Hard Money Loans for New Construction: A Checklist for Avoiding Costly Mistakes

Hard Money Loans for New Construction Projects: 7 Key Elements to Track

Whether for residential or commercial properties, hard money loans for new construction typically require the following elements. Overlooking any of these can delay funding and/or complicate the financing process.

1. The appraisal

Using a standard (templatized) appraiser-engagement letter can expedite this part of the process. Here, the appraisal should be:

• Ordered by a lender employee who is not directly involved in the loan: This can ensure independence.
• Reviewed for accuracy: This is essential to ensuring both factual accuracy and that the appraisal can be reliably used to support the decision regarding the loan.

2. Automated valuation models (AVMs)

This software can generate value estimates, based on information from one or more databases. AVMs are becoming more and more accepted, as this time-saving software can offer more flexibility when it comes to valuation methodology.

3. Title insurance

This coverage can protect lenders, agents, and buyers, but the right endorsements need to be selected in order to obtain the proper coverage and protections. So, carefully review initial title policy language, and make sure any errors are fixed ASAP.

4. Environmental property assessment

This step is crucial to discovering whether a property may have any hazardous wastes or other materials that could devalue it. As part of this step, lenders may:

• Have property owners complete land use and land history questionnaires
• Retain environmental engineers to conduct Phase I and/or Phase II property assessment(s)

5. Land Survey

The land survey is used to verify the legal address and boundaries of a property, as well as other essential details, like:

• The dimensions
• Setbacks and flood zones
• Potential easements and encroachments

Mistakes with this aspect of the process can affect the loan amount and possibly whether the loan is funded at all.

6. Surety bonds

These payment commitments are used to provide some assurance that the contractors who will be used as part of the new construction project have:

• Submitted bids in good faith
• The qualifications and capabilities to perform the work associated with the bids
• The resources and intentions to pay suppliers, subcontractors, and/or others who will be associated with the project
  Carefully review surety bonds to make sure they offer the expected level of warranties for the future project.

7. Other insurance

Depending on the type of project, several other forms of insurance, like (but not limited to) the following may also be important to have:

• Builders’ insurance
• Flood insurance
• Workers’ compensation insurance

Contact COHI Capital to Work with an Experienced Hard Money Lender in Colorado

For more than 10 years, COHI Capital has been a leading provider of hard money loans throughout Colorado. With a streamlined application process and responses within one business day, COHI is the lender you can trust for fast, flexible, efficient lending solutions, backed by honesty, transparency, and fair pricing.

Plus, from the initial application through the final decision, you will always deal directly with the lender making the decision, not a broker.

Call 970-922-3277 or email us now for more information about our private equity lending options for Colorado properties.

From offices based in Denver, CO, COHI funds Colorado real estate loans, from $50,000 up to $3,000,000, for properties throughout the Denver metro area, the Front Range, the I-70 Corridor, and beyond.