I received a call a few weeks back from a broker who sends us real estate loans occasionally. He had a client that owns a property free and clear, a rental property. The borrower needed a private money loan quickly before the end of the year in order to take care of some year-end obligations. The borrower also required at least a 2-year loan in order to allow him time to liquidate some other assets and have the ability to pay us back. This is an easy private money loan for us because there is no debt on the property, therefore the loan would be a low loan to value. Not to mention the property is cash flowing. We approved the loan within 24 hours and provided excellent terms, 9% interest only for 2 years, with 4 points as a loan fee.
Well, the broker didn’t even present our offer to the borrower at all. The points were too high the broker told us, therefore he wouldn’t be able to make any money on the loan.
“I’ve put a lot of time into this loan, and I really need to make some money on this one,” the broker flatly told me. I told him I would see if another affiliate lender could do it for less points but I would need him to send me more information on the borrower such as a full loan application, credit, and some other items.
“I didn’t take a 1003 loan application,” the broker then told me. What?!! I thought to myself. You’ve spent so MUCH time on this deal and deserve to make more money but you haven’t even taken the time to take a basic loan application from your borrower?! This made no sense at all.
A week went by and I didn’t hear anything back from the broker. So I decided to call him to see if he was able to get his borrower into a better loan. The broker then told me,
“No I got the borrower an 18% interest only loan for one year. The lender only charged 2 points so I was able to tack on another 5 points and make some money on the deal.”
I promptly answered the broker saying, “I thought the borrower absolutely needed a 12 month term?”
The broker answered, “Oh well, he’ll make it work.”
This happens all of the time in the world of private money and hard money lending. There are so many “joker brokers” out there who don’t care about the needs of the borrower on a loan. These brokers only care about making the most money they can, and have no problem putting their borrowers into bad loans so they can profit. This is pure greed. This broker didn’t even take a basic loan application from the borrower or ANY documentation at all, but he thought he deserved to make 4% of the loan amount as a broker fee?
If you are a private money lender that sees this type of broker activity, consider cutting these “joker brokers” out of the picture completely.
Corey Curwick Dutton, MBA. Real Estate Lender for Private Money Utah Corey Ann Curwick is a private money consultant for Private Money Utah, a real estate lender based in Salt Lake City, Utah. Corey is from Austin, Texas and is an MBA Graduate of the prestigious Thunderbird School of International Management. An authority in the private money lending industry, Corey provides educational resources for investors who use hard money loans in their real estate investing activities. Before she joined Private Money Utah, Corey was the President of an investment education company in Utah called Bray-Conn Investments LLC. In this role, Corey organized classes, which taught investors how to invest in five asset classes. In her free time, Corey enjoys skiing, snowboarding, and mountain biking in the beautiful Utah outdoors.