The Story of a Loan ‘Shopper’
In the lending industry, there is a commonly used term called a “shopper” to describe a person who is calling every lender in town to find the best deal on a loan. Experienced lenders can usually spot a ‘shopper’ a mile away, but from time to time anyone can fall victim to one.
This is a story about a ‘shopper from hell,’ a woman named Jackie who was also desperate for a loan. After we offered her terms for the loan, she suddenly went cold on us and wouldn’t return our calls. This is a tell-tale sign that you are being ‘shopped’ by a borrower. So we forgot all about her and moved on.
Several weeks later Jackie returned and seemed motivated to move forward with our loan. So we drew up the loan documents and sent them to the Title company. Later that day, the Title company called to say that several lenders had also opened escrow on the same property! I called Jackie to find out the story. She said that she had a lender she was working with previously but that she backed out. She promised that we were her only lender now and that she had eliminated all of the other lenders. This was when we should have stopped the presses and cut our losses. But we continued in vain.
A couple of days later, Jackie went in to sign on our new loan at the Title company. Soon after she arrived to sign, we received a call from the Title company saying she left without signing. The Title guy said that she was missing the correct document she needed to sign for the business entity that held title to the property. We were very clear with Jackie as to what documents she was required to bring to Title to close. But why had she failed to bring them?
Shortly thereafter, I received a call from the person who was receiving a payoff from our new loan. He said Jackie had called him to say there would be a delay in getting him his money. He then asked her, “I thought you were at the Title company signing on the new loan?” She answered that the other lender had come back and offered her a larger loan amount. In order to keep us on the hook a little longer, she pretended to us that she was going to sign on our new loan. She deliberately forgot the document she needed to sign, and said she would have to return with it at a later time.
We were able to speak to the other lender later that day. He told us that he had been working with Jackie all along. Like us, he also had no idea she was working with another lender. He was in disbelief when I told him she was at Title that very day signing on our new loan and had left without signing. The entire time, Jackie had been playing all of us like a fiddle until she got what she wanted. Feeling very cheated and duped I was at a loss at what to do.
The moral of the story? Be wary of these loan ‘shoppers.’ They will waste your time and stretch your sense of sanity. Also, be on high alert when a person approaches you for a loan who seems desperate. This person is one who will call incessantly, email you non-stop, and in some cases text you at all hours of the day. If you suspect someone may be ‘shopping’ you, make a few calls around town to other lenders and find out.
Please share any stories you have about ‘shoppers’ or ‘desperate borrowers.’ I need some comic relief after being taken so badly by this ‘shopper from hell.’
Donald Hendricks - Yes. I found out this week from a broker. She did close with the other lender.
Great story- we send an loan offer to them and make them sign it and give us a refundable deposit of $250.00 as a payment toward doc prep prior to inspection and final approval. If we do not approve the loan after inspection we refund the $250.00- if it closes the $250.00 is a credit toward doc prep. But if we approve the loan and THEY do not close they forfeit the $250.00- is not a lot of money but usually stops the games. Also, is small compensation for our time and expense. You like????
Hard money lending business is all about patience.
Things must be accomplished one step at a time and cannot be rushed. Can't pull on seedlings to help them grow.
It is frustrating when a borrower takes you to the point of signing and walks away. It is also frustrating when a lender takes you to the point of signing and adds new terms to the loan.
Hard money lenders are not looked upon with a lot of trust by the general population. Hard money is thought to be "money from loan sharks and criminals". But in reality the word "hard" refers to "cash out" and has nothing to do with bone breakers. Hard money refers to cash out and soft money refers to refi of existing loan, i.e no cash out.
Yet, the reputation of hard money lenders is not very bright.
So, it takes a lot of patience and perseverance to stay the course, and not be frustrated by a "shopper", no matter how difficult they are, no matter how many times they go to sign and pull out the last minute. It is easier said than done, but this is part of business and it is what it is.
Amir
Historically, "Hard Money" refers to loans collateralized by a hard asset (real estate) and not based on soft lending criteria such as DTI and FICO scores.
A purchase hard money loan if not based on credit score, etc, is still hard money if based on the asset value, and there is no cash out involved.
Thanks Amir Levi, well said. I completely agree. The hard money industry has a tough image to overcome. This is why I believe it's one deal and one borrower at a time. That's how we make a difference and consider ourselves successful, to help real estate investors accomplish their goals. It's a good feeling when it all comes together but geez is it tough when it doesn't and something like this happens....
Ann Bellamy, you are very correct. I looked up the definition of "hard money" and your's was it. I do remember, when I was studying for my Broker Lic. years past, that was one of the subjects, and it defined cash out for hard money definition. I must have misread then :-), and stand corrected.
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I really think the industry is just reaping what if sows. How many calls have you received from borrowers who needed last second money because another lender flaked out and didn't perform? And don't even get me started on the cold feet that many private lenders (i.e. Aunt Mildred) seem to get. It's not limited to P/HML's either.
Conventional lenders, with their often vague and nonsensical requirements, can be as bad; regularly screwing mom & pop end buyers with inane requests for endless documentation and often pulling out at the last minute. It's a problem with the lending industry as a whole, and not limited to HML's.
Is there any wonder why borrowers play the same game? I don’t blame them a bit and view this as nothing more than a cost of doing business. The good news is you can take advantage of it by filling the void and offering extremely reliable service by working quickly and always doing what you promise.
Loyalty counts – both ways, and is easily earned when an active borrower knows they can rely on you to get the job done 100% of the time. I think its better to just walk away from someone who burns you than establishing a punitive system that suggests everyone intends to. Once bitten...
Well said, Jeff. I'm rewarding my best borrowers, and they know they can depend on me. And if I can't do a deal for whatever reason, they know I'll tell them immediately.