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How to Spot Lender Scams: Advice from a Hard Money Lender

At Builders Trust Capital each team member from Managing Partner to Account Executive has experience in investing. Our diverse backgrounds allow us to understand clients’ challenges at a deeper level and advise on how to best utilize people, processes, and technology to drive real estate investment success. 

Richard Loniewski shares, “Being an Account Executive for Builders Trust Capital, clients are always telling me about ridiculous loan terms they received from someone online who claims to be a lender. I have to explain to them that if it seems too good to be true, it probably is. Reputable lenders always attempt to get you the best terms they can, while mitigating risk, not only for their company but for the client as well.” Here are some key points you need to be aware of when choosing a lender.

How to Spot the Difference

Upfront Fees. Large upfront fees in the amount of $5,000 that will be “credited back to you at closing” are a red flag. There’s no need for a fee that high and typically those deals never close leaving you out a chunk of money. Appropriate upfront fees that cover costs like application fees and search fees, up to about $200, are a fair upfront cost and not likely a scam. For example, at Builders Trust Capital, we don’t charge application fees but may ask for a portion of the attorney’s fees upfront when dealing with a complex loan. 

Generalized Labeling. Scammers will hit you with a big upfront fee with little to no detail about what that money is for. Be careful of any fees that are not clearly labeled for you to be able to do your due diligence.  

Guaranteed Approval. When you’re being solicited by a lender, remember that all credible lenders follow certain guidelines to protect their risk. So, if a lender tells you “we don’t need to run a credit check” or “they can guarantee approval” with an exact rate, ie 5% or less. Run!

Legitimate lenders do not immediately guarantee approval. There is an underwriting process that takes place before offering a term sheet. Even then that is subject to verification before final terms are given. If a lender tells you he can guarantee approval before certain verifications, they are, most likely, a scammer.

Prepayment. Scammers will ask for prepaid credit cards or for you to Venmo them money in advance for due diligence fees. They usually ask for $1,000 or more and then they suddenly disappear.

Lack of Address. Always do your research on a lender by checking their website, social media, online reviews, etc. Their website should be secure with “https”, the s is for “secure” at the beginning of their domain or a 🔒 to the left of their URL. Most scammers don’t have a website, making it very difficult to track them down. Additionally, check that they also have a physical address listed on their website that you can check on Google Maps. Be aware of PO Box addresses.

Recommendations. When you do business with anyone in your real estate investing company, you probably look for online recommendations and reviews first. This is an easy way to spot and avoid a scammer – they won’t have any reviews or, if they do, they won’t be good. Aside from reviews on their website, check Google My Business Listings, Facebook Reviews, Yelp, etc to locate independent reviews they couldn’t have written themselves. 

Pressure. Most scammers want to get your money and disappear as fast as they can. They don’t want to give you time to do any research on them. Legitimate lenders want to work fast to get you approved, but will never pressure you to act immediately since there are certain documents and application reviews that need to be completed first.

Bad Credit. All lenders heavily weigh their decision to lend to a customer on their credit rating. It’s the most accurate way to tell if the borrower will pay back the loan. Since it’s the lender’s responsibility to manage their risk, not checking credit or accepting a low credit score without large trade-offs to leverage is something a true lender wouldn’t do.

Properly vetting our borrowers is not only beneficial to a lender, but it also ensures the borrower isn’t getting involved in a deal that isn’t a good fit for them. At Builders Trust Capital, as investors ourselves, we work with our clients and through proper vetting and full transparency can give the best terms possible and the greatest chance of success in their investment.

Partner with an efficient, personable team that has delivered $150,000,000+ in real estate loans. Contact us by phone at 856-422-3232. Let’s get your next project funded!

Builders Trust Capital Client Success Stories

Partner with an efficient, personable team who has delivered $190,000,000 in real estate loans

Builders Trust Capital Success Story Photo: 1185 Route 9 South, Cape May Courthouse, NJ
  • Purchased $185,000
  • Rehab $150,000
  • ARV $475,000
  • Fix & Flip Philadelphia, PA
Builders Trust Capital Success Story Photo: 10 Anderson, Morristown NJ
  • Purchased $1,675,000
  • Rehab $450,000
  • ARV $3,955,000
  • Fix & Flip Cape May, NJ
Builders Trust Capital Success Story Photo: 10 Anderson, Morristown NJ
  • Purchased $550,000
  • Rehab $208,286
  • ARV $1,005,000
  • Fix & Flip Haddonfield, NJ

How to Finance Your Real Estate Investment

Our process is simple! We handle the entire loan process in-house. Loans are closed in as little as 10 business days.

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Photo of Alexandra Petruchenya

I appreciate your team's support during the entire rehab process for my property. This is my first deal, there were a lot of unknowns that came with that. The construction process intimidated me and held me back from doing real estate for several years. Kurt has been phenomenal, he was a wealth of knowledge. I appreciate how he gets in touch to talk through in-scope item completion and aligning on ways to ensure my construction draws are adequate. I'm thankful to have someone who has my business's best interests at heart.

Alexandra Petruchenya recommends Builders Trust Capital Oct. 2021
Photo of Sharina Jackson

I recently completed a cash-out refinance transaction with Builders Trust Capital. I would like to say thank you to Anthony for your partnership during this process, your excellent customer service and professionalism made the process easy for me.

Sharina Jackson recommends Builders Trust Capital Oct. 2021
Photo of Raphael Akinsete

If you are a newbie investor, I highly recommend Builders Trust Capital because your first few deals will impact your outlook on real estate investment. If you are a seasoned investor, I also recommend the company as they now offer products for both quick flips and long holds. This way you are covered in both your entry and exit strategy. As a longtime client of Builders Trust Capital I can testify that they are the real deal and there are genuinely good people behind this business.

Raphael Akinsete recommends Builders Trust Capital Oct. 2020
Photo of Kristian Latham

Just finished up my first project with the Builders Trust Capital team and wanted to share my appreciation for the good business. Success is often driven by effective relationships, and Builders Trust Capital’s partnership assisted me in strengthening my team all around. The process from beginning to end was smooth and efficient. They are a great partner to have to create opportunities for rookie and veteran investors.

Kristian Latham recommends Builders Trust Capital Aug. 2020
Photo of Timothy Rosenblum

Builders Trust Capital lives up to its name. They have truly been a partner to me with my projects. The process from underwriting to construction inspections has never wavered from their initial promise and Ive always been met with professionalism and efficiency. Rare in this space.

Timothy Rosenblum recommends Builders Trust Capital Apr. 2021
Photo of Mike Bonadies

Builders Trust Capital is an incredibly responsive and flexible lender for RE investors. They have been able to work with my unique situations and helped us close on properties no one else could. They know their local area well and can offer guidance. I highly suggest them.

Mike Bonadies recommends Builders Trust Capital Apr. 2021

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