How to Tell If a Private Lender Is Real Before You Pay Any Upfront Fees

When a commercial property is headed toward foreclosure, the pressure to find financing fast can push borrowers into bad decisions. One of the most costly is paying upfront money to a lender who does not exist.

H. Jack Miller, founder of Gelt Financial, a private lender that has been making commercial and investment real estate loans since 1989, says his office hears from borrowers in this situation almost every day. “Someone will call up or send us an email,” he said. “I was ready to close. I gave this guy $5,000 and he just disappeared.”

Here is what borrowers should know before they hand over a deposit.

A polished website is no longer proof that a lender is real. Miller says anyone can create one quickly, along with press coverage that looks legitimate at a glance.

“Within an hour, we could put up an unbelievably nice looking website,” he said. “We can create some articles, maybe real, maybe not real, that make us look legitimate. And we’re a total scam.”

He recently reviewed the online profile of a man in Florida who presented himself as a real estate success story, complete with awards and features in what appeared to be a major national magazine. The logo looked right. The web address did not. It was a misspelled lookalike of the real publication’s site.

The lesson is simple. When a lender points to press coverage, click through and check the actual web address. A real feature will live on the publication’s real domain.

Scammers win by telling desperate borrowers what they want to hear. Miller uses a simple example. In today’s market, a typical private loan might offer around 65% loan-to-value at roughly a 12% interest rate. A fake lender will promise 90% loan-to-value at 6%.

“If they get five people quote them between 11 and 13%, and one guy quotes them 6%, they believe it,” Miller said. “But that guy doesn’t exist.”

A term sheet from that kind of lender, he added, is not worth the paper it is written on.

This matters even more for borrowers already in default. Banks are federally regulated and generally cannot lend on a property that is in foreclosure. Anyone who claims to know a bank that will approve a loan in that situation should raise immediate concern. Miller has described a borrower who paid a broker $5,000 on exactly that promise, nine months behind on her payments and with poor credit.

Miller’s advice comes down to a few checks that take little time and can save thousands of dollars.

Look at reviews from real borrowers, and read them closely. A lender with a long history of closed loans should have a trail of feedback that goes back years.

Find out how long the company has been in business. A lender that has operated through multiple market cycles has a record you can verify. Legitimate firms make that history easy to find, the way Gelt lays out its background on its About Us page.

Be cautious about how much you pay upfront. “Make sure you don’t give them too much money up front,” Miller said. Some fees are normal in lending, but a large payment before any real underwriting has happened is a red flag.

Ask whether the lender actually specializes in your situation. A borrower facing a sheriff’s sale needs a lender that does foreclosure bailouts regularly, not one that is learning on the fly.

Finally, do not pick a lender only because it offers the lowest rate or the highest leverage. “Don’t go with the lowest and the highest leverage just because they’re the lowest and the highest leverage,” Miller said.

Fraud in this space works because of timing. Borrowers who are down on their luck feel pressure to grab the first offer that sounds like a way out.

Miller says the first step is often emotional. Many borrowers in distress feel ashamed, and that shame can lead them to act quickly and quietly instead of carefully. “You’re not alone,” he tells them. “Don’t be embarrassed. Everyone goes through hard times. It’s all about the rebound.”

Taking a day to verify a lender can feel impossible when a sale date is close. But losing a $5,000 deposit to a fake lender costs both money and time, which is exactly what a borrower in foreclosure cannot afford to lose.

About Gelt Financial: Gelt Financial LLC is a national private lender and distressed debt buyer with over 37 years of experience across commercial and investment real estate. Operating in 37 states, the company provides bridge financing, foreclosure bailout loans, and non-performing loan acquisitions for real estate investors, operators, and institutions.

This article is intended for informational purposes only and does not constitute legal, financial, or investment advice. The views and opinions expressed herein reflect those of the individuals quoted and do not represent an endorsement of any company, product, or service mentioned. Readers should conduct their own due diligence and consult qualified professionals before making any investment decisions.

Disclosure: Individuals or companies mentioned may have a commercial relationship with KeyCrew.

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