FUNDING: AVOIDING FRAUD
RED FLAGS DURING THE APPLICATION PROCESS If you’ve made it to the application process with a hard money lender, watch out for these additional red flags: REQUESTS FOR UPFRONT FEES. Beware of lenders who require excessive upfront fees before processing your loan application. Some fees are standard in the lending process, but excessively high fees or fees demanded before any work is done could indicate a scam. INCONSISTENT OR CONFUSING COMMUNICATION. If a lender is evasive or unwilling to provide clear information about loan terms, fees, or lending practices, proceed with
lenders should have a physical office address and be licensed to operate in their jurisdiction. If a lender refuses to provide this information or operates without proper licensing, proceed with caution. QUESTIONABLE BACKGROUND CHECK RESULTS. Check whether the lender or any affiliated individuals have faced disciplinary actions, lawsuits, or sanctions in the past. This information may be available through regulatory agencies or court records. Verify the lender’s credentials and credentials of key personnel (e.g., loan officers or brokers). Look for relevant experience, qualifications, and membership in professional associations.
caution. Transparent communication is essential in any lending relationship, and a lack of transparency could indicate fraudulent intentions. Also pay attention to inconsistencies or discrepancies in the lender’s communication. For example, if the lender provides conflicting information about loan terms or seems unsure about key details, it could be a sign of trouble. UNPROFESSIONAL OR INCOMPLETE DOCUMENTATION. A legitimate lender will require documentation to assess the property’s value and your ability to repay the loan. If a lender is willing
to offer a loan without requesting any documentation or conducting due diligence, it’s a major red flag.
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22 | think realty magazine :: july - august 2024
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