“I need your assistance!!! What can you do?” At the other end of the line was a hopeless female voice. I could tell her heart was beating, and when she called our office last Friday around 4 pm, she was out of breath. If I don’t close on Tuesday at this house, I’m going to lose my $5,000 worth of cash and much more in revenues than that.
We were able to get more data once she calmed down. It was a strong agreement that we had looked at a couple of weeks ago. She was a new client with whom we still haven’t had the joy to work. She was prepared to lay down 10 percent, so she was a candidate for our acquisition loan of 90 percent. Fortunately, we can close that loan very quickly!
“Price fixes everything” Mine’s favourite sentence when it comes to property. The phrase is true when selling a house, but when borrowing money, it can’t be further from the reality. Fast the hard way our new client discovered this. Fortunately we were able to get her closed, but I’m not sure we could have accomplished it if she had called any later.
She called for the loan a few weeks before shopping. We spent some time with her and walked her on the bargain through the numbers. We quoted her with a fee and interest rate normal pricing of 2 points. Without an assessment, we would loan 90 percent of her acquisition. She kept shopping and discovered another, much lower difficult cash lender, who quoted her 1.75% in charges and the same interest rate. Looking at the price alone, it was a better deal, so she went there for it.
The issue was not being able to supply this other lender. They didn’t have the funds available, but fortunately, before the closing day, they let her know what I’ve seen happening several times. After we spent so much time with her and asked us to assist, she apologized when she called us back. She nearly lost her $5,000 and what feels like a profit of about $35,000. Everything because she wished to save.25%. For her loan, it was just $460 in savings. She almost lost everything in hopes of a $460 savings.
In order to get fresh investors in the gate, many lenders use smoke and mirror approaches. They focus on creating loans, not assisting successful investors. It is a model of turning and burning and depends on bringing in fresh customers continually. Having a better price is the way you win at that match. Instead of what really matters like relationships, reliability and support, new investors are focusing on cost.
We have closed two loans over the last five weeks where we have refinanced other lenders of hard money. The borrower had more time on the loan in both cases, but in each case they were no longer comfortable and wanted out with their lender. We are pleased to jump in and help our customers, but it is essential to realize that chasing prices ended up costing them a lot in both instances. To get out of the other loans, they had to pay a fresh set of charges and closing costs. In both cases, even though they committed to financing the repairs, the other hard money lender ran out of construction funds. And there were two distinct lenders of hard money!
Pricing is an significant element when shopping for a loan, heck, the price you pay directly affects your profit. But it’s not the only variable to take into account. Be sure that you work with reputable lenders of hard money and make sure that you compare apples with apples Here are some issues to consider:
- What do you get with the higher priced lender that the less expensive option doesn’t give you?
- What is the credit term and what if you need to extend it?
- What is the repair fund drawing method and how long does it take?
- Are repair funds placed in a distinct trust account (such as those used by title businesses and lawyers) so that they are accessible to you when you need them?
- Does the lender have a nice reputation when they say they’re going to close?
- What is the requirement for down payment?
- What about penalties for advance payment, fees for payment, minimum interest or other concealed charges?
- Are they adequately staffed and willing to assist when you need statements of payoff or releases of links?
When you see lenders of hard money advertising prices below 10 percent, this usually implies that they are highly conservative loans. From what I’ve seen, in this price point, it’s just as simple to work with a bank as the lenders, and banks will range from 5% to 6%. When you have the same demands you would have with a bank, it’s uncommon to use a hard money lender.
We’d love to be a resource for you, but we know we can’t win the whole company. Sometimes it allows going with another lender afterwards. Having said that, we are pleased to spend some time with you and discuss your requirements to assist you find your best choice. Call us and let us assist!