In what situation would one typically obtain a hard money loan?

Obtaining a hard money loan is most commonly associated with properties in foreclosure. Hard money loans are asset-based loans secured by real estate, and they are usually provided by private lenders rather than traditional financial institutions. This type of loan is often sought after in situations requiring quick financing, such as purchasing distressed properties that may require immediate action, like a foreclosure.

In a foreclosure context, buyers may need rapid funding to secure the property before it is sold at auction or to negotiate directly with the homeowner in a short sale. Hard money loans can be closed quickly, making them an ideal solution for investors or buyers who need to act fast. Additionally, because these loans are often based on the value of the property rather than the borrower’s creditworthiness, they are appealing in situations where traditional financing might be difficult to secure due to the property's condition or the buyer’s financial situation.

While hard money loans can be used in various contexts, such as new construction projects or investing in long-term properties, their unique features are particularly advantageous in fast-moving situations like foreclosures, where time is of the essence.