Everybody is pretty much aware that the economy has changed and the way a lot of things have been done has changed. Banks no longer lend like they did before the economic recession struck, and they take even longer to reach a decision than they did before. However, there are still ways to locate funds to complete investment type deals by using hard money lending sources.
People who are very interested in providing money to support these types of transactions have been around for a very long time. They like to help in the purchasing of certain properties that are deemed risky by traditional sources. This is either because of the property itself or the credit history of the person seeking funds.
Another reason a person may seek the assistance of a hard money lender is that the deal must take place quickly or it will not happen at all. This occurs during short sales, where the land or building is selling much lower than it normally would, because the land became over valued and the mortgage is much high than the land is worth.
When something like this arises, the people in need of cash will locate investors who might be interested in providing short term funding that will benefit both parties. The investors generally do not want provide all the funding for a project and they do expect repayment to happen within a short time period.
One of the situations that occurs with great frequency now a days is the short sale transaction. Essentially, the original mortgage holder allows the person who had owned the property to sell it at below full value and less than what the mortgage amount is worth. The one seeking to buy it knows that this has to happen fast or they will lose the opportunity to gain control over the piece of real estate. The people lending the money in the new transaction places a value on the property. They will lend a certain amount and no more.
One of the differences between these lending groups and the banks is the cost of borrowing the money. They are not looking to lend the money for more than six years in most cases, and the interest rate they charge can be in the neighborhood of 10 to 15 percent. This actually works in the one seeking the funds favor as it acts as an incentive to try to find a traditional mortgage once the property is fixed up.
One of the good things is that in these situation the lenders really do not care about credit rating of the potential buyer, or if this person is involved in any type of foreclosure or bankruptcy proceedings. This is because they lend based on the value of the property. They will not give enough to cover the whole cost, usually they only cover 60 to 70 percent of the value, and this will give them some room to still make money if they have to sell it to get what they lent back.
Although the economy has changed and getting cash is not as easy as it used to be, there are still avenue to explore to find what one may need to complete a real estate transaction. Hard money lenders can sometimes help when no one else can.