Getting a commercial hard money loan seems simple. After all, most articles on the subject seem to imply that all you need to do is calculate how much you want, let your fingers to the talking, devise a business plan, find your private money lender, convince him to trust you that he can invest in you and you get the loan.
Actually, your team consists of much more than one hard money lender. The hard money lending team consists of a team of people who are headed by the hard money lender. They band up to invest in one person or one organization in order to make that loan possible. For example, recently we succeeded in convincing a team of Israeli investors to lend us a certain sum of money. With that funding in hand we could extend our loan offering to $20,000,000. Those individuals helped us help you. That money enabled us to loan to more people. It also helped us fund more expensive projects.
When you access our site, you simply see our organization and its hard money lender (or manager) Yanni Raz. Behind us – and behind those of our competitors – there are other individuals who are involved in your hard money application, approval and funding process and who make it possible.
Introducing you to our team.
Hard Money Lender
The hard money lender is the director of the company. He directs all aspects of the company, makes sure it is running seamlessly and does his best to make you happy that you’ve chosen that company. The lender supervises your loan from start to finish.
Here’s what he does for you: He creates your loan package, including the application, income, credit, and asset documents you provide. He gathers and reviews the title information as required. He advises you on the best available hard money program that his company offers. Per regulations, the lender should also provide you with all applicable federal and state disclosures. He wants to make sure that his investment is protected therefore orders and reviews an appraisal or other asset valuation on your collateral. He coordinates the title /escrow services that specialize in hard money lending, underwrites and approves your file for a private investor, and helps find private investors to fund your commercial hard money loan. Finally, the hard money lender determines the loan servicer of your loan, creates the final loan documents and coordinates the loan settlement or closing.
These are the people who fund your loan and enable the investor to service you. It usually takes several private investors to invest in one individual particularly if the individual requires a considerably large amount. Sometimes, the hard money lender pools loans from several investors into one fund to service larger loans of individuals (called ‘fractionalized’ loans). Other hard money lenders fund from a so-called ‘mortgage pool’ where the broker or fund manager decides who she want to loan to and under which conditions. The benefits with this is that you don’t need to wait until the manager has aggregated your funds. They are there for you.
Both title insurance and escrows for hard money are two separate divisions in the company. They work together and provide many of the same tasks as are done for traditional mortgages.
The title insurance company provides a title report on the subject property being offered as collateral for the loan. This report is compiled by searching the county records for all information, liens, judgments, easements, etc against the property as well as the borrower. The hard money lender will use this report to determine if the property can be insured. If it can, the transaction continues and the title company will issue a title insurance policy that protects the investor from losses on that property if there is a defect in title. “The Borrower’s Guide to Private Money Loans” urges that borrowers disclose all title defects to the title company. Just because the investor has insurance does not mean the borrower is also covered.
Escrows for Hard Money
The Escrow division is also called the settlement services in the eastern board of America and is performed or overseen by an attorney. This division is a neutral 3rd party that collects and disburses the funds as directed by the private investor, oversees the final signing of all applicable deeds and loan documents and records executed documents with the appropriate county office. It’s usually this company’s office where you will go to sign your final loan documents, also referred to as “closing” your loan.
Appraiser for Hard Money
This is the person who appraises your property and provides an analysis of it to the hard money lender and to the private investor. This appraisal is for their private use only although you could request a copy if you want. The lender calculates the value of the property (LTV or ARV) according to his analysis and investors decide whether or not to invest with you accordingly.
The lender may decide to replace the appraiser with a broker who may be cheaper and sometimes more professional. Other times, the hard money lender is the one who visits your property and apprises it before his handing his report to his pool of investors.
Hard Money Loan Servicer
The hard money loan servicer is the entity or person who does what is arguably the most unpleasant job of all. He collects your money. In small companies this is usually performed by the hard money lender or could be performed by one or other of the private investors. Some hard money lenders prefer to hire a representative to do this for them. Either way, the loan servicer is responsible for all aspects of servicing your commercial hard money loan including sending you periodic statements, year end tax reports on interest paid, and if taxes and insurance are collected monthly as part of your payment, the loan servicer will escrow the funds and pay them as they are due.
As you can see, the hard money lender is made up of far more than the manager. Our company – and that of our competitors – are a team who complement each other and works together to suit you and to deliver your loan from start to finish. Hillary Clinton says it takes a village to raise a child. Well, it takes a team to get your hard money transaction going from application to loan closing.