Remember the last courtroom movie or lawyer show you watched. Without fail, the client lies. Your client is likely to sugar coat, hide or otherwise lie about some detail of the real estate. It shouldn’t surprise me or you if they try to hide something from either of us. You can only do your job right if you know all the information. The good lawyers in each of these court room dramas tell the client “I need to know everything…The good bad and the ugly.”
The Lender is the jury judge and executioner. If you or your client lies it will likely come out right as the deal is about to be closed. Your loan likely will never go through and you will damage your relationship with the lender. Everyone will be upset possibly jeopardizing your relationship with the client and the lender. That’s not a spot you want to be. Remember honesty about the borrower and their circumstances is always the best policy.
Here are a few stories about not telling the whole truth and how they killed loans we would have been happy to make.
There was a property in the North East. We traveled to look at the property and loved it. The LTV (Loan to value) was within our parameters. What we didn’t know was that the government was going to seize the property in a
few days. If the borrower disclosed this information we would have had incentive to move quicker and possibly help him save his property. We couldn’t because he didn’t tell the truth.
At one point we were working on a deal with a woman that earned around a million a year from her share of a ventures profits. She needed a loan and used her own funds poorly. Her broker told us that we would be in first position on a loan then second and then 2 hours before we were ready to wire money that we would be in third position. We generally only lend on first positions but made an exception for this deal based on her yearly cash inflow. Being in third position was a deal killer. We did not make the deal because we were lied to. We may have been able to provide funding if they told the truth allowing us time to figure out a solution.
Remember, lying or not knowing the truth will hurt your reputation! Tell your client that. Tell some horror stories. nothing like scaring someone straight.
