Successful Lenders Solve for Exits, Not Payments
by Chase Scott, AlphaFlow
T he chief concern for lenders servicing an existing loan is to create a positive experience for the borrower. That begins at the application process, but it doesn’t end with the funding of the loan. In fact, the borrower experience doesn’t end until the loan is paid in full. The first thing to consider is the exit. As the lender, your focus should be on helping the borrower exit the loan successfully. That requires, to some extent, putting yourself in the borrower’s shoes. With fix-and- flip loans, there are two primary ways borrowers make the exit. One way is to sell the property and the other way is to refinance the loan. In the first instance, the investor has made the necessary repairs and put the house on the market. In that case, they line up a buyer, sell the house, and pay off the loan. In the case of refinancing, many times, the borrower has missed a payment for some reason. More often than not, it isn’t their fault. Either they’ve had a subcontractor miss a deadline, they’ve got an issue with materials and supplies, or some other unforeseen situation has delayed them. Maybe there was a delayed shipment or weather destroyed critical construction materials.
In cases like these, it’s important not to come off like a payment collector. If you’re a borrower and you’re trying to get your crew back to work again, acquire your materials on time, and get your project back on track, you don’t have time to talk to bill collectors. But if someone is calling to help you with solving your problems, you’re more likely to take that call. And you’ll be more cooperative. The goal is not to get the borrower to make an interest payment on the loan. It’s to get them out of the loan so they can get into the next one. HURDLES REAL ESTATE FIX-AND-FLIPPERS MUSTJUMPTHROUGH Property rehabilitation isn’t easy. The fix-and-flipper has a dozen or more concerns going through their head all the time. Property acquisition is the first step. Investors must ensure they buy the right property at the right price. While doing that, they must assess the repairs necessary to get the house back on the market and estimate what those will be. Then they have to manage the construction project. If they do their own repairs, they have to buy materials and make sure they’re delivered on time.
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