Hard Money Bankers - 2 Questions To Ask Your Lender
If you are calling a hard money lender for the first time or trying to find a new one, there are two crucial questions and answers you should take away from the discussion. Most people call me and never ask these questions. You need to know ' Will you close on time every single time' and 'How do your construction draws work'. These seem like questions you shouldn't have to ask a lender, but you would be shocked at how many don't give the answer you would expect.
Closing on time should be a given in the real estate industry, but if you have done a few deals, you find that closing on time can be a lot trickier than others may think. You never want your lender to be the reason you couldn't close on time. Your lender is supposed to be your bank account and the sellers side of the transaction is expecting you to be there with the money. If you can't show up on time, you are now in the seller's pocket. This doesn't mean the deal will blow up, but now you owe the seller something and they can call the shots because you are in breach of contract. They may want more money down, more money as a daily penalty or flat out walk away. Hard Money Bankers always closes on time. It is one of the strongest features we have as a hard money lender that closes in 5 days. We receive a lot of calls from borrowers that their lender fell out and they are on the 11th hour to try to close this.
Construction draws are another very common topic you would want to clarify with your hard money lender. Different companies have different policies with this. Timing is also very very important when dealing with construction draws. The way we do it at Hard Money Bankers is as follows. The borrower sends us a breakdown of the draw schedule with line items and phases. After closing, the borrower begins phase 1 and then as soon as that phase is completed, they order an online inspection from us. Within 72 hours our inspector is out at the property and confirming that phase 1 was in fact complete. If it looks good, we wire the money directly to the borrower. There are companies that do this differently and usually take a lot more time than we do. I frequently work with clients that come over from other lenders because it took the other lender 2-3 weeks to approve a draw. This should be unheard of in this business because time is money.
It is very important to develop a relationship with your hard money lender. It is just as important that you make sure you ask the right questions to determine if the relationship will work for you and your needs. Expectation setting is very important.
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