Private lending Warning #2…NOT USING A THIRD PARTY FOR CLOSING AND DOCUMENTS.
Another popular way for private lenders to get scammed is allowing a borrower to provide all the documents (loan, mortgage, deed etc…).
This might appear to make the process easier for everyone (especially when you don’t have any documents in your back pocket). But it won’t be easier. It’ll only lead to problems. Possibly devastating problems.
Let’s check out an example:
I once had a client, Jennifer, who lent money to a person on one of their homes. This person was a local real estate guru, so Jennifer thought she could trust him. She went ahead and let him write up all of the documents.
He completed them and she funded the deal.
Fast forward six months…
The loan ran into problems and Jennifer wanted to collect.
Guess what she found out? Not only did her borrower not file a lien, but he did little to protect her in the promissory note he created.
When she came to me for help, we discovered the note did not allow for her to collect any attorney fees or default fees. So, the borrower could keep using her money, unless she wanted to pay thousands of dollars out of pocket to collect on the loan.
The best she could do was get her principal back, while he continued to hijack her money at little to no cost.
Why was he able to hijack her money?
Because he wrote up all of the loan documents and MADE IT LEGAL TO STEAL!
Did you miss Warning #1? Click here to read it in a past blog post.
Private lending Warning #2