Keeping the hard money lender from bypassing you on a deal

I found a hard money lender listed on this website, and they probably are a completely fair & legit company. If you look at their steps for completing a hard money loan application…its rather straight forward. Basically you filll out an application with all the details of the deal, and email or fax it to them. They either approve you or not within a day or so. They don’t care about credit [note I have great credit, but FYI anyway] - they just care about the LTV being 70% or less.

But what is stopping this company from going…hmm…if this guy can buy this house for 65% or 70% of its appraised value…I’m going to just step right in front of him, sweeten the offer and pay cash on the spot for the house and use it as a rental!

I’m NOT saying the above company would do anything like that. They’re probably great guys. But I’m sure there are some hard money lenders out there that would do that.

Any ideas on how I can protect myself??? Anyone use any agreements/documents to protect themselves they would like to share?

Thanks!

Why and how could they do that if you have a contract on the property? Hard money lenders want to lend you the money that’s how they make money. Do you think they want to risk their entire business for stealing one deal? I don’t ever see that happening.

Don’t take this the wrong way, but your paranoia is not warranted…as mentioned, HMLs are in the business of financing investors, not “cutting there noses off to spite their face”—what you are suggesting would canabilize their own revenues…

If you want to contractually protect yourself, you could customize a standard non-circumvent/non-compete agreement.

Regards,

Scott Miller

Don’t see it happening buddy.

They wouldn’t tie up their capital, possibly face legal action all for one deal that’s a RENTAL.

Just like the flipper they want to get in and cash out as quickly as possible, collect their interest and points and have that capital ready for the next deal. Preferrably YOUR next deal if all worked out according to plan.

Just chiming in…no worries on the HML stealing your deal. They are in the business of making loans, and as profitable as that is, they are not going to risk their entire business to steal one deal. They usually have enough to work on.

As far as the non-circumvention agreement, I doubt that any lender would ever sign one. They’ll just tell you to move on to another lender.

Thank you for repeating what bears repeating…

“HMLs are in the business of financing investors, not “cutting there noses off to spite their face”—what you are suggesting would canabilize their own revenues…”