While C-Loans, Inc., the owner of CommercialLenders.com, believes that each of the commercial lenders found on The Blackburne List is bona fide and legitimate, we make no warranty to that effect. The commercial lending industry is crawling with con men, and the thing about con men is that they are very, very convincing. Despite our years of experience, even we here at C-Loans, Inc. occasionally get fooled. You must not assume that simply because a “lender” makes The Blackburne List that he can be trusted!
Here’s how these cons work. Essentially all commercial real estate lenders require a large deposit to pay for third party reports – the appraisal report, the toxic report, the title commitment, and sometimes an engineering report. These deposits for third party reports can run from $3,000 to $10,000. Even experienced commercial mortgage borrowers expect to be required to pay for these third party reports fairly early in the loan process.
The con man creates an imaginary commercial lending company. He’ll prepare expensive looking letterhead and sometimes even a small web site. Then he’ll advertise for commercial loans. When borrowers call, he’ll quote delicious rates, like 5.25% in a market where most banks are quoting 6.75%. After receiving a loan application, he’ll issue a conditional commitment letter and ask for a $10,000 deposit for third party reports, made payable to his “lending company”. After receiving your $10,000 deposit, the typical advance fee scammer will stop returning your phone calls and move on to his next victim. The victim typically threatens and threatens, but he seldom actually sues the con man. Litigation is simply too expensive. After fleecing 300 or more victims, the con man often then moves to a different state.
So how do you protect yourself? Try to work only with banks. If your deal isn’t strong enough for a bank, and you simply have to apply to a private (hard money) commercial lender, you must be very alert for clues. The cheaper the loan offered by a “commercial mortgage company”, the more suspicious you should be. Certainly you should be wary of any “commercial mortgage company” quoting an interest rate of less than what most banks are quoting. I tend to trust lenders who quote 15% and 8 points for one year. Lenders with painful terms are usually legitimate.
Look at the “commercial mortgage company’s” web site. Does it smell legitimate? Do they list a street address and a phone number? If there is only a post office box address and no phone number listed, run-run-run! Does the web site contain lots of pages or just two or three pages? If the "lender" claims to take deposits and investments from private investors, does his web site have an extensive investor section? Does the “lender” even have a web site? If not, run away. Do the loan officer’s emails come from the "lender’s” web site or from some free gmail or hotmail account?
Finally, be sure to actually read the conditional commitment letter (aka: term sheet). Has it defined “quick sale value” or addressed what happens to your “commitment fee” if the property does not appraise for enough money? What does the conditional commitment letter say about the disposition of your deposit if the deal falls apart?
A wise man once told me how to spot a con man. He said, “George, if you’re in a room full of 100 people, pick out the one man in the room who you are absolutely sure is not the con man. He will be your con man.” The moral of that story is that con men are usually very convincing. Therefore even we here at C-Loans, Inc. occasionally get fooled. So please be careful out there. If you do get conned or suspect a con, would you kindly notify Alicia Gandy right away at 916-338-3232 or email her at email@example.com? At least we can immediately remove the “lender” from The Blackburne List.