DO I NEED AN APPRAISAL FOR A HARD MONEY LOAN?

We are frequently asked, “Do I need to have an appraisal done for a hard money loan? Absolutely. Hard money lenders are primarily asset based lenders, rather than credit driven lenders; therefore, the value of the commercial property is key to a hard money lender’s consideration when conducting due diligence on a property.

But, before your race out and engage an appraiser. You will need to know if the lender you are applying to will accept an appraisal performed by someone you choose or prefers their own appraiser to conduct the appraisal. In addition, you will need to know what type of appraisal will be acceptable to the lender. You should not expect a lender to accept a residential style appraisal for commercial property. In most cases, the lender will want to see a “stand alone” commercial appraisal and it must be performed by a MAI certified appraiser. This type of appraisal is more expensive ($2,500 to $7,500 or more).

We had one client refuse to pay a lender a due diligence fee to cover the cost an appraisal, insisting the lender use a residential style appraisal that he had already obtained. Consequently, the lender dropped the loan and the client lost the opportunity to purchase property he wanted to acquire.

The cost of appraisal is money well spent to achieve your objectives.