Once the valuation report is received the next step is for you to forward it to the private mortgage lender, along with the signed term sheet as your loan proposal. The number of documents and searches you should send depend upon the circumstances. One way to keep it slim while also providing all your searches and other supporting documents is to upload the documents to a Dropbox or Google Drive and then hyperlink to them from a covering email.

The more comprehensive the information you provide the less work the lender has to do, and the more confident they will be in you as a broker and in the loan. Then it is time for the lender to do their own due diligence. Like you, their focus will be on:

  1. the scenario, with particular emphasis on its veracity and the viability of the proposed exit strategy, and

  2. the value of the security offered.

A private loan is not subject to the same loan underwriting as a fully documented bank loan, however if the borrower claims their turnover is $3M then it is legitimate for the lender to ask for a copy of the borrower’s ATO Integrated Client Account Statement for the last 12 months. That is not onerous, but it will validate their claim.

The gold standard of due diligence on the valuation report is for the lender to personally inspect the property, and drive by the comparable sales, and speak to the local real estate agents. The astute investor will rarely dispense with this step. Valuers are often in a hurry and lack knowledge of local nuances. Local real estate agents on the other hand are very knowledgeable about their neck of the woods. If the investor talks to them, and inspects the security, and visits the comparable sales relied upon by the valuer, they invariably come away with a solid appreciation of the property’s current market value.

Do not try to dissuad