NUTS & BOLTS
HARD MONEY
3 Negotiation Strategies forWorkingwith HardMoney Lenders BETTER UNDERSTANDING MEANS EVERYONE WINS.
by Sam Jacknin and Charles Einsmann
T
he key to leveraging more beneficial negotiations with your hard money lender is, as with most negotiations, better understanding your lender and what they are trying to accomplish. This article will outline three ways to harness more negotiation power with your lender, as well as to lower your project costs and complete your project faster – and that will likely benefit you as well as them! INCREASE YOUR DOWN PAYMENT Hard money lenders are constantly managing risk. Many different areas in a transaction can create risk. There is the physical risk of loss on the property, which is covered by hazard insurance. There is risk at the closing that the title company will not put the deed on record, which is managed with an insured closing letter. There is the title itself that is NEGOTIATION TOOL #1
insured with title insurance. However, the one risk that nobody can be sure about is the risk that you will default as a borrower. What if the mar- ket goes down dramatically and you walk away from your property? What if you become injured or otherwise unable to complete the project? The only way that a hard money lender can protect against default risk is to insulate themselves against default losses. If you have a really good equity position on the property when you buy it, that is helpful. However, that still doesn’t demonstrate your commitment to the deal. The only way to prove to a lender that you are reducing your default risk is to increase your down payment. That way, the lender knows you will do everything possible to avoid a default and the loss of your own money that you have in the deal.
84 | think realty magazine :: september 2018
Made with FlippingBook Learn more on our blog