How to Identify a Hard Money Lender Rip Off
Hard money loans are a relatively new concept in lending, whereby a lender offers loans on properties that generally do not qualify as proper collateral. This can be due to foreclosure, bankruptcy or even damage to the property. The lender will often charge a much higher interest rate (usually between 12-25%). Identifying these scams will help you avoid losing money and potentially a piece of property.
Other People Are Reading
Instructions
-
-
1
Avoid all lenders that call you. While some may be legitimate, it is best to avoid solicitors altogether. Someone who is calling to offer a hard money loan has previous knowledge of some issue with your property and is essentially preying on your vulnerability and exposed financial state.
-
2
Do not accept a financing offer until you've met your lender face-to-face. Some illegitimate companies do not operate as a normal business, merely having call operators handle financing over the phone. Seek out a local company instead, or ask your local bank--and a lender that you trust--for recommendations.
-
-
3
Do not accept financing if the loan terms change at closing without your knowledge. Loan terms often change (especially with high-risk hard money loans), but it is the obligation of your lender to discuss these terms with you and get your consent to proceed. A sure sign of a "bait and switch" is changing terms that favor the lender (and often, the loan representative) at closing.
-
4
Beware of good faith deposits. These are generally secured by lenders to show that a customer is indeed interested in a hard money loan, but scam artists will generally demand this payment upfront and with limited knowledge of your situation or property. Never ever wire money to a source whom you suspect is not completely legitimate.
-
5
Always ask for recommendations from any lender. Ask for customer testimonials or reports from other lenders. Only a scam artist would not have references or balk when asked to provide such information.
-
1
