Identifying frauds and un-reputable lenders when seeking commercial real estate financing.

As with all industries, the commercial lending industry features a wide variety of individuals and firms – some highly reputable, and others less so. When in the market for a commercial loan, the number of potential lenders can present a challenge to even the savviest real estate investors and developers.

Seeking a private lending partner can present even more challenges, seeing as private lenders do not have the same accreditation processes as banks. So, when shopping for a private commercial loan, how does one identify the frauds and fakes and make the best selection for their borrowing needs? As private money lenders in the Pacific Northwest, we’ve outlined potential red flags to look for when determining the quality of a prospective lender.

Big Upfront Fees
Occasionally referred to as an underwriting or due diligence fee, nonrefundable deposits are required by some lenders upfront, before underwriting a prospective loan. In some cases, these fees may be in the tens of thousands of dollars and are required without any real commitment on behalf of the lender. Once a prospective borrower is financially committed to a lender it becomes significantly easier for the lender to change the proposed loan terms – increasing rates and fees.

For large commercial loans, the cost of underwriting may necessitate the requirement of an upfront fee. However, a borrower should ensure the upfront fee is fully applicable to the final loan fee, and as we discuss below – check the lender’s references before remitting any funds.

Not a Direct Lender
A good commercial mortgage broker can be a huge asset to a real estate investor in need of financing. However, significant savings can be obtained by shopping your loan request directly to direct lenders. Furthermore, borrowers should be aware of mortgage brokers who pose as direct lenders, shopping your loan while adding their own fees to those of the actual lender.

No Track Record of Success
Many lenders talk a big game, but when the rubber meets the road, they fail to perform for their borrowers. The best way to separate the frauds and fakes from the quality lenders in the marketplace is to talk to a lender’s past clients. Ask for several references of individuals with projects and properties similar to yours. A quality, reputable lender should be able to produce such references who can provide you with some insight as to whom you are doing business with.

At Juniper Capital we have built a track record of successfully funded loans, lending in Seattle and the Pacific Northwest since 2012. We specialize in investment residential loans, fix and flip loans, private construction loans, and more. We take time to educate our borrowers and are always happy to provide references to ensure our borrowers are comfortable and informed when doing business with us. Give us a call to start the conversation today.