legitimate private lender has already earned a positive reputation. • Foreclosure rescue services or other mortgage relief services that, in exchange for a fee and sensitive personal information, promise to lower payments or change loan terms.
insurmountable, the industry’s reputation for speedy closings, flexible loan terms, increased negotiating op- portunity, and the ability to form close working relation- ships are powerful draws when compared to traditional financing. So how does an investor go about limiting risk while max- imizing reward?
FIND LENDERS THROUGH TRUSTED THIRD PARTIES. Asking other investors for referrals to private
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lenders with whom they have had a good experience is a great place to start. Even if that specific lender cannot underwrite your deal, they will often know of another lender who can. Beyond your immediate network, the American Asso - ciation of Private Lenders offers a public online member directory at aaplonline.com/directory. These lenders have all pledged to follow the association’s Code of Ethics. There is also some recourse against a member lender via AAPL’s code- violation process. Finally, there are companies that specialize in lead generation for private lenders, including Private Lender Link, Scotsman Guide, and Connected Investors. When using one of these platforms, be sure to research how lenders get listed. Platforms that let anyone advertise are more likely to attract scammers.
KNOWTHE COMMON PRIVATE LENDING SCAMS. According to a 2019 joint research effort called
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Exposed to Scams from the Better Business Bureau and Stanford Center on Longevity, knowing about a scam method makes you 49 percent less likely to be victimized by it. Some of the most common scams in the private lending industry are: • Pretending to be a private lender and asking for large application fees, other up-front fees, and/or large down payments. These “lenders” do not actually make any loans and may also use sensitive information from the application to commit identity theft. • Stealing the identities of legitimate private lenders, including spoofing their websites. These “lenders” may pass rudimentary due diligence because the
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