Title Report Back----NO LOAN FOR YOU

[John Thedford]

I have been working with an "experienced investor" stating he needed 200K before year end to "start the new year off right". The borrower was kind enough to provide me "comps" showing a value of over 200K for one of his properties. I just don't see it. I told him I would need a full appraisal to move forward. He responds that he has a current appraisal..but then cannot find it LOL. I learned a valuable lesson from @Jay Hinrichs about doing HML and asking for an appraisal. I think this borrower is full of it. On the second property, I agreed to a small loan. I just got the title commitment policy. Borrower has outstanding federal tax liens, judgements, code enforcement violations that are not paid, etc. I did not ask for a credit report because judgements and liens would show on the title report. This borrower is NOT credit worthy. HML can make great money if you follow simple rules:
1. credit worthiness of the borrower---HE FAILED
2. capability to repay the loan---NOT CONCERNED NOW
3. collateral---just not worth what he claims.

[Account Closed]

Originally posted by @John Thedford:

I have been working with an "experienced investor" stating he needed 200K before year end to "start the new year off right". The borrower was kind enough to provide me "comps" showing a value of over 200K for one of his properties. I just don't see it. I told him I would need a full appraisal to move forward. He responds that he has a current appraisal..but then cannot find it LOL. I learned a valuable lesson from @Jay Hinrichs about doing HML and asking for an appraisal. I think this borrower is full of it. On the second property, I agreed to a small loan. I just got the title commitment policy. Borrower has outstanding federal tax liens, judgements, code enforcement violations that are not paid, etc. I did not ask for a credit report because judgements and liens would show on the title report. This borrower is NOT credit worthy. HML can make great money if you follow simple rules:
1. credit worthiness of the borrower---HE FAILED
2. capability to repay the loan---NOT CONCERNED NOW
3. collateral---just not worth what he claims.

 Just to fill in the blanks for people reading this: What that all means is that when you lend against a property, IRS tax liens and other unpaid liens get paid off first when teh borrower sells the property. 

So, if the borrower has a property worth $100,000 and a tax lien of $25,000, they don't have 100% equity of $100,000. They effectively have $75,000 equity since the liens were filed before you lend them money. 

Without doing a Title Search before you lend money, you don't know if they are even the legal owner of the property no matter what they say, & you don't know if there is a second owner, you don't know if there is already a loan against the property or perhaps a second or a tax lien or a lawsuit among other things. Always get a title report when lending against a property or when buying a property. 

And if someone has tax liens and unpaid violations it means they don't take their business seriously enough to deal with those problems. It indicates that they either don't have enough money to pay the bills or they aren't willing to pay the bills. Either way, it means you are very likely going to have problems collecting if you lend to them.