A Loan We Declined: A Property in Wallsburg, Utah

A loan broker asked us to loan $900,000 toward the purchase of a property located in Wallsburg, Utah.
We learned the property was selling for $1.6 million, a 56% LTV.

This was attractive to us until we found out how the remainder of the purchase was being financed. The additional $700,000 for closing was not being paid in cash by the prospective buyer/borrower, but was to be a note to the seller. In short, the buyer was not putting up any cash.

While the LTV initially looked appealing, the value of an arms-length transaction is always suspect if the buyer is not committing some cash. Our experience is, without the cash commitment, borrowers are more likely to default.

As a result, we passed on the loan.