Distressed Property Loans in California
Short Sale, Foreclosure & REO Loans
California Hard Money Direct has and will continue to close loans for clients actively buying distressed properties in California. These include Foreclosure Loans, Short Sale Loans & REO loans throughout California.
In almost all instances getting your hands on a distressed property will also mean the purchase is below market price. What’s the catch? Most of them are in poor condition. The substandard condition is what leads borrowers to hard money lenders most of the time. Banks are not interested in making loans on a property they perceive as sub-par. Below we will further discuss instances where real estate investors would seek the services of a hard money lender to acquire distressed properties.
Foreclosure Loans in California
Foreclosure is the legal process by which a lender attempts to recover the amount owed on a defaulted loan by taking ownership of and selling the mortgaged property. When a borrower misses a specific number of monthly payments, they trigger a default. If the default is not cured, the next step is foreclosure. It is not only the lack of making payments that initiates a foreclosure. It can also happen when the borrower fails to meet other terms in the mortgage document. Defaulting on a mortgage loan means failing to keep the promises you made by signing a promissory note and mortgage contract. You will also be considered in default by failing to pay property taxes, failing to pay homeowners insurance, transferring ownership of the home without the lender’s permission, and more.
A foreclosure loan is one way to refer to a purchase loan if it is used in the acquisition of a property that has or soon will be foreclosed on. It is in many ways quite similar to an REO loan. A borrower with a foreclosure looming overhead may also get what is referred to as a foreclosure bailout refinance loan. They can also be referred to as foreclosure refinance or stop foreclosure loans. In many instances, hard money lenders can save borrowers from foreclosure by offering money foreclosure loans.
Short Sale Loans in California
A short sale is a sale of real estate in which the net proceeds from the sale of the property are not enough to pay all of the debts secured by liens against the property. A short sale can only be accomplished if all of the lien holders agree to accept less money than the amount owed to them. Approvals for short sales from the lien holders are very unpredictable. We’ve seen them take just a few months or as long as one year or even longer.
They become more unpredictable if there is more than one lien holder. This will almost certainly create a longer approval time. The new buyer has no idea when or if the short sale will be approved. As such, they can’t even begin the process of getting a bank loan. When the short sale is finally approved, many short sale banks want to close within 30 days of short sale approval. As such, getting a conventional loan becomes next to impossible. Hard money lenders can close in a matter of days as soon as short sale approval is in hand. For this reason, the majority of short sales are closed with hard money loans or cash.
Once the property has been acquired by the borrower they will be able to refinance to a lower-cost and long term loan if desired.
When the title to the property is in the new borrower’s name they will be able to make the necessary repairs and acquire less expensive bank financing. Essentially, hard money lenders are simply the vehicle allowing the borrower to get their hands on the property. As we discussed earlier with regard to REO properties, short sale properties may also likely be in disrepair. Not only are timing issues a problem but you also have the possibility of property condition requirements not being met. As such, buying with cash or using a hard money lender are the two most popular ways to acquire short sale properties.
Distressed Property Loans in California
California Hard Money Direct can help you purchase a distressed property almost anywhere in California, with loan amounts from $50,000 to $20,000,000.
What is an REO in California?
The initials REO stands for “real estate owned.” These are real properties owned by a lender. The lender in most instances are banks but it could also be a private lender or governmental entity like Freddie Mac or Fannie Mae. Lenders take ownership because the property has not been successfully sold at a foreclosure auction. When there isn’t a bidder at auction offering enough money, the lender takes ownership of a foreclosed property.
The bulk of REO properties are sold “as is.” Prices for these properties are substantially discounted in most instances. As such, they are sold with a “take it or leave it attitude” as such, requests to make repairs will virtually never be approved. Because of the condition of many of the properties, oftentimes there are too many issues for the FHA to approve a loan. Adding insult to injury, there isn’t enough time in most instances to resolve the issues. The option of FHA financing reaches a dead-end quickly if the needed repairs cannot be made.
This is where California Hard Money Direct can step in to quickly close the loan. Many of our borrowers are specifically looking for unattractive properties with multiple items needing repairs. It is exactly this type of property that once fixed has the greatest potential for profit.
It isn’t a coincidence many REO properties are in poor condition. If a person can’t make their mortgage payment it is unlikely they are keeping up with maintenance and repairs. As such, even the minimum property standards to qualify for an FHA loan cannot be met. In some cases borrowers are so angry about losing their properties they will literally cause further damage on the way out. In some instances, they intentionally devalue the home by either destroying the house or removing “fixtures.”
Fixtures are items permanently affixed to the structure or land that must remain in the home under the law. This practice is known as foreclosure stripping. Fixtures include the oven and built-in microwave, countertops, kitchen cabinets, light fixtures, ceiling fans, plumbing, in-ground landscaping (bushes, trees), and the like. Other times it might be something as simple as leaving an inordinate amount of trash around the house. Any way you slice it, these items can be very costly for the new owner.
FHA Loans May Not Be Possible Due to Property Condition
The federal housing administration (FHA) has specific property standards at a minimum that must be met to qualify for their program. It is at this intersection problems may very well occur. In distressed property instances, it is likely the seller is incapable or unwilling to spend the money in order to make necessary repairs to the property. Those very issues will then prevent a traditional lender from providing the necessary capital for the purchase. Simply said, if it doesn’t meet minimum FHA standards, an FHA loan is no longer an option.
The FHA does not require the repair of cosmetic or minor defects, deferred maintenance, and normal wear if they do not affect the safety, security, or soundness of the home. However, FHA requires that the properties meet the following minimum standards:
- Safety—the home should protect the health and safety of the occupants.
- Security—the home should protect the security of the property.
- Soundness—the property should not have physical deficiencies or conditions affecting its structural integrity.
A detailed breakdown of what FHA is looking for can be found on the HUD Government website. If any of their listed conditions exist and the seller cannot afford or refuses to make the necessary repairs the buyer will be unable to obtain an FHA conventional loan. It is at this point the remaining options for the borrower are buying the property for cash or utilizing the services of a hard money lender.
Depending on the severity of the damage, the hard money lender may require a larger down payment. For example, if the property suffered fire damage, extreme mold, collapsed roof, or severe structural damage. On the other hand, cosmetic issues are the norm and will not be considered a negative by the majority of hard money lenders.
Quick closing times hard money lenders offer are a major draw for borrowers. California Hard Money Direct can typically close loans in 7-9 days. Even if a conventional loan was an option, it could take in many instances three months or longer to close the transaction. If somebody is purchasing a property to fix and flip, time is money. Therefore, conventional loans become less and less desirable to professional flippers.
TIME TO FUND LOAN
As few as 7 to 9 days
$50,000 to $20,000,000
12-48 months with longer terms available
1st & 2nd
LOAN TO VALUE (LTV)
Up to 70% of current value of property.
LOAN APPLICATION APPROVAL TIMELINE
Same day pre-approval available
Single family, multi-family, commercial
Recently Funded Distressed Property Loans in California
Read what other borrowers have to say about working with our California distressed property lenders
William Terry Hunefeld
Fantastic Communication & Service! California Hard Money Direct is a an excellent home loan company. I have worked with them on 4 different loans over the past 6 years. They do exactly what they say they will do – when they say their will do it. My expectations have been exceeded on every transaction. If you’re looking for a home loan — regardless of your credit rating — call and ask for Judy Robbins. She will tell you if you can get a loan or not. If she says she can, you will get a loan, period. Straight talk, excellent communication, top notch service. Judy knows her stuff; she and her team deliver every time.
I reached out to several private lenders online. Judy was among several that answered my inquiry regarding a loan of this kind. She stood out! She was direct, nonevasive, honest and kept communication open. To her there were no weekends; she could be reached after 6pm! She cared for her clients, the investors, tremendously; nonetheless, she also made me, the borrower, feel that she had my best interest at heart — a tough balance to strike. The communication/update link was very helpful and made exchange of documents smooth. With a lot patience and education from her (and her team), today we were able to close on a complex loan on very fair terms. I highly recommend California Hard Money Direct.
I found Judy to be a pleasure to work with and a professional. Judy is accessible and she promptly returned my calls, texts, and email. She understands this niche business of hard money lending. I closed a loan with her at competitive terms and fees. I would do business with her again and recommend Judy to my friends. Thank you Judy.