Do hard money lenders pay for the wholesaler fee?

3 Replies

Originally posted by @Armand Arellano :

Will hard money lenders pay the wholesale finder fee? Also would traditional financing pay that fee?

 Hard money or traditional lenders will lend based on "some percentage" of the value of the property. Traditional lenders (I was once a traditional lender) will lend based on the lesser of the selling price or the appraised value. 

That means if a traditional lender is lending 80% LTV on a $200,000 house they will lend $160,000 of the purchase price unless the appraisal comes in lower. If the appraisal comes in low, say at $180,000 they will lend 80% of $180,000 & they will lend $144,000 regardless of what your offer is above that appraisal amount.

If the appraisal comes in at $220,000 no, they won't lend 80% on $220,000 if your purchase price is $200,000. They will lend 80% of your purchase price of $200,000. 

Hard money lenders are free to do whatever they want but my past experience is that they do their own appraisals (walk through) and undervalue properties and lend 65% to 75% of their undervalued appraisal.

I don't make he rules, I just know what the rules are. Hope that helps.

So, the answer turns out to be . . .  it's unlikely the numbers will work in your favor for that to be done.

Hard money lenders will not pay anything.  You can try to add the amount into your loan amount. You will still need skin in the game of 20-30% plus the closing costs. You could try for an equity partnership. If you need any more questions please ask.

This depends on the HML. This is a very good question to ask any HML you talk to. I've seen some that do not fund any wholesale fee, which means that will have to come completely out of your pocket. Most seem to finance the wholesale fee as long as it's within a certain percentage of the purchase price. I've seen 6% to 20%, with most HMLs averaging about 10%. As Account Closed says, the total acquisition cost (purchase price + wholesale/assignment fee) still needs to meet their LTC (based on cost) and LTV (based on ARV) guidelines.

I haven't seen any conventional lenders be able to finance the wholesale fee, and they may not even allow it.  But definitely seek other opinions on this because I'm not an expert on conventional loans.