Posted over 8 years ago

Hardmoney Upfront Fees

Man, have I ignored this blog for a while or what?!  It's possible nobody even noticed because they don't check in, but in case you did notice, I'm sorry!! 

There was a thread a few days back about hard money lending and their upfront fees.  It reminded me of a time when I was desperate for funding, surrounded by good deals with not enough capital to invest.  I had about 10-12k in my bank account at the time, but was bartending, so I didn't have the best tax returns, although I was making decent money.  I was 22 years old, had little experience, serious determination, and a 4 unit under contract for 54,500.  The emails below are copy and pasted from my Gmail.  This was a conversation I had with a broker who said he representend hard money lenders....

Sorry it took so long to get this to you.  I lost your email address, then obviously I found it.
In response to our conversation, here are the items you will need to get to me for your purchase in NC..........
1.  1003 Application filled out and signed  (attached)
2.  Last two years tax returns and w-2 forms
3.  Last two paystubs (if any)
4.  Last two bank Statements
5.  A copy of a recent Credit Report with Scores
6.  A subject to appraisal (To be ordered later)
7.  The last Statement for any investments you have (Stocks, mutual funds, retirement plan)
Please get me those items.   As far as the app fee, I am also attaching an authorization form for you to fill out and send back to me.  As soon as the card clears, I will submit your docs to the lender and get you the best deal,
The quicker you get this to me, the sooner I can get this done.  If you have any questions, don't hesitate to call.

thanks for your help so far ...a few quick questions...i always thought income wasn't so crucial as a deciding factor for hard money loans..i could put my actual income, but i would not be able to prove it with tax returns..what do you suggest i do?  also, i'm curious about the 299 upfront fee..i don't mind paying it as long as i do get the funding i need..what happens if after the investors see my low income if they do not want to fund my deal?? if i don't receive the funding i need, do i get my 299 dollars back?? ---bryan

Based upon the income you told me about on your bank statements, this is a doable deal.  They are more concerend about reserves.  Plus the fact you have the pre-approval from your bank as an exit strategy gives them peace of mind that you can get out of this deal.
If you have any others questions, feel free to ask.  Thanks.

I don't mind paying the 299 as long as I get the money, but that's a good chunk of money to give away if for some reason I do not get my funding.  What happens to the 299 if I dont get the funding I need? Is it returned to me?? Thanks--Bryan

As you requested, let me explain the $299 refundable app fee.  This is a fee my lenders require to make sure borrowers are for real and serious.  The fee is refundable, as the authorization states, if I do not perform my duties as consultant or the loan is turned down for disclosable reasons.  Such as your income or reserves.
 I hope this helps you out.  Please let me know what you want to do.  Thanks.



What have you decided to do?

I talked to other hard money lenders today.  You were the only one wanting to charge a consulting fee or any sort of application fee.  Please understand, I do not think you are trying to take advantage of me for a measly 300 bucks.  On the other hand, I am indeed serious about my business, and that is why I have to question every single expense.  I'll be more than happy to pay you if you can get me my funds.  But I'm not looking to pay someone before they deliver.  If we can get creative and you will allow me to pay the money at the closing table, I am in the deal, and ready to do business, but I have to make sure my money is being used properly.  Are you willing to work something out?? Thanks-Bryan

I suggest you go with others.  I will back out of this deal.  Thanks.

No problem, thanks for your time. --Bryan

When you find others can't do your deal, remember I could have.  You are the type of people my investors want me to stay away from because they feel if you can't afford the $299, you can't afford the loan.  That is why they stick to that rule.  If I could, I would love to help you.  You seegim like a good guy.  But I am always reminded by my guys this simple truth.  When you go to the grocery store, do you tell the cashier you are taking the groceries home and then you will be back after you eat them and pay?  That is what they remind me about whenever I want to help someone like you.  Bryan you will spin your wheels and end up with nothing.  Good luck.

I had several great responses to Dave's last email, but in the end, I decided it wasn't worth my time.  Now, was he trying to scam me? Maybe yes, and maybe no.  In the end however, I used this as motivation to go on BiggerPockets and find a hard money lender to get a deal done.  I private messaged anyone who mentioned there were brokering hard money loans or lending hard money.  Finally, I came across a lender who was honest and upfront.  So far, he has lent me hard money on 4 deals.  Not only that, but he has also been a great reference for me to two other private lenders. If you ever feel something is sketchy in your guy, stay away!!  I'd love to email this guy back, and tell him how I've done since we last talked, but it's not worth it.  It just makes me smile every time I read it because of how far I've come. 

 Now on to the meat of this blog post---if you're out there looking for money, a deal, buyers, sellers, etc.  Whatever it is, don't give up if it's your passion and you truly want to do it!!  I was ready to give up, but I perservered, and the rest is history.  

Comments (48)

  1. Dear Josh,

    BP is an awesome resource to find a lot of useful information for the entrepreneurs we all are, tahnk you !

    But although a lot of information could be used all over the place, what I regret is that the databse of lenders for instance is restricted to the United States...

    I am in Europe, more precisely in Portugal.

    Investment opportunities in Portugal, real estate in general, for new building and rehabilitation of old, and in tourism-related projects in particular, are almost endless.

    From the list you are mentioning or elsewhere, would some mondey lenders, or any other private equity venture capital investors, be interested in Portugal ?

    Thanks a lot in advance,


  2. I have to disagree with this post, it's almost as factual as a CNN report.  First off, there are multiple reasons hard money lenders charge up front fees, which from a borrower's perspective could never be seen without a little empathy.  

    The fee is to make sure you don't go shopping the deal. I would be a richer man if I got a dollar for ever borrower who gets a conditional commitment, LOI or a term sheet and then runs around shopping it to the whole world.  

    The borrower(s) have 0 loyalty to a lender, and they will typically run off into the sunset with the first person that tells them they can beat the current sheet they possess by any of the following means: rate, term, fees, 3rd party reports, timing, pts. Of course they can beat your current offer because you showed them your current offer, and they will say what ever they can to take the deal, only for the borrower to find out that it's priced even higher, doesn't close at all, or are blasted with hidden fees or fell for a Broker pretending to be a Lender.

    For a lender to spend time deciphering your deal, yes it cost money, for them to have 3rd party reports pulled, yes it cost money.  Lenders are not in the business to do charity work on prospects, they are their solely to make money with their money.  I really don't understand how any borrower thinks that a lender should be able to guarantee them anything, nothing in life is guaranteed, not even that you will wake up tomorrow.  Any lender that guarantees you anything is a liar and will surely dupe you somewhere down the road, and at the very least you will have wasted countless hours.

    If you don't have the money to pay a commitment fee or a diligence fee, your surly not going to be able to afford the rates and extensions of a hard money loan.  

    The only time you should think that you don't have to pay a upfront fee is when your sitting on a golden egg, a 100% occupied apartment building in a trending metro area with a LTV lower then 65%, cream of the crop property. 

    No one wants to spend countless hours figuring out how to structure a blanket loan on your 10 investor residential units worth 50k a pop at 80% ltv with a rehab component in a urban neighborhood, just for you to pull out at the closing table because another lender said he would give your 85% if you hand over the diligence that your first lender packaged.

    Heres another misconception for borrower(s) they think borrowing less is better. Lenders are going the spend the same amount of time working on your $100k loan request as they will your $5,000,000 loan request.

    Bryan, I honestly think your post is a disservice to your readers, if you really wanted to help them your would throw your lender a bone and your readers a bone, and share the lender that so graciously did your deal, and maybe give some real numbers on your deal, such as income, loan LTV, closing pts charged, Loan amount requested, structure, year term. 

     Your setting your readers up to become what lenders call borrower(s) in the business "booma-rangs".  A borrower tells you they found a better rate for the refi, then come back 3 months later with a ballooned note on their 2nd extension because they wasted their time with the guy who said "I can do it for no fee" and close ya in 7 days only to be turned down or stood up at the closing table.  

    If your going to make a open statement like "don't pay upfront fees" at least have the civility to provide real facts and explain the components of the deal, don't give some poor sap story to gain empathy just to sling it like a spear of justice through hard money lenders.


  3. I am currently looking for a hard money lender and so far everything I have come across wants a ton of money upfront. They all seem like a scam wanting me to wire them money. Can anyone suggest a real Hard Money Lender??

    1. Thank you, Bryan, for this interesting post, and for all the comments to everyone.

      Looking for a loan or private equity venture capital, I too have been in touch with many wanting upfront dees, either to cover due diligence expenses or to rent out guarantees or to prove our committment to the deal and not run away for a better deal just the minute after signing.

      I have always been reluctant to pay, for several reasons :

      - On one side, I do not have the asked for money, not now at least. That's why I am looking for lenders.

      - On the other side, how can I be sure the alleged lender is not a scam who just wants to collect some fee money and disappear with no trace ? Or even worse, collect my personal and banking data and do nasty ID theft things with them ?

      Some "amateur" scammers are easy to detect, just with freely available online databases, Scan Watch and the like, WhoIs and other NSlookup search tools (already reported scammers, or individuals trying to look like corporate investors and still using private and disposable e-mail addresses, or at some point asking you to pay to a fake bank with not even a decent website), but some have so sophisticated setups that it is hard to see if they are real or not.

      What shall we do then ?

      Pay and risk to lose the money ?

      Not pay, and not knowing if we would get the loan or not ?

      Basically, what would be needed is a trustworthy database of real money lenders, and a clear path to how to do it and what it shall cost us.

      DOes anyone know where to find this ?

      Thanks a lot,


  4. I am grateful for BP. This post along has made me question HML...should I or not use them. I am so anxious to get started with REI but do not want to be taken for a ride. I have spoken to one HML company recently, and frankly I think the young man was new to the compay becase he sound like he was reading from a script. He told me I would have to pay 2,500 upfront for the closing. Me, being new to this, it just did not sound legit. I have no money to work with of my own, but want to quit my day job just so I can move money from my retirement to a IRA or Roth to get me going. 

    Any suggestions....

  5. I'm finding that every HML I've talked to wants an appraisal fee upfront, and if not, then they want too much in points & other fees. So still looking.............

  6. inspiring ...thank you 

  7. Wow! Great post! I'm encouraged that you found some money elsewhere. It shows that there is more than one way to skin a cat (I do not endorse cat skinning). Encouraging!

  8. Great post! I'm shopping for hard money lenders and fount this info very insightful.

  9. Great Post and Information. I am a newbie to this industry and I wanted to know about a few things. I am an Independent Consultant with Kingdom Builders Financial Group, I have been with them for about 2 months, it was free to signup as a consultant, they host tons of tele-conference calls, Has anyone heard of this company any reference good or bad, I have come across several red flags, I have just began to work with clients seeking funding and I don't want to get any potential client caught up in a fluke, I have my reputation on the line as a professional real estate agent. I asked a question regarding two questions on the funding prequalification sheet that I did not understand, what are the expectations of the borrower, Equity___ or Debt____ or combination of both, did not understand how this applied to hard money or how to articulate, and the second question I did not understand was What has been laid out for the borrower, what are they willing to do for the borrower. I did not understand this term either, and this would be the first time I would be submitting an offer. I have two clients looking for Hard Money Loan one for 211 unit $10 million, and one for 60 unit $700K, as a newbie I wanted to make sure I knew what I was asking. not knowing anything about this business and only actively using my real estate license for 1 year. I am a little stuck and very uneasy. I don't want to place my potential clients in a messed up scenario, my conversation with the CEO was very unpleasant and uncomfortable, rude, arrogant unprofessional and antagonizing regarding the above questions, Bottom line I am not in the business of bringing harm or hardship to folks and I would just like to know the 411 on what is protocol for this industry, I'm doing my own due diligence now on this company? Any info Any help would be greatly appreciated. Thanks

  10. Most of my deals are short sales and they want cash only and sold as is. I just want to get a break in getting my feet wet. Should I look to a HML to do this type of deal or is this not the way I should go. I'm not using no one money for rehab, because they're in move-in conditions.

  11. First, Thanks for sharing your experience with the HML. Secondly, I do agree that if you get a shady feeling from a deal, walking away is a better option or have a very, very good lawyer on your side. Personally I don't have a problem with a fee, but it has to be either after or refundable. You absolutely did the right thing. Best of luck !!!

  12. I have been searching for a lender for a property in FL I bought cash 115K put 65 K into fema improvements and seek 80K for final work. I have spoke to countless lenders and the feeling that some are just there to take your app fees and couldnt fund a real loan is amazing. It seems if they enough suckers to spit out a few hundred a week thats a nice payday for them. I stand by the premis if they want to loan $ they will do their due dilagence and roll it into a loan. If there is someone who maybe interested get back to me the arv according to a cma /bpo is 300K so a 80 k loan shouldnt be that hard for a credible lender. after all I have 175k into the project and its all out of pocket.

  13. I found a web site that for $277 offers unlimited proof of funds letters. I am thinking this is not a bad deal. They are hard money lenders as well but with very high fees. I have found less expensive money. Is the $277 worth it? A pre-approval/proof of funds is the last thing we need to be able to start making offers.

  14. Great post. Very detailed So I would love some feedback from all of you as well. I am a hard money lender, not a broker we lend our own money. We have a set loan to value we are able to loan for example up to 70%. To verify the real value of th eproerty we get an apprisal, desktop apprisal, and automated valuation. Each of these has a cost that has to be paid regarless if the loan closes or not. We do not fund based on. Credit, income or job ( As long as you don't have tax liens, judgements something that would attaché to property or in a bankruptcy) I give you these details not to plug what we do but so that you can understand that if the values come in right then we can loan the money basically no matter who you are. That bein said the only thing we need to Know to do a deal is the value of the property. Because of that w charge $550 to get the apprisal, distoo apprisal and avm completed. We don't make any money on this obviously and in sow cases we loose money on it. Teproblem is that there is no way we can afford to pay for that for everyone that makes an application, we would go broke in one day. So my questions is Brian, If you would of been told to pay $550, to cover the cost of the apprisal And you would get a copy of the apprisal that you paid for. And that you would get funding it is just a question of how much the apprisal came in at, what would you think of that? I hope you can see my perspective as the lender. Anyone else have any feedback. I can lend to you it is just a question of how much, it is simply a percentage of the final determined apprisal value. So the loan won't be denied, you may not get what you want for th Sloan, but at least you will have an apprsisal to justify it and you will know the LTV before you payfo the appraisal. Anyone else have comments or an ideas how we could do this better. I only ask because I can clearly see h concern of paying money up front. Thanks in advance for your comments...

  15. thanks davion..glad you enjoyed it :)

  16. Epic post Bryan.

  17. todd, best thing i can tell you is go to local REIA's and find out who is lending money locally...good luck :)

  18. I am a new mortgage deed investor. Does anyone know of a private money lender in the Cleveland, Oh area who is actively looking for more money to fund real estate deals?

  19. byron i am in raleigh nc do you no any hard money lenders here

  20. Great post Bryan.

  21. I work primarily in the hard money world, and get asked this question often, and I certainly agree that someone telling you that you need to put up money to show you are serious is a ridiculous explanation of an upfront fee. I would run, not walk, away from that kind of explanation. However, there are two situation where I have been involved with deals with upfront fees: I always make it clear from the start if that might be the case though, not in the tenth email. 1: I have contacts a few small private lending groups which manage money for several other investors who are basically retired guys lending out of their investment portfolios. The management company underwrites loans and when something fits their parameters they reach out to the money guys who approve the investment and then cut checks in anticipation of funding the loan. The file then goes through third party due diligence like title and appraisal and the attorneys look over the docs. These are not banks, so for the most part the attorneys handle all the paperwork. That third party diligence can take 2 weeks or more depending on property type. All the while the investors' money has been tied up waiting for funding. Sometimes these deals fall out of underwriting because something comes back like bad title, or an appraisal coming in low. The deal falls apart and the investor's money is sent back. In those situations, the management company has to offer the investor a return for the time their money is out of pocket. This is usually a few hundred to a few thousand dollars depending on the size of the loan. They'll sometimes give a few dollars to the attorney depending on how much work was done too. Again, I make it clear what's happening up front. The borrower always has the option to choose another lender. Also, I wouldn't do that with someone I don't have a working relationship with. It would be very hard for me to tell a client to spend $1,000 on a fee with a lender I haven't already closed a loan with. When the deals do close, those fees are credited against closing costs, so they are not a profit center for the lender/investor. 2. On larger deals, some clients come to me for help putting their package together before it goes out for financing. We've done this with hotels, a few SBA loans, and a few large residential developments. I charge them an hourly rate or a flat project fee to help them get all their docs in order, and to do feasibility studies if necessary. I've done that for several developers in the past and have a few templates I use and a few resources for the research angle. That tikes time and money on my part, and some of the borrowers don't use me to do the funding. In that regard its like a consulting fee. The ones who do use me to find financing for them too, i charge off that upfront fee against the percentage commission I get when the deal closes. That structure has worked for me and has added value for the developers. I just wanted to send this reply because not all upfront fees are bad. You just need to be clear with what you are offering in return for that fee, and it has to add value to the deal.

  22. Based on his writings I may know him, I think he is a terrorist and needs to money to wage Jihad

  23. thanks for the comments rachel..300 may seem like a little, but back then when i was starting, that was a big chuck of change for me to lose....come to think of it, even today, i'd still be pissed losing 300 bucks... i guess cheapos will always be cheapos :)

  24. Hi Brian, I thought it was great how you sussed him out and how you dealt with the situation, especially as you were a beginner. As I have been brokering hard money and bridging loans for many years, I know from experience that the ones who charge upfront fees- are not the real deal, namely, they are scammers. Although your guy had a modest fee, he surely was not going get you the deal. The big sharks charge something like 3k or even 1% of the loan amount and never deliver. I will not mention names, but I know at least one of them has been under FBI investigation.

  25. hey george, glad you enjoyed it! mathew, i definitely encourage you to be more active on BP..i have a few deals going on with BP members, and another couple potential ones that we're trying to work out still...bottom line is BP is great for learning AND networking/dealmaking! as far as that last email, i just figured it was no biggie...a broker that is that unprofessional is not someone i would do business with...i'm sure he just wanted the 300 bucks and that's what he was pissed about

  26. Thanks for the post. I'm also a young investor (24), but I don't post very much on the forums. Come to think of it, I don't think I've introduced myself. I'll have to do that and be a more active member. As for the email exchange, I can't believe he wrote you that last email. How condescending and plain mean that was; not to mention burning a bridge. How hard was it to not reply to that?

  27. That was so much fun to read. Thanks Bryan!

  28. tracey, i see the tables have turned!! i believe it was your post that actually inspired me to write this blog thanks for reminding me about my converation with Dave back in the day, and thanks for letting me know you enjoyed this as well..i'm glad you got something out of it!

  29. Bryan, Thanks for sharing your story, you have really encourage me tonight. I look forward to sharing my story one day

  30. Dave sounds like a locater and not a direct hard money lender. They want to get the fee upfront so they get paid for the time invested. There are tons of direct hard money and private money lenders and locaters are not needed.

  31. hey george, glad you liked it...hopefully you can learn from my "almost mistake" :)

  32. very interesting - thanks for sharing

  33. I would second that award.

  34. jon, that wins the award for best comment on a blog, hands down!!! josh, can we make a special award for "comment of the year"?? seriously, thanks jon, and everyone means a lot!

  35. I agree with the rest that this was a great post and that you have come miles and miles in a short time. If you were a stock, I'd buy 1000 shares.

  36. hey james...thanks for the comments..we need more young entrepeneurs like yourself on BP! keep on keepin on!

  37. Awesome post Bryan. I love seeing my fellow "youngins" out there with good instincts, passion, and mind for investing. Maybe some day we can work together on a deal!

  38. thanks's experienced veterans like yourselves that have helped this "youngin" out so the other "youngins" out there who are trying to build a reputation on BP--post and post often...people will reach out to you, and soon you'll be on the phone with BP members, meeting them for lunch, etc. It's the easiest way to start networking if you're timid about going to a REIA or something. :)

  39. Great post! I'm glad you have found what you were looking for on BP too Bryan!

  40. Appreciate your willingness to share this as well. I have never done a hard money loan, but your experience will help if I ever consider this. You have come a long way it seems. Glad to hear that you have a good start in your investing career. Your a great example to other young investors.

  41. Great job Bryan.

  42. quick BP success story: as i said above, i got this deal funded through a hardmoney lender from BP. as soon as i refinanced that property with my bank I had a 4 unit cashflowing property, plus the hardmoney lender said to keep the money invested in charlotte! i then used that money to flip a house and put some nice change in my pocket. after that first deal's success, it snowballs into another, and another...!

  43. thanks for the comments guys! it's nice to know people are reading lol.....i've used hard money for 7 deals to date, and i've never paid an upfront fee so far...BP has been awsome for me, and i encourage everyone to jump in and get their deals going!

  44. Bryan, great post. Congrats on your continuing success.

  45. Bryan, this was an awesome post. I thought it was interesting in his first response that he never addressed the most important issue. Most people would stop there and just give in to the $300 fee, but because you didn't you found this path and it led to success. Congrats!

  46. AWESOME post, Bryan! I'm so happy that you decided to share your experience for all of us to learn from. I'm glad you stuck by your guns on this and didn't give in and pay the fee. I'm also glad that you ended up on BP, as you've added a great amount of value here to the community, and with articles like this, you're only raising the game. Thanks for sharing your experiences with all of us!