First:It is common for sellers to accept good credit buyers with larger downpayments..maybe a 20% downpayment..but the extensive underwriting, the 30 to 60 day appraisal process and close scrutiny of the debt service coverage may lead to a declination.
If that happens, then the bad credit buyer may have been a better bet. A Buyer using hard money has to put down 30 to 35% down payment. Debt Service Ratio will be calculated and must make sense next to a look at the last two years tax returns of the buyer by the hard money lender. Some hard money lenders will close in 14 business days and will not require an appraisal(as is the case for one of my lenders whose minimum loan amount is $1 million). One of my lenders does require an appraisal and may even require a toxic report.
In terms of getting the deal done quickly, if a buyer wants to us hard money and wants the property REALLY bad and the seller NEEDS to sell "like yesterday", a bad credit buyer using hard money may be the better bet. This is especially true if their have been very few "bites" by the buyers and your seller is getting nervous. If the property is not in the middle of a heavily populated town/city and is located in a small town where word of mouth has not been doing a good job, that one buyer may be your best bet...and in retrospect, may turn out to be your only buyer!
Hard money lenders may have high interest rates but some of our lenders have no prepayment penalties allowing the loan to to be a bridge to a better loan a year or so after the loan closes. Most commercial property owners refinance after their initial purchase loan so the buyer wins in this case because they get the property, commercial credit history and are not surprised that a refinance will be in order in the next few years (as opposed to refinancing and being put into a loan whose terms will force a refinance.
Call Charles Hennebeul, Owner of American Cash Solutions Inc at 631-368-2219. Fax the rent roll yield to date, last two years of the Hotel or Motel tax returns, real estate agents, attorneys involved to 631-270-3935. We will take an application over the phone and obtain a rate quote from our hard money lenders. More paperwork may be needed but these documents are a good way to give me a better view of the deal.
This blog wa reposted by the Owner of American Cash Solutions Inc from www.mybuildingfunds.com with full permission from the corporation.
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