Done with so called HML's, on to plan B!!

Financing, Hard Money Lenders, Private Money
1

Wow, I can see why they call them HARD money loans, they are so hard to get and by the time you jump through 2000 hoops, you lose the deal you wanted which is exactly what happened today!

I won’t send you to sleep with all the details but the deal was solid, the house was awesome, great area, 4/2, 1/4 acre lot etc. etc. etc.

ARV was a solid 270K, good solid comps etc.
Rehab costs 33 - 35K
Negotiated purchase price 135K

(is someone going to tell me that deal sucks?)

We have an unused 100K HELOC (and not going to use it), 20 - 30K in the bank and a mid fico of 648 (not a great credit score but not that bad either)

A (can remain nameless) direct lender says “go ahead, we’ll fund it today” Then comes back, right after we made the offer to purchase and says “we need a 660 fico”!!!

Are you kidding me? You’re going to kick back a deal over 12 lousy credit points?

Wow, for those looking for rehab loans, try to find it locally from a private source. HML’s can and will be very frustrating, BS to get and for the amout they want to charge you, make sure you explore other options first.

Trust me, you’ll get a boat load of we think we cans, we might be able to if you do this, we need more $$, we have various plans and we’ll let you know what they are sorta kinda when we feel like it, and much more BS like that.

Oh, that property I mentioned… someone else snagged it at 4pm today! A nice chunk of change in net profit down the drain based on a “lender’s” we can do it.

Do you home work and good luck with all the promises!

2

Further to my post. Am I the only one who sees 8 million offers and “great deals” on here for HML’s and yet I have seen ZERO posts from people offering a testimonial about actual loans they have obtained from actual lenders and recommending the services of a particular company?

3

hmm…interesting post…

i was actually thinking HML would be easier to get since i’d have to deal with higher rates…thanks for making me stop to reanalyze all the potentials out there

4

They say it’s easy but by the time you add up all the fees, points and bs, it’s certainly not a cheap way to go.

I’ve seen people talking about hard money lenders being careful and not wanting to ruin their reputation too LOL

For some of these guys, maybe HML should be spelled MOB

5

5 Years ago we were buying foreclosures and flipping them with hard money in Phoenix, AZ.
The terms were simple and easy then, however I heard today from a friend things have changed.

We use to put 20% cash based on the purchase price and pay for the repairs.

The HML gave us 6-months at 14% paid monthly on the loan amount and were paid in full at closing.

If for some reason the property did not sell in the 6-month time frame they would usually work with you, or we would have needed to get a mortgage loan.

This actually never happened, just needed to be considered. Back then the average time on the market was (14) days.

6

Applied,
I’d be highly interested in knowing if you find anyone for your plan B.

I’ve probably looked at and quietly qualified all the HML’s on the REIClub list and those I found through Google search. I found a few that seem OK, but without an actual deal to send them, I can’t say for sure. It’s very interesting to read your experience and something to really consider. My own research has revealed that using an HML for a deal would actually leave me short of Money for the purchase (or I’d have to go back and renegotiate a lower sale price) for them to fund 100% of the purchase, after they take out their fees on top.

Let’s say I need 100K to purchase and the fees (Points) come to 12K (12%), they’ll take that off the top and leave me with 88K to buy the property, and so I would actually need to buy the property at a lower price (at least that is how it was explained to me by 2 HML’s I caled from the list). But does this NOT make any sense? No matter what purchase price I negotiate with the Seller, this scenario just repeats itself. Many of them actually said that I needed up to 35% of money from my own pocket althought their websites stated they funded 100% of Purchase (Bait and Switch?)!

I’m actually giving up on HML’s and don’t really see how anyone who is trying to invest in property (or has) would ever use them. They may be OK for saving someone who has bad credit from Foreclosure or something short term like that, to help restructure or buy some time, but nothing else.

Oh well…
-Gary

7

The hml’s are always tough and certainly not cheap, if you have decent credit there are conventional rehab programs out there from lenders and banks that work great if you have a broker to work with that is farmiliar with how they operate. The conventional route may take a little setup on the 1st loan but once you get in, the following deals go quicker. Hml’s are less reliable and more difficult to work with in my experience. I’ve had much more success placing funds for clients through traditional sources.

8

:cool THEY are called HARD MONEY LOANS :banghead THEY are not to be easy !! THE most part is for people who can not get aloan any other way !!! THE hard money people are getting just as picky and more so as the mainstream due to all the defaults (can you blame them ) !!! MOST of the ones i know of now are doing 1 year to two and they have above 10 % on the loans !!

9

Erm, that’s kinda what I said!

The point I was making is the whole run around situation.
A lot of them just think they are lenders AND ONCE AGAIN, show me anywhere on these sites where borrowers give some testimonials about actual loans from actual lenders they have worked with.

Maybe YOU have that info.?

10

I’d be Teed too! If they put it in writing before you made the offer, I’d get an attorney and make my profit the easy way.

I would think with a FICO in the mid 600’s you’d be able to use a construction loan with a good rate from one of the more aggressive banks in your area - they may want to cross-collaterlize with your own homet hough.

A few months back I checked out some HML’s and they didn’t sound too bad. The rates ranged from 12 to 16% with 2 to 6-pts down that they would roll into the loan along with the first four or six payments depending on the term.

You’re the second person, however, that I’ve heard about in the past week that was outraged by the demands of an HML. It sounds like they’re getting demanding and choosy because of all the new business being pushed their way from the sub-prime mess and all the people looking for new loans for a temporary bailout to a foreclosure. That’s a guess of course.

As you suggested, I use a private lender. We split the profits 50/50 and I can be fully funded (including rehab costs) within hours on deals up to $250K. It seems like a lot to give up in terms of profit, but it sure is turn-key and if the house sits on the market unexpectedly long, it doesn’t increase my carring costs (except for property taxes & insurance that I split with the PL).

Depending on the deal, HMLs often take more than 50% of the profits. I wouldn’t totally rule them out though if you can find a good one and the numbers work.

11

Applied - This is one of the best (informative, interesting, etc.) posts I’ve seen in a long time!!

How about if we hear from everybody who reads this as to your personal experience with HML’s…I’m sure they’re not all bad, but is it that rare to find a decent one?

I haven’t used one yet but will certainly post when I do…

12

You have to realize that its not 2005 anymore, its 2007 and the rules have changed. Back a few years ago your deal would appreciate between offer acceptance and closing and would appreciate even more during the rehab. Buyers were plentiful, time on market was short, and prices were high. Those days are GONE! If an HML took back something a few years back it was nothing to sell it fast to get rid of it and recoup their cash, now that’s hard to do and the last thing they want to do. Also, with more people having trouble unloading their completed rehabs, prices dropping while they are rehabbing/trying to sell, and eventually running out of money the HMLs are stuck in a position where the risk is FAR higher than it used to be since many of the rehabbers might stick them with an ugly foreclosure situation. Money tied up in a foreclosure can’t be loaned, HMLs make money lending money…if they are stuck with a defaulting loan they are losing money by the day. Things are tighting up at your local mom and pop bank, the big shops like Bank of America, and the HMLs…they have to do it or go under…its all they can do. Complain all you want but its not going to help, the standards have changed. You might want to consider using the equity line and pick up a cheaper property to start you off and use your profits to reinvest in the next property eventually gaining enough cash to stop using the HELOC.

13

I wondered how long it would take!

I think you missed the point of my post.
I didn’t ask these guys to get into lending money, if they don’t like it then maybe they should take their “hard earned” money and do something esle with it but stringing people along and not coming through after saying they would is something they shouldn’t do.

If they want to be a little less greedy and invest their money elsewhere then they shouldn’t start crying when they are not getting quite so fat!

Let’s face it, they structure their “deals” in such a way that they would probably prefer it if you DID fail! (can’t wait to get the backlash on that one)

Instead of defending them, maybe YOU can be that elusive person who can provide all of us with an actual HML lender who has provided actual money to real people who can testify to how well it went for the borrower? I’m still searching for those.

AND, HML lenders need to remember that greedy pigs eventually get slaughtered.

:banana :bouncemulti :dance :elephant

14

In a bull market I would agree wholeheartedly with you as I think they stand to gain a lot, in this market I don’t think that’s the case at all. It’s like hot potato and the last one holding the house loses.

15

If it was such a great deal…and you have the money…why didn’t YOU pull the trigger on the deal yourself? I mean, if it’s a no lose situation, you aren’t going to lose anything.

I have 3 HM loans currently in default. There is more risk on the lender in today’s market than the lendee.

16

Need a tissue?

17

I wouldn’t be so proud about stating I have multiple defaulted loans, myself! That doesn’t say much about you. (prefer not to call names)

However, I think we are still missing the point here… The HML Applied321 was working with did not perform as they stated they would (maybe a breach of contract in there somewhere, but I’m not sure) which caused him to lose his deal. This may or may not be the same situation with all of you, but it was his experience and he is asking for clarity. If you know of any reputable HML’s that maybe we all can benefit from (and possibly change our outlook), please DO SHARE. :beer

My personal experiences are such that just in precursory evaluations of HMLs they all misrepresented their criteria for borrowers. I thought true HMLs do not worry about credit or assets (meaning horrible credit and no Investment money at the worst), however, the few that I actually talked to and clarified their requirements, were asking for up to 35% liquid from the borrowers. If I had 35% of $700,000, I would take that money and go invest in the SouthEast or Mid-Atlantic Coast somewhere where that money could get me something without any partners, HMLs, or Banks. I would just do it myself!

I do agree that in todays market, there is humongous risk on the lender’s part, especially after the events of the past month! I think GaryPettee said it best “If they put it in writing before you made the offer, I’d get an attorney…”. If they post certain criteria, and you meet that criteria then they SHOULD do what they say they can do (not that they HAVE to though). I thought that is why they charge abnormally high fees for the use of the money in the first place. Where we get into the confusion of it all, with Applied’s case, they made a committment to lend and he ACTED on that committment and lost the deal due to the HML backing out. What we all need to know is why they backed out. What was their definative reason. Then we can end the speculation and either go on with our lives or take action.

Bottom Line for me is, this is just one more coal on the fire. HMLs are not reputable to deal with and are just adding a new twist on “Bait and Switch”.

…my 2 cents.
-Gary

18
I wouldn't be so proud about stating I have multiple defaulted loans, myself! That doesn't say much about you. (prefer not to call names)
Who said anything about being proud about having a loan in default? What an ignorant statment. A defaulted loan has nothing to do with the lender, but with the one who is defaulting. I did my homework on the loans in default, but due to the stricter guidelines, the normal banks doing the refi's are either calling for seasoning now, or are delayed due to the sheer number of refi's happening. Try to be a little more educated before you post such nonsense.
19

Not me. You are the one crying on here that you missed such a great deal…you need one? Either it wasn’t that great of a deal, or you have no clue what you are doing. I’ll stand by the lender on this one.

20

You’ll stand by the lender? lol, you moron.
He’s now a lender under investigation!
(along with a bunch of other so called lenders on here)