Purchasing Foreclosures? Hard Money Lenders Can Help!

One of the most common methods for the purchase of foreclosures is employing the help of hard money lenders. Both the Borrower and Lender benefit from such an arrangement, as the process is significantly shortened and the lending group can charge a premium interest rate.

Typically homes listed for foreclosure are in dire need of a number of repairs and are often in the process of being renovated. When a home is considered non-livable, traditional lenders will not get involved. If the plumbing is in shambles, appraisers take note. Should the Borrower need the funds to complete the numerous projects, a hard money lender maybe the only option. Commercial hard money can be used in the same manner. Shopping malls or retail parks are a prime example of such endeavors.

When closing a real estate deal, timing is everything so the streamlined decision process associated with hard money lending has its advantages. Hard money lenders can help you purchase a foreclosure quickly, adding value to their business model. The major advantage is that a Borrower has an answer within five to seven days, while a bank can an average take a minimum of 30 days to respond. Deals could be lost waiting on paperwork or answers.

As noted, the shortened process of hard money lending is partially due to the documentation process. Traditional lenders are highly regulated. Hard money lenders can make the investment decision personally and do not need a majority of the supporting documentation such as income verification. Borrowers then can spend the time on working the deal, not the documents. You are essentially taking on an investor that has written you a hard money loan.

A strategy often used when working a foreclosure or when dealing with commercial hard money is to use the hard money loans as bridge loans. A bridge loan allows the Borrower to use the hard money funds to pay for renovations. And, because the loan repayment period is typically between six months and one year, the property can be renovated and resold quickly, generating a profit for both the Borrower and the Lender.

Hard money lenders are like real estate agents, as they utilize expertise to work a region. There are numerous Los Angeles hard money investors specializing in geographic areas throughout the city, giving them a specialized advantage.
Traditionally hard money loans maintain a loan to value ratio of 60% to 75%, which is smaller than most banks. The Los Angeles hard money market is no exception. As a Borrower, this helps lower the risk, as they know they will improve the property’s value once purchased.

There are benefits to the purchase of foreclosures via hard money lenders. A speedy transaction and an efficient business model can do wonders when you must strike quickly!