Every deal requires a bit of Savoir Faire: Hard Money Loan Closing
In hard money lending there’s always an element of flexibility that is needed to be able to get to the end result; a hard money loan closing. In order for that to happen the underwriter of a company or the lender need to know as much about a property as possible in order to issue a clear to close for the hard money loan closing.
Title Is Big Factor In Timely Hard Money Loan Closing
If you’ve been reading our blogs you know that checking title is essential to being sure that a deal will go. We have two right now where there is an IRS lien that needs curing and for some reason the IRS office doesn’t know how to write a proper payoff letter so that the title company will close and record the deal. Why would this be such an issue? Not so much that the title company is nervous, but the IRS doesn’t know how to do its job…?? If someone from the IRS comes and says sorry you can’t let this go through, then the deal is off. If a court comes and says something similar a closed loan gets rescinded by court order and that deal is gone as well.
How To Avoid Issues With Liens On Title?
So what does one do when there could be a danger of this happening?
You have a few options: You can walk away from the deal (this is for both investor or lender), you can negotiate with the IRS to be sure that something viable and acceptable by title can be written so that you can move to close. (Be ready to do a lot of back and forth with this option) You could just move the deal to a different property and go for a loan on something completely different which would show that the other deal was a waste of time. (not highly suggested, but sometimes the only option leftover so no one loses out)
Solutions To Get To Hard Money Loan Closing
One way or another you need to be ready to be flexible. Now this is for both the active and passive investor.
As a private lender you want the deal to be as “Vanilla” as possible. But, c’mon now, if that were the case that it was a “no brainer” don’t you think that borrower would have gone to a bank? (at least the newbies would) You got into this to make higher interest rates than banks charge by ending to people that have less than perfect credit and you KNOW that they are hoping you’ll lend on the merits and value of the property.
As a borrower, you need to keep your head outside of the box, but not so far that a private lender won’t get what you’re trying to do. We get that a lot;; unrealistic borrowers is what we call it. They want higher LTV lending and when they get to us, the cost is high, the LTV isn’t enough, they want to do no money down. Etc. Here’s what it means to be Savoir Faire; being flexible and amenable to the seller so that a true opportunity can be vet into a deal. Then, you take that opportunity to lend to someone like us, and we vet the property and a bit about you so our investors can see we’ve already figured a bit of the savoir faire for them and yet still have a secure deal. Then they lend. You get your funding and the deal is done. Hopefully you’ve figured you MAO properly so you’re netting at least 30%.
It means, be flexible, be ready for anything, check everything that is within reason, and make a choice to do business. Then when it’s all said and done you are looked at as an investor with savvy, and savoir faire. Not an easy title to attain, but quite doable.
This article was written by Michael Kaleikini, President and Chief Operating Officer of Hard Money Capital Group