Commercial Hard Money Loans – Be Careful

If you’re reading this article, you are probably considering a commercial hard money loan. Perhaps you’ve been turned down by a few of your local banks or you know they won’t approve you due to credit scores, lack of documentable income, bankruptcies, foreclosures, etc so you haven’t bothered to apply.

Be careful as you do your shopping and be as patent as possible. This is one of the rougher areas of the commercial mortgage business as it is unregulated and lending decisions are often made by individual’s that have little or no accountability. The main area that you can get hurt, is on the deposit fee that you have to send in after you have been approved and received a term sheet (or Letter Of Intent). Be careful of any lenders that asks for money beyond the payment of third party fees.

Third party fees on a commercial hard money loan include appraisal, environmental reports, engineering, title and sometimes travel fees for principles to fly out and personal inspect the property. Commercial hard money lenders that ask for more money than to cover these basic costs should be dealt with very carefully. Why do they need more money? Is it just to “tie you up”?

Unfortunately there are a few hard money commercial lenders that are basically just con-artists that will take the deposits and that’s it… Yes borrowers can seriously worsen their situation by picking the wrong hard money commercial lender and sending them the last of their cash in hopes that this will be the solution to their problems.

The majority of commercial hard money lenders are just that – lenders and are in the business of lending money and won’t bother to consider deals that they’re not going to fund. But be careful and take your time as you don’t want to get stuck with the few shady ones out there that will gladly take your deposit then won’t return your calls and or give you complete BS reasons why they can’t fund your loan request.

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