Fairfield Financial Services, Inc. - Private Money Loans, Lending & Borrowing

The Private Money Broker

Covid-19 be damned!

October 12th, 2020

S. Clay Sparkman

Okay, so here we are. Halloween is just around the corner. (I wonder how that is going to work. One good thing: There should be plenty of masks.) But let me not deter my own intentions. So here we are: We’ve crawled through 7+ months of unanticipated and unpredictable Covid DMZs and war zones–sometimes battling fiercely at the front and other times hiding in the woods with all the patience we could amass. Our communication systems have held up to combat, but our problem is more with regard to what we communicate and who we communicate it to. There has been a great deal of chaos and confusion with regard to the command structure. In times of battle, we need to know our commander and listen intently and often solely to this commander, because generally we are just lone chess pieces lacking the ability to see the grand arena of war in its entirety (the chess board). Add to that an opponent unlike any we have battled in the current era. Maybe the last great battle of this sort was the Spanish flu in 1918, just over one hundred years ago. But it was different then (though somewhat the same), and things have changed in so many ways since then. No, this is an entirely new experience for those of us who are here now to deal with it.

What have we done? First we waited. We hunkered down and waited to see what would happen next and to avoid the initial onslaught. Then, having seemingly–after much struggle–gotten our attacker to retreat or at least brought them to somewhat of a draw, we mostly decided to abandon our jungle-cat strategies of hide and kill, and we began making plans to get back to something of an ordinary existence, though not entirely so: rather, revised, to greater or lesser degrees, to ward off the sneaky little Covids. And ultimately…this worked with varying degrees of success and then failed with varying degrees of failure–and it became clear to any coherent Sapien adult that this campaign was going to be significantly more difficult than any of us could have ever known. Where are we now? Sapiens are brave (if at not times foolish). I would say that we are getting on with our lives the best we can, taking measure frequently, and adjusting accordingly. But one thing is for sure. We can no longer just wait this bad boy out. A life spent hiding under the bedcovers…well frankly, this is not life at all.

And that, I suppose, is what this has to do with real estate projects and private money lending. (You knew I was going somewhere with this.) It is time to get on with what we do the best we can: live our lives and feed our families. If we deal in real estate, these are uncertain times, though thus far much less certain than I would have guessed six months previously. Markets are holding up–particularly in places like the Pacific NW. Prices are holding firm in places like Portland and Seattle, where demand for housing continues to greatly exceed supply. I believe that this may be an opportune time in these markets. If you buy, build, renovate, rent, and sell real estate, the opportunities may be now.

And we–at Fairfield Financial Services, Inc–are choosing to move forward with what we do, more fiercely perhaps than even pre-Covid. We are better conditioned now. We are alert! And we are ready to work twice as hard as we did previously (if that be the right thing to do). Let’s say that we all tend to get lazy when things are too good. Quite frankly we are not feeling the least bit lazy any more. We say, let’s go! We say, bring us your deals. We say, let’s get creative and make things happen together. What do you say?

What we do, of course, is help people (who do what you) to do what you do, and with greater command of your projects. We help you buy with confidence (knowing that the funds are there), and we make it possible for you to move your projects with greater velocity. In vaguely unpredictable markets, speed is your friend.

I hope you find this useful as a starting place to advance your own projects or to discuss these matters with your clients.

If you think we might be able to assist you, I recommend you ask. A few things to note: We tend to make small loans (under $750k). We make short-term loans (generally 1-2 years). Our rates are at an an all-time loan for us (operating in Oregon since 1964). We lend in the 8-11% range. We have no prepayment penalties (velocity). And we can move fast, particularly as we develop a solid working relationship (more velocity), with you understanding our needs and us understanding yours. Most of our clients are repeat clients (of many loans and projects) or repeat brokers who see us as their go-to Private Money Source.

We wish you all the best in your endeavors. (May Covid-19 be damned!)


– Clay Sparkman (clay@privatemoneysource.com, 503-476-2909)

Covid-19 and real estate markets

March 17th, 2020

S. Clay Sparkman

Clearly these are unusual times worldwide. We have very little precedent to draw on in in speculating about how Covid-19 will affect real estate markets in the US. Most investors, of course, don’t like uncertainty. So many will tend to take their chips off the table when things get weird. At the same time, there are investors who look for unusual conditions affecting markets and speculate about possible opportunities to be had. The following article struck me as a good thought piece to help real estate investors figure out where they stand. The article is:

“Impact of Coronavirus Pandemic on the Real Estate Market,” by Marco Santarelli at Norada Real Estate Investments, March 17, 2020

I hope you find it useful as a starting place to discuss these matters with your clients and/or speculate about your own opportunities.

All the best in your endeavors, Clay

– Clay Sparkman (clay@privatemoneysource.com, 503-348-7011)

Using a private money option

February 14th, 2020

S. Clay Sparkman
Just about every broker should have a private money option to go to. Here are a few quick tips on how to get that going.
(1)   Find a Lending source that you like and trust. Also, make sure that they will work with you, guiding you through the process AND giving you quick feedback as to loans that you run by them on an ongoing basis.
(2)   Read through their loan specification guidelines and discuss these with them so that you have a decent idea of where private money might be a better option than a bank loan.
(3)   Find out what their sweet spots are. Ask them: Where do you bring options or value that a bank cannot?
(4)   If they want large non-refundable deposits up-front, I suggest that you don’t work with them.
(5)   Whenever a loan comes to you that doesn’t fit your ordinary lending criteria, think about private money. Would this scenario be a good fit?
(6)   If you feel like talking this out a bit with someone in the industry, give us a call. We are a small family business, started in Portland, Oregon in 1964. I myself have been at it for about 25 years, and I’m still learning new things every day.
All the best in your endeavors, Clay
– Clay Sparkman (clay@privatemoneysource.com, 503-476-2909)

National home pricing and supply

January 24th, 2020

S. Clay Sparkman

A recent article (“Supply of homes for sale hits record low, and prices suddenly jump,” penned by Diane Olick at the CNBC site, posted 1/22/20) discusses the current numbers and issues related to home supply, demand, and pricing.

It seems that in general, high demand for housing coupled with a precariously low supply, has lead to even higher prices for homes. It seems that investors are jumping into the fixer market (both fix/sell and fix/flip) at high rates competing with consumers for the existing supply of homes, driving prices even higher.

It is not entirely clear but I get the feeling that Ms. Olick views investors as gumming up the works, but I am inclined to think that they add critical value, as they often buy homes which need a significant amount of work–homes which most consumer buyers would be hard pressed to tackle on their own (with issues like financing, the problems inherent in renovating a home which you wish to live in, and of course the problems of how to get that work done and done at a quality level and according to specs).

At any rate, this is both good and bad for the investors, as they face a more competitive buyer’s market (and this is where there profit is really made), but also face a high demand sellers market (allowing them to move the property quickly or rent it, and maximizing the value).

I always tell buyers that the buying is the hardest part. Many don’t have an operation setup for buying, and they should. I would argue that even small operations should devote one third of their resources and time to the buying process, and that process should be continuously ongoing so that the investor always has the next home lined up in time to move the construction team to the new property immediately upon completion of the prior home.

Consider sharing this with your appropriate clients and let us know if they need funding for a project. After 55 years in the business, we can give a few pointers and some guidance, and would be happy to provide funding when projects make sense and fit our parameters.

— Clay (clay@privatemoneysource.com, 503-476-2909)

Clay is Vice President of Fairfield Financial, a primary source for private money since 1964.  Fairfield is currently targeting loans in OR, WA, AK, CA, CO, ID, FL, GA, ID, MT, NV, NY, OK and TX.  To submit a loan to Fairfield for consideration: http://www.privatemoneysource.com/loanproposal.php

A Typical Loan

December 4th, 2019

Clay Sparkman

Here is a prospectus for a loan that we placed in 2019. This is fairly typical of the types of loans that we do. We provide samples of our work several times per year.  Not only does it give borrowers and brokers a better idea of the kinds of things that we do, but it also gives them a nice working format for presenting new loans.



Cash out refi on SFR rental property in Lake Oswego, OR

Loan Details

  1. Loan Amount: $380,000
  2. Term: 24 Months
  3. Interest Rate: 9%
  4. Monthly Payments: $2,850 Interest Only
  5. Security: Deed of Trust in 1st Position security interest in real property at XXXXXXXXXXXX, Lake Oswego, OR
  6. Clackamas County Assessor Market Value $1,768,046
  7. LTV based on Assessor Value: 21%

Loan Overview

Mr. and Mrs. XXXXXXXXX purchased this property with all cash in 2014 for 1,450,000 in April of 2014.  Mr. XXXXXXXXX is an Attorney in CA, who was specializing in construction liability law.  Shortly after purchasing this house, there were changes to the regulations in CA that essentially destroyed his business.  This caused a cash flow shortage (and a hit to their credit), and he then borrowed $264,000 against this house through Fairfield.  His loan is ballooning in a few months, and rather than pay it off, he’d like to pull out some more cash to take advantage of an investment opportunity.  His current workload is such that another private loan through Fairfield (vs. a more conventional loan) is attractive because he simply doesn’t have time to shop around or go through the process with a bank.   

The property is being used as a short-term rental, marketed to people moving to the area while they look for permanent housing.  The borrower reports that a typical rental time is 2-6 months.  Currently, they are between tenants.

The borrower plans to exit this loan with a refinance or to simply pay it off with cash out of pocket in the next 2 years.

Property and Valuation

The property is .6 acres with 7,569 SF home that includes 4 bedrooms, 3.5 baths, finished basement, attached 2 stall garage, detached 3 stall garage (that the borrowers intend to convert into a separate living space), climate controlled wine cellar, vaulted ceilings, sun room, and high end finishes.

I visited the property when we made the loan in 2017, and although the furnishings are different, the photos are a good representation of the house. This is a very nice property in a high-end location in Lake Oswego.  The land value alone is estimated by the county assessor as $423,646.  Zillow.com estimates this property to be worth just under 1.7MM, and Realtor.com estimates a value of $1,832,400. I have no concerns with the value of this property as being more than sufficient to collateralize this loan with very little risk.


A commercial loan application has been provided by the borrower’s showing an annual income of approximately $360,000.  Property taxes are not included in this loan, or their current loan, and the borrower has kept them current.  In addition, I’ve included a copy of their pay history in the loan packet.  Mr. XXXXXXXXX’s bookkeeper makes the payments each month, and the pay history is excellent.  The June 2019 payment was late, but that was an oversight by the bookkeeper.  When I let Mr. XXXXXXXXX know, they sent a check out immediately.

Credit and Prelim

A credit report for Mr. and Mrs. XXXXXXXXX have been provided in the packet.  As I briefly mentioned above, the demise of Mr. XXXXXXXXX’s practice a few years ago had a big impact on their credit.  At the time of the loan in 2017, their credit scores were in the upper 500’s.  currently, their scores are in the mid-600’s, each with a mid-score of 643.  There are some charge-offs on the report, and one account still in collection left over from his business, but all other accounts are current.  I believe this is an excellent sign, and it has also put them in a position to where they could qualify (or at least meet a min. credit score requirement) for a more traditional

The private money lending business: likes and gripes (part I)

September 6th, 2019

Clay Sparkman

Awhile back I published a 3-part post on my Private Money Investor blog regarding my personal likes and gripes as a purveyor in of private money.  This has been my sole job for the past 20 years.  Who wouldn’t want to go rant and rave publicly about their job?  I guess I could have easily made it a 24-part post, but that would have been amusing for me, yet not so much for the rest of you.  At any rate, I decided that these posts would be relevant to this audience as well, and so I decided to publish them here.

There is a bit of free association here, as I allow one idea to lead to another and so on, allowing my emotions to carry the narrative, and thus these items are in no particular order.  So I give you the things that tend to kick start my emotions and get me going (for better or worse):
The trust deed system (particularly as it works in Oregon, Washington, and California) is a thing of great beauty!  It provides for order and procedure, eliminating subjectivity (except for in the event of a judicial foreclosure), nicely balancing the interests of the borrower/owner and those of all the lien holders involved with regard to a particular piece of real estate.  Most of the professional investors I know enjoy and appreciate the trust deed system, and they have a lot more good than bad to say about it.

Associated with this is another wonderful thing they call title insurance.  Title companies are the only businesses I know that provide insurance against the possibility of their own error.  Knowing title companies as I do, I’m betting against them.  I will take title insurance every time AND THUS I shall be able to sleep at night.

Which brings me to the escrow service role of the title company:  This is a very tough job, high stress, with many people simultaneously placing multiple demands, and the need to consistently walk a tightrope avoiding costly problems and errors.  I most certainly wouldn’t want to do it.  And apparently most title people don’t either.  Most title companies do a poor job of training and preparing their people and setting a high standard, and thus unfortunately, most escrow services offered by title companies stink.  Fortunately, there are exceptions.  Unfortunately, we often don’t have any control over where a particular closing is going to take place.

Now I realize that this post is going primarily to loan brokers, but still I have to do this.  I have often heard that 10% of realtors do 90% of the sales—and I suspect that the numbers are even more extreme with regard to loan brokers.  A good loan broker is worth her weight in gold—and there are some good ones out there—but there are … oh so many sadly disappointing loan brokers.  Still, we need loan brokers, so we soldier on.  I figure our loans at Fairfield are about 50%/50%, with half coming to us through loan brokers and the rest coming directly from the borrowers.  The problems in my experience are not so much with honesty (though this certainly can be a problem from time to time), but with matters of basic business professionalism in general and with the specific knowledge of the business in particular.  Of course, it is a big step for many loan brokers to move into the realm of private money and commercial lending, but my company works hard to provide assistance, education, and support; we spend extraordinary amounts of time working to educate brokers.  If you are already a top-notch professional in the realm of private money, please come and do business with us (immediately).  If you are professional in your dealings and organized, but not very savvy with regard to the particulars of private money, come to us with an open mind and we will lead you through the process and do our best to educate you.  (Hey, a free education is not so easy to come by these days.)

Now here’s one that really gets me going:  I am downright angry at banks for not lending money on real estate secured loans anymore.  “Come on banks, lend money!  That’s what you do for a living isn’t it?”  We in the private money sector need banks.  We lend money to help generally strong borrowers get from point A to point B, and point B is frequently a bank loan (or a buyer who needs a bank loan in order to be a buyer).  This needs to change.  There are plenty of good safe loans for banks out there that don’t require the banks to disregard every rule of good lending (as they did with many sub-prime loans leading up the collapse in fall of 2007).  It reminds me of something Mark Twain said (and I’m paraphrasing).  He said that if a cat sits on a hot burner it will never sit on a hot burner again.  But then it won’t sit on a cold burner again either.

I love my attorney.  It took me years to find a guy like this.  Everything that you have ever heard that can be bad about attorneys: the opposite is true about my guy.  He is honest, pragmatic, honorable, and fair.  He knows his limitations—and will be the first to tell you when he comes up against them–but at the same time has a vast breadth of knowledge regarding real estate matters and business in general.  And he doesn’t start a clock every time he picks up the phone or answers an e-mail.  Believe it or not, he actually seems to charge only for “real work:” research and document preparation and such.  (And on top of all that, he’s the kind of guy you’d want to have a beer with.)  If you want me to put you in contact with him, I will.

And speaking of lawyers, I have to say that I really enjoyed Happy Hour is for Amateurs, by Philadelphia Lawyer.  If you are offended by explicit talk of sex, drugs, and binge drinking, you may want to give it a miss.  But beyond the raucous tales, this book takes you right into the bowels of the enormous billing machine that is “the law firm in America.”  This book takes what we thought we already knew and knocks us right upside the head with it.  It turns out we knew nothing at all.

End of part I

— Clay (clay@privatemoneysource.com, 503-476-2909)

Clay is Vice President of Fairfield Financial, a primary source for private money since 1964.  Fairfield is currently targeting loans in OR, WA, AK, CA, CO, ID, FL, GA, ID, MT, NV, NY, OK and TX.  To submit a loan to Fairfield for consideration: http://www.privatemoneysource.com/loanproposal.php

Flexibility and creativity: the beauty of private money loans

August 7th, 2019

Clay Sparkman

This post was first published on this site on July 6th. 2010.

Our private money lending programs tend to be fairly rigid with regard to LTV requirements but quite forgiving with regard to most other issues. One of the nice things about private money is that it allows for creative problem solving. I have put many transactions together, that initially didn’t appear to be doable, simply by seeking out a creative way to bridge the gap.

Let me give you an example.   Say that you have a client come to your office and they want to buy a commercial building in Seattle, and they need financing. The borrower is strong and the property is prime but the construction on the building is only 90% completed and there are no tenants yet (and thus no income), and in addition to all that there is no appraisal and the buyer doesn’t have the time to wait for a commercial appraiser as this is a distress sale situation. So, I would say that this guy might have a tough time getting bank financing. So, you consider private money and decide that this loan is a good fit.

You check with a private money outfit such as ours and determine that we will loan 65% LTV against the value of this property. Now let’s say that the buyer has negotiated a purchase price of $800,000 for the property and he has $80,000 (10%) for the down payment. At 65% it appears that he may need to bring $280,000 (plus costs) to the table to make this loan work, and so you are thinking that you’ve reached a dead end.

Well, that’s where the flexibility angle kicks in. There are at least four ways that you can meet the equity requirements without the buyer bringing additional cash to the table.   Study these because if you are going to work with private money you should know them by heart.

Solution #1: The borrower may borrow based on the true value of the property.
If he can demonstrate that he is buying well, and that the true value is higher than the purchase price, then some private money lenders will be willing to base their LTV on the true value of the property. In this case, if there is a strong argument to be made that the property is actually worth $1.2MM, then a private money lender may be able to arrange to lend enough to cover much of the purchase of the property (how much, of course, depending on the overall “strength” of the borrower).

Solution #2:  The borrower may borrow based on the projected value of the property.
Say that he needs an additional $100,000 to complete the construction on the building, but that the building will be valued at $1.2M upon completion, then certain private money lenders would be willing to arrange a loan of up to $880,000 to cover both the purchase price and establish a construction fund. The construction funds would then most likely be held in a trust fund and disbursed as the work is completed on the project.

Solution #3: The borrower may be able to persuade his seller to carry back a portion of the sales price as short-term debt.
Particularly if the seller is in a distress situation, he may be willing to negotiate on this point.  So, in our example, let’s say that the buyer is able to convince the seller to carry back $400,000 of the sales price in second position subordinate to a $500,000 loan arranged by Fairfield Financial.  In this case, we may be willing to move forward with a low down-payment loan. With a strong borrower, we would, for example, be willing to make a loan for $500,000, of which $100,000 would go into a construction account for improvements and something like $30,000 would go toward loan fees and closing-costs, and the buyer would only need to come in with the $30,000 needed to cover loan fees and closing costs.

Solution #4:  It may be the case that the borrower has additional real estate assets that he is willing to pledge as collateral to make up for the shortfall in down payment money.
Private money lenders are almost always willing to consider additional collateral, to make a transaction come together.  Say the borrower has another commercial building, this one at the coast, in Lincoln City, Oregon, and that it is worth $1.6M with $750,000 owed against it.  The lender would quite possibly be willing to make the loan, with the borrower bringing in $80,000 cash and the Lincoln City building as additional security for the transaction. And if the borrower is concerned about tying the building up, because he has plans to sell it or refinance it in the future, then it should be easy enough (and standard practice) to negotiate and write into the loan a specific release clause provision stating that we are willing to release the Lincoln City property as security in exchange for a principal reduction, for example in this case, of $200,000.

Keep in mind that these solutions can be brought to bear in combination, so that all four may come into play in order to bridge the gap for any particular loan scenario. Private money is flexible and creative and for this reason often takes up where the other options leave off. (In these moments, it tends to tap dance away from the competition.) I have often said that if the banks ever acquire imaginations, we will be out of business, but in fact I’m not worried about it because it isn’t going to happen.  The banks are not interested in creative problem solving because it requires too much special handling.  The banks prefer to batch process the plain vanilla loans–the kinds of loans where the whole story can be fit into a sequence of boxes–and then leave the loans which must be custom built, one by one, to people like us. So, come join us for some loan building and some creative problem solving.  It is not only lucrative, but it is fun.

– Clay (clay@privatemoneysource.com, 503-476-2909)
Clay is Vice President of Fairfield Financial, a primary source for private money since 1964.  Fairfield is currently targeting loans in OR, WA, AK, CA, CO, ID, FL, GA, ID, MT, NV, NY, OK and TX.  To submit a loan to Fairfield for consideration: http://www.privatemoneysource.com/loanproposal.php

Bridging the Gap

July 16th, 2019

Clay Sparkman

One of the most notable advantages of using private money to source your borrower’s projects is that it allows for creative problem solving due to the flexible nature of the beast.  In particular, there are a number of ways that one can often make a private money transaction work, on any given project, even when the LTV initially appears to be too high. And as you likely know, that is all too frequently the case. Here are some of the loan-hacks that we may use to get around that problem:

  • We are able to base LTV on the true value of a property (as opposed to purchase price); frequently our savvy commercial investors are able to buy under value and thus this makes a significant difference when establishing true LTV.  (The caveat here is that the borrower must be able to make a case to support the alleged higher value. This need not be formal, only well organized, clear, and logical.)
  • We are able to base LTV on the projected value of a property when rehab or construction is involved. (Money well be held in a trust account and disbursed as the project is completed, ensuring that the LTV never gets wonky.)
  • We will allow a seller carry back in second position when a buyer is able to negotiate this type of arrangement to his/her advantage. With a cooperative seller, this may make up the majority of a borrower’s down payment.
  • We will allow a borrower to pledge other real estate assets as additional collateral to make up for a shortfall in LTV on the primary project. (And we will build in release clauses allowing for the release of additional collateral properties prior to the completion of the project.)
  • And ultimately, one of our most effective tools for bridging the gap when the LTV ratio is running too high is to carry some or all of our fee (either to be paid monthly or to be paid in one lump sum at the completion of the project. My father has often said that the difference between being able to do a loan and not being able to do a loan is generally our fee. And there was a time when that was too often the case. Well, we at Fairfield have made a conscious policy decision to ensure that this never happens again. Based on the premise that a dollar tomorrow is better than no dollars today, we have decided to carry the necessary portion of our fee (as a small second) any time that this is necessary to make an otherwise good loan fit our LTV criteria. This is no small thing, as our fee generally runs in the range of 3-5% (depending on various aspects of the loan, including size, location, degree of difficulty, risk factors, and speed of closing, among others), and originating brokers (when involved in a transaction) generally charge somewhere around 1% for their part in the loan. Thus, combined fees may run as high as 6%. (I never claimed that private money was cheap; I said that it is fast and flexible.) Hence, with broker cooperation, we are able to reduce, for example, 71% LTV exposure on the main loan to 65% LTV, and this will frequently bring it to within a workable range of exposure.

Bottom line: Private money gives us flexibility in many situations where more conservative loan sources cannot. And with our commitment to making good loans come together, we are willing to work with brokers and borrowers to utilize the full range of this flexibility.

Give us a try.

— Clay (clay@privatemoneysource.com, 503-476-2909)

Clay is Vice President of Fairfield Financial, a primary source for private money since 1964.  Fairfield is currently targeting loans in OR, WA, CO, ID, MT, and NV. To submit a loan to Fairfield for consideration: http://www.privatemoneysource.com/loanproposal.php

Private money FAQ

June 12th, 2019

Clay Sparkman

I like to post our general FAQ from time to time.

Private money is often misunderstood. Many industry professionals know very little about it, and fallacies and misconceptions tend to dominate the collective wisdom. I have made it my mission to try to educate professionals regarding the realities of private money. In this capacity, I spend a lot of time answering questions about private money. I figured it was about time to prepare a FAQ on private money and share it with this group. So here you go.

-What is private money used for?
Private money is generally used as a bridge: a way to get from point A to point B. It is generally a short to medium term solution (1-3 years), and there is nearly always an exit strategy going in. It is used for all types of real estate secured financing: commercial retail, restaurants, hotels/motels, marinas, elder care facilities, industrial, agricultural, raw land, land development, construction, rehab, multi-family, single family homes, manufactured homes, and floating homes. For a list of our private money loan programs, click here.

-What are the interest rates?
Private money rates generally range from 8 to 13% (typically 11%). The rate is determined by looking at a combination of factors: (a) LTV ratio, (b) strength of borrower, (c) condition/desirability of property, (d) actual cash-in or real equity contributed by borrower. A list of our loan guidelines may be found here.
-What fees are involved?

We charge a loan fee which varies depending on the particulars of the loan between 3-5% of the gross amount of the loan. We also charge a doc prep fee ($675 or more, depending on the size of the loan), a property inspection fee ($500 or more, depending on the location of the property), and a collection account setup fee ($470 or more, depending on the size of the loan). That is all the charges you will ever see. We have no hidden junk fees.

-Can the fees be paid from the proceeds of the loan?
Yes, if there is enough equity in the project. This is generally the case.

-Is there a pre-payment penalty?
Most of our loans have no pre-payment penalty.

-Why would anyone pay those kinds of rates and fees for a loan?
There are many reasons why a borrower would choose to use private money over a cheaper institutional option. For example, professional real estate investors like to use private money when buying because they are able to make offers which are not constrained by long timelines and numerous rigid conditions. Often times speed is a very significant factor in completing a profitable transaction and in those cases it often makes sense to pay for a short-term private money option rather than loose the deal. Frequently the condition of a property won’t allow for the initial financing with conventional money, and in those cases private money may be used. Often the type of property is a factor: banks don’t like lending on raw land and lots, but private money lenders are more inclined to do so. Cash leverage is another factor. Fairfield Financial, for example, loans based on the true value of a property, not the purchase price, so sometimes we lend most of the acquisition cost for a property.. The structure of the deal may be a factor. Most private money lenders allow the buyer to establish their equity through the mechanism of a seller carry back; banks won’t do this. The list goes on and on.

-What is the most common use for private money?
Our most common loans are probably construction, rehab, and land development loans. We have an entire FAQ devoted to such loans at: http://www.privatemoneysource.com/articles/rehabfaq.php

-How fast can private money loans close?
We have been known to close loans in a matter of a few days, but more typically, you should figure on 10-15 business days. (Keep in mind that it is only possible for us to move quickly if the borrower, broker and other third parties are moving quickly as well.)

-is an appraisal required?
Some private money lenders require them. We don’t. Evidence of value is a critical part of the private money loan process. However, it is our opinion that a good set of comps is just as effective in establishing value as a good appraisal. Many of our borrowers are professional investors, and we feel that they are qualified to perform the value analysis. This allows us to streamline the process. However, it is important to note that putting together a god set of comps is hard work. See the following article on our website for a detailed description of how to prepare a proper value analysis: http://www.privatemoneysource.com/articles/comps.php

-As a mainstream mortgage broker, I don’t see much of this type of thing. Why should I be interested in private money?
To be perfectly frank, it is my belief that mainstream mortgage brokers are gradually being squeezed out of the industry. Lenders are ramping up their operations to better provide online loan sourcing directly to borrowers. We saw a similar thing in the travel industry. The travel agents that have survived, and even thrived, are the ones who effectively established niches within the industry. It is my belief that the same will ultimately be true for mortgage brokers. Plain vanilla loans can be easily processed in an assembly line fashion which easily translates to the world of the novice and a web browser. Niche lending, on the other hand, tends to be a hand-crafting of sorts, and cannot be easily automated. Look at private money. There are no absolute rules. Many factors must be considered in making a decision and frequently those factors are intangible. Ultimately a high degree of thought work and common sense is involved. Private money will always be a people process. At the very least, it allows you to broaden your offerings and make yourself more attractive to borrowers who may need different kinds of lending. So, if you tell me, I am not interested in private money because I don’t do unusual loans, I say to you, you might want to reconsider.

-As a mortgage broker bringing you this transaction, how do I get paid?
It is simple. You bring us a borrower. We price the loan to you. (Think of yourself as a wholesale buyer.) You price the loan to your client, adding your fees as appropriate. You stay involved in the loan (or not) as you choose, and prior to closing, you submit a fee demand to escrow and receive a check directly from the title company. For more information on this topic, see: http://www.privatemoneysource.com/brokers.php

-Why do they call it hard money?
It is difficult to find an answer to this question. I’ve heard plenty of speculation. Some people say that it’s because the money is used for hard to do loans. Others say it is because the loans are hard to get or hard to pay. It is my belief that it is called hard money because traditionally it has been real money in the sense that it is not borrowed. Institutions loan borrowed money, and in this sense, they loan soft money. However, I must point out that things have changed a bit over the years, and these days a good deal of hard money is in fact borrowed.

-How do I go about doing a private money loan with Fairfield Financial?
There are basically seven steps.
(1) First, run the concept by us. The best way to get started is to provide us with a high-level summary of the loan. You may e-mail a summary, or you may use our online submission engine, which will walk you through the process. It is quite simple to use. You will find that at: http://www.privatemoneysource.com/loanproposal.php

(2) If we like the project concept and feel that the numbers are acceptable, we provide you with a rough quote.

(3) Once you approve the rough quote, we provide you with a list of items that we need to receive and review in packet form.
(4) We then review this loan packet. We ask that this be sent via overnight mail or send via e-email, as a single Adobe or Word attachment.
(5) If all this checks out we ask the borrower for a deposit (average amount = $1,000). This should be in the form of a cashier’s check or money order. We provide a conditional loan commitment letter at this time, and the deposit is fully refundable (as described below).
(6) We send someone out to inspect the property.
(7) If the property checks out, we draw up the documents and close the loan through escrow.

-Is the deposit check refundable?
If we close the loan through escrow, the deposit is applied as a credit to the loan fees. If we don’t close the loan because (a) the borrower does not or cannot perform or (b) the project upon inspection is “significantly” different than as represented, we keep the deposit to reimburse us for our costs. Otherwise, if Fairfield fails to perform for any reason, we return the deposit to the borrower.

-What needs to be included in a private money loan package?
As I said, we provide a list specific to your loan scenario. However, if for a list of our general packaging guidelines, please see the following: http://www.privatemoneysource.com/packaging.php

– Clay (clay@privatemoneysource.com, 503-476-2909)

Clay is Vice President of Fairfield Financial, a primary source for private money since 1964.  Fairfield is currently targeting loans in OR, WA, CO, ID, ID, MT, and NV.  To submit a loan to Fairfield for consideration: http://www.privatemoneysource.com/loanproposal.php

Traversing the private money path

June 6th, 2019

The following is a re-post of a good article in The Scotsman Money Guide (2016), providing a road map through the private-lending landscape, for brokers and borrowers:


By the way, if you do not already use The Scotsman Money Guide (either the online or paper version), I highly recommend it as an excellent guide to various lender resources. They do a nice job of helping you find lenders that meet your specific needs and criteria.

If you would like to discuss private money loans further or run a particular scenario by us, contact Clay via e-mail at clay@privatemoneysource.com. Otherwise, if you would like to get a better feel for our company and the types of programs we do, please browse our web site at http://www.privatemoneysource.com.

Clay Sparkman

– Clay (clay@privatemoneysource.com, 503-476-2909)
Clay is Vice President of Fairfield Financial, a primary source for private money since 1964. Fairfield is currently targeting loans in OR, WA, AK, CA, CO, ID, FL, GA, ID, MT, NV, NY, OK and TX. To submit a loan to Fairfield for consideration: http://www.privatemoneysource.com/loanproposal.php