Hard money loans - Value, Value, Value. What is the property worth?
Consider this scenario:
"Mr. Hard money lender, my property is worth $1,200,000. I have owned this vacant commercial property for 4 years and only owe $315,000 against it. My fico score is 618 and I am self employed. Can you make me a 50% loan with no bank statements, no tax returns, no nothing, other than an application, title insurance and an appraisal?"
My response, "Of course I can. All of my loans come down to clean title and acceptable appraisal to verify the value. So, in this case I am happy to make a $600,000 loan against this property. Let's get going with it."
Now let's fast forward 8 days...
"Hey Mr. Hard money lender guy, this is the appraiser calling you about that vacant commercial property. When I went out to do my appraisal of it, I noticed that there was a FOR SALE sign posted on the property, from a local real estate agency here in town.
When I called the local listing agent he mentioned that the asking price for the property is $850,000. He mentioned that it has been on the market for just under 4 months.
Oh, and by the way, the borrower keeps calling me. He wants to know when my appraisal will be completed and he keeps pestering me about the fact that the property is 'easily' worth $1.2 million. Since you are the lender and the client on this appraisal, I just wanted to give you a heads up about this."
Deal or No Deal?
Why did the borrower represent that this property is worth $1,200,000?????
The propety is sitting on the market and NOT selling at $850,000. Is this borrower on crack? Is the borrower trying to scam the lender? I gotta tell you, I see this happen all the time...
NO DEAL.
Mr. Borrower, your "pants are on fire."
"Mr. Hard money lender, my property is worth $1,200,000. I have owned this vacant commercial property for 4 years and only owe $315,000 against it. My fico score is 618 and I am self employed. Can you make me a 50% loan with no bank statements, no tax returns, no nothing, other than an application, title insurance and an appraisal?"
My response, "Of course I can. All of my loans come down to clean title and acceptable appraisal to verify the value. So, in this case I am happy to make a $600,000 loan against this property. Let's get going with it."
Now let's fast forward 8 days...
"Hey Mr. Hard money lender guy, this is the appraiser calling you about that vacant commercial property. When I went out to do my appraisal of it, I noticed that there was a FOR SALE sign posted on the property, from a local real estate agency here in town.
When I called the local listing agent he mentioned that the asking price for the property is $850,000. He mentioned that it has been on the market for just under 4 months.
Oh, and by the way, the borrower keeps calling me. He wants to know when my appraisal will be completed and he keeps pestering me about the fact that the property is 'easily' worth $1.2 million. Since you are the lender and the client on this appraisal, I just wanted to give you a heads up about this."
Deal or No Deal?
Why did the borrower represent that this property is worth $1,200,000?????
The propety is sitting on the market and NOT selling at $850,000. Is this borrower on crack? Is the borrower trying to scam the lender? I gotta tell you, I see this happen all the time...
NO DEAL.
Mr. Borrower, your "pants are on fire."
posted by hardmoney Tom at
11:26 AM
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