For the last two to three years, we’ve been getting a lot of requests from agents for bridge loans. Here’s why:
The typical scenario is that an owner wants to sell their house and downsize by purchasing a property that better meets their needs. They have equity but not a lot of savings to compete with the many “all cash buyers” out there these days.
We work with the owners, and once they identify the area and dollar range they’re looking for, we formulate a “battle plan” for them to make a competitive offer. Most go in and offer what is essentially an all-cash offer with a 2-3 week close.
Once their offer is accepted, which is more likely to happen with parameters like this, we instruct the escrow company for the home they’re buying to open an escrow on the home they already own. We then provide a loan to purchase the new home and cover all closing costs.
Depending on the scenario, we may just secure this loan with the property being sold (if the LTV is low enough) but in some cases, we may cross-collateralize the loan with the property being purchased. Once the old home is sold they pay off our loan. If the sales price of the old home isn’t enough to cover the payoff the referring broker will provide permanent financing.
Bridge loans have been a very successful and hot product with many benefits to the homeowner:
- It allows the owner to compete with all-cash buyers.
- It allows them to move into the new home at their own pace.
- It allows them to make any repairs or improvements to the old home to better position it on the open market.
Most importantly, in this current economic environment, their old home continues to increase in value over the course of the time they take that, more often than not, covers the expense of our loan.
We just had a new spin on the bridge loan program.
We had a business owner in San Jose, CA who runs their business out of their home. They were at a point of growth where they wanted to buy a building for their business. They had enough equity in their present home to cover the cost of the building they are buying.
We provided the business owner/buyer with a $1,350,000.00 loan secured by both properties. They were able to compete with all-cash buyers and closed in 10 days. The referring broker will be able to secure a permanent 30-year fixed loan within the next year, and they will be able to grow their business to cover their expected growth over the next several years.
So consider a bridge loan, and if you have a borrower that needs to close FAST, please give us a call.
In many cases, Excel Trust Deed Investments is able to close loans up to $5,000,000.00 within two weeks with receipt of a complete package, verification of all material facts, and investor approval. Excel Trust Deed Investments has been in the private lending industry since 1986 and can help you through each stage of the lending process.
Sheldon Perry,
Founder, VP Investment Lending
Excel Trust Deed Investments
Sheldon founded Excel Trust Deed Investments (formerly Excel Financial) in 1986. Specializing in expedited and efficient loan closings, he applies creative problem-solving skills to every facet of the private lending process for his clients.