Want to get a hard equity loan on a property – keep your eye on the actives in the neighborhood and surrounding areas. Low actives will crush your value.

A lot of people looking for Hard Equity Loans on properties right now and getting frustrated.  Some of them are justifying the property value using comparable sales, but ignoring the active listings in the neighborhood.

Not knowing the actives in a neighborhood is a huge mistake.

After they apply for a loan the lender or investor in the loan will drive a neighborhood, to find out how much they can buy a property for there now.  If they can buy a property for less than what you need the value to be, count on getting a lower value and lower loan amount for you to work with.

You can really spin your wheels if you ignore the actives. If you can buy a similar property (similar in structure if not finishes) for 200K right now, what makes you think your property is worth 230K or will be in this market?

The listing on the property for $200K is what is being asked, and so if you wanted to buy that one, you can probably get it for less in this market.  So what is the value?

Less than the $200K, not more. Even if your property is “superior” to that one, the lender/investor is not going to want to be the one to stick his neck out there at all right now…

In 2004 and 2005 sellers and realtors justified higher prices by saying “Well nothing is available for less than what this property is selling for, so it must be worth it.” And they were winning that fight often, even though nothing else had sold that high before. The increasing market gave comfort to the new highest value….”hey, if it’s not worth this much now, it soon will be….”

Now the worm has turned, and lenders and buyers are justifying lower prices because the market is declining. Hey even though nothing else has sold that low, “it soon will…” is the logic.

If you are needing to justify a higher value than the actives will support easiliy – get your ducks in a row and be prepared, or you aren’t going to get any love from private lenders. Have pictures, have your resume in order, let them know why you are going to be able to make this deal work. If you have experience, make sure you have it laid out for someone to recognize.

Private lenders are not interested in owning any more property right now….and do not want to take back a deal that an unprepared investor can’t finish. If you are ready and your ducks are in a row – the hunting is good right now – if you need some help give us a call.

Craig Garcia is a Managing Member of Bridge Capital Lending, LLC. A mortgage and investment firm specializing in Investor Loans that Use Private Lenders that fund Hard Equity Loans. Craig can be reached at 877-8GO-GREEN or 954-217-9518. Gene Schroeder and Angelo D’Alessandro are the founders and owners of Bank On It! – A Real Estate Investment Firm that sells Investment Properties at Wholesale Prices. Gene and Angelo can be reached at 954-515-0030. The three have also formed a service to connect prospective borrowers to a network of Local Mortgage Brokers called 888-2Lend-Fast.