Many people cannot underestimate the value of a qualified broker when it comes to private or hard money loan requests. I always use the comparison between a good broker and a good attorney. The analogy is presenting a deal for funding to the lender compared with presenting a case to the judge and jury in the courtroom. If you were being tried for a felony and possibly facing jail time, would you go before the court and present your case without a good attorney?
I can't tell you how many stories I've heard where a borrower tried to go before the lender (the judge & the jury) by him or herself and was denied the loan (found guilty). This being said, we have also funded many a loan (court case) by presenting it properly to our lender (the court).
Many times when borrowers are seeking private or hard money they are in a delicate situation. This is where a good broker plays a crucial role in getting a deal funded. A good broker understands all of the details of the loan request, including the strengths and weaknesses, and is able to present this to the lender in the best way possible.
A story that happened recently is about a client that needed a construction loan for a halfway completed condominium project. As his broker, we determined that private/hard money was his only alternative for completing the condo project. We queried his loan request to all of our lenders and luckily we were able to find one lender that was willing to stick his neck out and help our borrower finish his project.
Our lender gave us the initial terms sheet and our client tentatively agreed to the terms set forth by signing off on them. However, without consulting us first, the client decided to call the lender himself to see if he could negotiate the interest rate down. BIG MISTAKE.
In the course of the short phone call with our client, the lender began asking him questions about the project that were "delicate" questions, to say the least. These were certainly questions that we as the broker should have answered for our client. Back to the analogy of the court case, our lender heard some things that gave him a bad taste in his mouth. Several hours later, the lender called me back and said he was withdrawing the initial terms and had decided NOT to do the deal. GUILTY!
Because our client decided to go straight to the lender without our representation, he lost the terms that were on the table and as of today, his project is still sitting in limbo. This is a valuable lesson for all of us. Pick a good broker that's been in the private/hard money lending game for a long time. This is your best chance for getting your deal funded (or winning your case!).
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