Private money Lenders make their living making loans and providing loan services to individuals who need private money loans, (loans by private individuals, secured by real estate.) Private money lenders can be direct private money investors or simply brokers. Most professionals in the industry are actually brokers. Some of these people are both direct lenders and brokers. In this scenario, the private money professional typically funds only one or two small loans each year and works as a broker to borrowers for the rest of the incoming loans that he or she brings in.
Deciding if you want to work with a private money broker or a private money lender is much like weighing whether to purchase a house with the help of a realtor or whether to write an offer directly to the seller, representing yourself in the transaction.
Working With Direct Private Money Lenders
The upsides of working with a direct private money investor or lender are clear on the surface: it will cost you less money working with the end investor. Brokers are compensated for their time and effort by charging points on the loan transaction, often times in addition to the points the end investor charges. Therefore, the more brokers that are in a deal, the more you are likely to pay in fees (such as points) to accommodate that cost.
If you have been lucky enough to be working with a private money investor directly who is willing to fund your particular transaction, you will be able to speak directly with the investor or lender, and will be getting first hand information without having a middle man between you and the money. There are both positives and negatives to this.
By dealing with the direct lender, you can be assured that you are getting your updates and information first hand, and this can allow you to close your transaction with less problems or delays. This is due to the fact that no one knows your transaction in the manner you do, no one else can explain any items that the investor may have questions about better than you are able to, and no one knows the benefits that the transaction will bring like you do. The down side to this, though, is working with the direct private money lender means that your loan either funds or it doesn’t, there are no other options if the private lender turns you down, except to go back to looking for another direct lender who’s perameters your loan may fit.
Working With a Broker – Benefits
The benefits of using a broker are also straight forward: a seasoned, well-informed, honest broker will have the knowledge of and access to the direct private money lenders and will know where your loan has the best fit. Working with a broker will give you professional help in packaging your loan, improving the chances that you are able to obtain the loan you need at the rate and term that work for you in the least amount of time without the need for you to stress and continue to look and present your deal to investors you do now know.
Having a good broker will be able to help you properly package your deal (which is very important) and send it to the right direct private money lenders for your situation. Having a good broker should save you time and trouble in the long run and be well worth the 2-3% fee.
When you get right down to it, your choice to deal with a seasoned broker or directly with a private hard money individual will depend on whether you have a relationship with a direct private investor and whether or not you want to present your scenario directly without the aid of a professional.
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