One of the most unnerving parts of obtaining a hard money loan is determining a fire sale value of the real estate being used as collateral in the loan. Typically a Letter of Intent indicates that a loan is offered by the hard money lender, pending the outcome of due diligence in the amount not to exceed a specific LTV of our opinion of the appraised value.
 
How can you know what your property value will considered to be?

Street value of real property is the value that the property will sell for today, not the appraised value. If you have a recent written appraisal, you can use that as a starting point for valueing your property. By simply reducing it by a reasonable percentage, you might assume what the property would sell for in a quick sale scenario.

To get a better idea of its street value, contact a respected local commercial real estate agent.  Ask what you could expect to get for your property if you needed to sell it with the next 3-4 months. Ask to see what has sold recently in your area that is similar to your property. If there are no similar properties close by, look farther away and look at closer properties that are not similar.

Now is not the time to be choosy; now is the time to be pragmatic because that is what the hard money lender’s appraiser is going to be. Make a reasonable determination of what your property will fetch and you will have less concerns over whether your loan request could be funded. There is no sense in paying a down payment for the costs of due diligence if the money is merely squandered to learn that your property’s quick sale value is insufficient to support your loan request. A little due diligence on your part will strengthen your transaction and give you quality information regarding your position.