Fast Closings: Hard Money Loans

Hard Money loans have the ability to close FAST when all necessary paperwork is in proper order. This allows a real estate investor to obtain access to and ownership of the property sooner, meaning that further investments can be underway. Often times, such as with rehab residences, “flippers” need to remodel the property as fast as possible to avoid high interest-only monthly payments. On a tight schedule, they need to close as soon as possible, taking advantage of the highs in the real estate market. Additionally, borrowers who accept funding for apartment ventures need to rent units immediately, in order to begin cash flow.

There are a number of steps a borrower can take to ensure a timely hard money lending close, including:

1. Pre-Approval – Obtaining a pre-approval means that the seller will likely accept an offer to purchase the property sooner. It also makes it much easier for a real estate agent to present a solid offer from a pre-approved buyer.
2. Title Company – Once the offer is approved, it will be sent to a title company for a title report. They will in turn collect information about both the borrower and seller, search records for judgments, liens, easements, etc., against the property and create a complete Preliminary Title report that offers title insurance on the property.
3. Escrow Company – Once the title report is completed, assuming it is clean, the escrow department will open services. Having all necessary documentation, including identification of the borrower, or company documents if the borrower is an entity, is vital for escrow approving documents. Contacting escrow immediately to request what documents are required is highly advisable, as this will help speed up the loan process. Escrow is also responsible for obtaining payoffs for current loans against the property, obtaining current leases, security deposits, prorating property taxes, coordinating 1031 exchanges, preparing settlement statements and coordinating the actual signing between parties.
4. Signing – Once all documents are signed with escrow, including the loan documents sent over by the private money lender, escrow then contacts the hard money lender.
5. Closing – Most states require a three-day waiting period once loan documents are signed. This is known as a time when the borrower may rescind said documents. Once the three days pass, the hard money lender then wires the loan proceeds directly to escrow. Upon verifying receipt of funds, escrow then records the deed and mortgage with the county. All funds are dispersed to both parties and the title company then issues a valid title insurance policy.

By staying on top of this process and remaining in constant contact with the lender, real estate agent, title company and escrow, this will help facilitate a fast, smooth closing, that is sure to benefit all parties.