Arizona's Premier Private Money Lender

Why do hard money lenders lend on purchase price rather than appraised value?

In the past, many hard money lenders based LTVs on a properties appraised value rather than purchase price. But as the market continually shifts, this practice no longer exists. Private lenders have a good reason to do so. Current properties are selling far below appraised value and are often distressed sales.

Hard money lenders run the risk of foreclosure just as conventional banks do. If this happens, the lender needs to get the property off their books as quickly as possible. They will be in the position of selling a distressed property on at the foreclosure action along with the foreclosures from traditional banks.

Arizona hard money lenders know that a property is only worth what it will liquidate for. This is all factored in when determining how much they will loan on a given property. They do not want a home in foreclosure that will sell less than what is owned on the home.  If the bank is liquidating a property for $60,000, a hard money lender has to assume this is the same threshold where they would be able to liquidate the same property. Therefore, that number sets the stage for the loan.

Contact Capital Fund

14555 N Scottsdale Rd #200 Scottsdale, AZ 85254 Phone: 480.889.6100
Fax: 480.361.8628
Hours: Mon-Fri 8am-5pm
Email: info@capitalfund1.com 

Latest Posts