Screwed by hard money lender

[Account Closed]

I came to BP to find a lender for a BRRRR deal because I thought I could trust this forum, and that's where I found I found HouseMax Funding. I went through the background check and my credentials passed and I was good to go with the loan as long as the appraisal numbers came in where we needed them. Well they did so I thought we were good to go. Now we are supposed to close tomorrow and apparently the capital partners are backing out because

1. I don’t have enough rehabs under my belt (they’ve known the whole time that I’ve only done two) 

2. The comps are too far away (that’s because there is nothing like this property around the area, not necessarily a bad thing). 

3. They don’t like that the seller paid $175K for the house a few months back and I’m paying $345k for it now.   the seller had to pay liens and did some repairs so he has about $283k in the property. The lender has all that proof but apparently it’s still an issue.   

And the seller refuses to give me an extension after tomorrow (They've already given me two extensions because it took so long to find an appraiser). So I'm about to lose $8k in earnest money and fees because of this. I had to make the EMD non refundable to convince the seller to do the deal in the first place. As far as I can tell, nothing in our contract protects me from the lender backing out last minute.

....And we were supposed to close TOMORROW!!!

 I’m devastated, but not defeated. I’ve learned just because a lender is on the bigger pockets forum it does not promise that they are trustworthy. 

Is this normal? How do I know this won’t happen again? 

If you have any advice or want to just cheer me up, please leave me a comment. Thank you! 

[Jay Hinrichs]

Originally posted by @Jason Wray:

Mollie,

You have complete and fully packaged deal you do not have to lose that deal.  You can shop that deal with other investors and since the appraisal is done.  You can still use that appraisal with a Direct lender or Fully Delegated bank.  Regardless of only (2) rental properties for landlord seasoning that should not disqualify you it would in most cases result in larger down payment or a little higher rate.  That is why it is generally done as portfolio to cover those mitigated risks.

from my vantage point.. HML make their own rules change them when they feel like it and are not obligated to follow any kind of script or guidelines.. just like in March / April when many lost their funding lines temporarily they could not close a ton of deals.. nothing anyone can do about it.. the scenario presented above is about as high risk for a lender as possible.. out of area / state not a ton of experince

massive flipper profit etc etc.. Rural true HML are VERY tough to get and very few do them.

Also agreed just because anyone is on BP is not a endorsement that they are some great lender. Or can perform. 

the lesson learned here is your deals when your using any kind of bank money should always have an out for the event the lender pulls the plug.. only go hard on EM if you actually have the cash to close / or you dont mind losing it if you have a failure on the lenders part.