferals.  They might be criminals who are tricking you for critical things to get what they need.  It does not matter how good the deal is I would get a lender from BP.  Just go with your gut and now it feels.  Be patient and consistent and do not be afraid.  You are in business and be stern.  Your market knowledge and the locations you choose are critical.  I am 59 years old and I found BP about 6 months ago and I am still trying to decide what to do.  I am lucky that I have a good wife that has been saving for about 25 years.  I would talk somebody to give me a pre-approval loan letter and submit a copy of it with your offers.

I have a degree from college that emphasized real estate.  That same year, in 1980, I got a broker license.  Regardless of what I had I felt more comfortable in the construction business.  I have been in the construction business since I was 17.  My father is in the real estate business as a broker for about 40 years and he has taught me a little bit.  I have done a few deals for others.  I did both residential and commercial.  If you think that I can help you please contact me at BP at any time.  Good luck!

Alsee Mccray · Answer

thanks for the responses guys

Jeff S. · Answer

Lending and borrowing are based on relationships, @Alsee Mccray. These don’t form over emails, solicitations from LinkedIn, Craigslist, or any other place on the web, in general.  Relationships as these are formed face-to-face.  With the growing number of lenders floating around now, you can toss a rock into any real estate meeting and hit one.  This is where I'd begin.

Here's a Meetup link to some real estate clubs within 10 miles Bridgeport, CT.  You can expand this out if you want.

Local lenders are the safest lenders since it's easiest to check each other out.  You can meet them face-to-face with a list of questions and get a sense of each other's integrity and legitimacy (licensing is but one criterion).  Local lenders will often have a reputation, good or bad, that you can discuss with other borrowers eye-to-eye in the same room.  They will know your local markets, including communities and building departments to avoid, or embrace, and possibly the same for contractors or other service providers.

A local lender will have an idea of local comps and might even know your specific property.  They can physically see your deals to give you an honest assessment and financial evaluation based on local knowledge of the costs.  Out-of-town lenders can only rely on the word of others and they have to price that accordingly.

In addition, a local lender will understand their competition; the prevailing lending rates, and place themselves with a competitive advantage over outside lenders, who have to work a bit more generically.

It's doubtful you'd ever be careless enough buy a property sight unseen over the web, Alsee.  Why would you send invasive personal financial information, as the result of an unsolicited email, to someone you don't already know?

There's no need to take these chances.

Pouyan Broukhim · Answer

The best way to check out anyone is to check for the department license number, in California its their BRE number.  In this case it seems like they are looking to do a consumer loan for you (tax returns) because of this item that they need they must have a NMLS number.  Make sure whomever you do business has proper licensing otherwise you most likely are working with someone that isn't licensed to fund your loan and is most likely doing something not kosher.

Good luck

Paul Kelly · Answer

I have done a few deals myself and helped some buyers with Hard Money Loans. I remember that some of them the only thing that matter was the property itself. However, as far as I can remember the buyer still needs to do a loan application (1003). I asked the Hard Money Lender your question and the response was that hundreds of thousands of dollars are being lent. They should know who the borrower is. My guess is that there have to be some incredible red flags to sour a deal for a hard money lender.

What I would recommend is that (I am sure you are doing this) verify who they are and do your dou-diligence.