The most valuable thing a Capital Advisor can tell you

Tim Milazzo
July 17, 2020

I’m convinced the most valuable thing a Capital Advisor can tell a real estate investor is “don’t work with that lender.”

There are currently 28 lenders we do not work with at StackSource.

Each one of them has been rejected from our platform for a reason.

While the reasons vary, our clients benefit from each one in the same way: avoiding a bad experience with a lender.

The commercial mortgage industry isn’t regulated nearly as closely as consumer lending. There are a lot of scummy things that lenders can get away with. In some cases, a lender may do something that’s illegal, but your only recourse as a borrower is to go after them in court, which itself can be expensive and time-consuming. In many cases, a lender can take advantage of a borrower without breaching any laws — it’s just a crappy way to operate.

When someone credible suggests you avoid a particular lender, it’s not worth rolling the dice. There are too many other lenders out there that actually care about the clients they work with. Let’s all let the bad ones die out. Here are some of the reasons we’ve banned lenders from the StackSource platform.

Why we reject lenders from our financing platform

They are an intermediary posing as a lender

This one is a particular pet peeve of mine, and it’s pernicious in the “hard money” segment of the industry. Calling yourself a “lender” and then issuing a “term sheet” just to see if you can entice a borrower is bad behavior. These “lenders” are really just intermediaries that will try to fulfill a loan request with true capital sources after you’ve signed the term sheet and paid a deposit. No thanks!

They re-trade on offered terms

This is a related problem to the first, so I guess these two problems are like devious cousins. While an intermediary can’t promise you loan terms reliably, a direct lender who habitually re-trades loan terms won’t stand by their initial loan offer. They aim to tie up the relationship with a borrower on the basis of loan terms that are much rosier than the final loan they issue later. It’s hard to make good in this situation, because they’ll “use” your deposit to order an appraisal and environmental check, and maybe pocket some via an “application fee”.

But when they later issue their loan commitment that is different than their initial offer, they are quick to point out all the legalese on their term sheet that states that the initial offer wasn’t binding. Jerks.

They pull out of deals

A “term sheet” is a very different stage for different lenders. The best lenders issue term sheets slowly, because it represents a deal that has already been vetted, and has received preliminary approval from credit decision-makers.

Beware lenders that issue a term sheet with laser speed, as it may mean that it’s a loan officer firing out offers that have not been vetted properly. That lender may very well reject the deal down the line, even if nothing negative comes up during underwriting.

Some lenders just don’t pay attention to the client’s experience. This can lead to mistakes, delays, and frustration. You still end up with the desired loan terms, but the path to get there can be brutal, full of red tape, and redundant paperwork.

Road rules

These are some of the most common reasons we ban lenders from the StackSource ecosystem. There are hundreds of lenders we do work with, and we make our expectations with them clear right up front:

Real estate investors, why else might you choose to stay away from a lender?

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