Avatar's Blog
» Costs of Due Diligence
When purchasing owner occupied residential real estate, the lending bank tends to front the costs of due diligence. In some cases, the bank 'eats' thoses costs and makes that money back over the course of the loan. Not so with commercial loans
Expect to pay the costs of due diligence up front, before the loan closes. Your hard money or commercial bridge lender should not charge you to look at your loan package - that's like paying for someone to make a sales call. However, at the time Avatar issues a Term Sheet and Letter of Intent, the company president and/or CEO has reviewed your loan package, including photos, financials on the property and your personal financial statement, etc. A determination has already been made to fund this loan, pending the outcome of due diligence. If you have been forthright in your loan package submitted to Avatar, you can be reasonably sure that your loan will fund. This is the time when you sign the Term Sheet and make a down payment toward the third party costs of due diligence, including appraisals, inspections, legal, document preparation and escrow fees. Expect to spend about $5000 for those services.
