Anyone who has ever applied for a hard money loan knows that the documentation requirements are minimal. Compared to what conventional lenders require, hard money documentation is a walk in the park. And yet, lenders sometimes ask for photos. Why is that?

Salt Lake City’s Actium Partners explains that most hard money loans are used to purchase real estate. That being the case, they also say that some lenders request that photos be included with an application package. Photos help lenders during the approval and underwriting processes.

Collateral Valuation Is Key

Hard money lenders like Actium Partners do not include things like business plans and profit and loss statements in their documentation requirements. They are not interested in such things because approval decisions are made primarily on collateral value. In fact, collateral valuation is the key to hard money lending.

In the case of a property acquisition, the property being acquired is collateral for the loan. It needs to have enough value to satisfy the lender. So of course, the lender will either send one of its own staff members to assess the property or bring in an outside appraiser.

Photos are a tremendous help because they can inform a lender as to whether a loan application is even worth processing. Photos give the lender a glimpse into the current condition of the property. If they clearly demonstrate the property is not worth as much as the seller is asking, going any further with the loan application may not be in the lender’s best interests.

On the other hand, photos showing a property in good condition and with a nice selection of features can be very encouraging to a lender. They can give a lender a reason to keep moving forward.

Photos Can Facilitate Preliminary Approval

Only in rare circumstances would a hard money lender approve a loan deal without having the property properly appraised. But there are occasions on which a borrower is looking for preliminary approval. A strong set of photos could facilitate that approval.

A lender with every reason to believe that photos show a property’s fair value could rely on those photos to offer preliminary approval. Should that happen, completing the underwriting process might even be faster. The lender could start the paperwork even while waiting on the appraiser to do his thing.

Photos of Value-Add Properties

Photos are also helpful when investors are attempting to obtain value-add properties. These are properties the investor doesn’t plan to hold on to for 7-10 years. They can be either fix-and-flip properties or commercial properties the investor intends to hold only long enough to build sufficient equity.

A lender might request photos of such a property in order to better understand how value will be added. Perhaps a particular property needs sufficient renovation. Completing renovations should make the property more valuable. And if it’s not renovations, maybe the buyer is hoping to add amenities, expand the property’s footprint, or rearrange the space.

An investor could do any number of things to add value to a targeted property. Supplying photos helps the lender understand the current condition of the property so it can be compared to the investor’s plans for renovation or rehab.

Whatever the case, investors can help their cause by supplying high resolution photos that show as much detail as possible. They should also take enough photos to cover the entire property – including all interior and exterior spaces. When lenders ask for photos, they do so for a reason. Giving them what they want goes a long way toward making them happy.