We run extensive background checks, criminal checks, bad actor checks, and reference checks on sponsors. In addition to never allowing a sponsor with a criminal history / any securities related issue to use the platform, we may also turn down sponsors due to poor reference checks even if background and criminal checks come back clear.
We require unaffiliated sponsors to use an unaffiliated third-party escrow agent. When an investor makes an investment with unaffiliated sponsors using the RealtyMogul platform, the investor’s money is transferred directly into a third-party escrow account. All closing conditions in connection with a sponsor’s offering need to be met before the third-party escrow agent will approve releasing investor funds to the issuer or general partner. For example, if an issuer or general partner plans to use funds for a real estate acquisition that does not ultimately transact, the third-party escrow agent will not transfer investor funds to the issuer or general partner, and funds will be returned to investors.
Our controls include visiting every property (or a subset of properties if it’s a fund) to confirm the real estate is what and where the real estate is supposed to be.
We have robust quality controls with detailed checklists and a review of third-party reports.
- Forward-Looking Statements: Investors should not rely on any forward-looking statements made regarding this opportunity, because such statements are inherently uncertain and involve risks. We use words such as “anticipated”, “projected”, “forecasted”, “estimated”, “prospective”, “believes”, “expects”, “plans”, “future”, “intends”, “should”, “can”, “could”, “might”, “potential”, “continue”, “may”, “will”, and similar expressions to identify these forward-looking statements.
- Market Risk: Investments related to mortgages secured by real estate are subject to market valuation risks that may be caused by changing economic and local market conditions. The property underlying the corresponding borrower loan is expected to have reasonably acceptable loan-to-value ratios and to meet certain other valuation criteria, but estimated values made when the loan is originated may not fully represent current market values, and subsequent market values will in particular be affected by changing economic or local market conditions. Such conditions are beyond the control of Realty Mogul and of the corresponding borrower on this loan. Such conditions may change due to factors such as local real estate market conditions, prevailing interest rates, the rate of unemployment, the level of consumer confidence, the value of the U.S. dollar, energy prices, changes in consumer spending, the number of personal bankruptcies, disruptions in the credit markets and other factors.
- Credit Risk: The borrower loan is being made with respect to a property that is in need of repairs, a situation that does not generally meet the financing criteria for conventional mortgages from institutional sources. Credit risk is inherent in the mortgage lending industry, and there can be no assurance that the credit worthiness of the borrower will be sufficient to assure the full repayment of the underlying borrower loan.
- Insurance Risk: The borrower will maintain insurance of the kind that is customarily obtained for similar properties, but is not expected to carry certain disaster-type insurance (covering events of a catastrophic nature, such as earthquakes). In the event that an uninsured disaster should occur to the real property underlying the corresponding borrower loan, or in the event a borrower does not maintain the required insurance and a loss occurs, Realty Mogul could experience difficulty recovering the principal amount of the corresponding borrower loan and any interest due thereon.
- Borrower payment dependent note structure: Investors are purchasing borrower payment dependent notes issued by Realty Mogul, Co., which are tied to the performance of an underlying borrower loan secured by real property. The notes are special, limited obligations of Realty Mogul, Co. that pay only if, as, and to the extent payments are received on the underlying borrower loan. The notes are not secured by any collateral, including without limitation the assets of the borrower, or guaranteed or insured by any third party.
- There is a limited guarantee on the underlying borrower loan.
- The security interest for the underlying borrower loan is a mortgage deed.
- The underlying borrower loan is protected by title insurance.
- The underlying property is protected by hazard insurance.
- Investor returns are not contingent on the appreciation of the property value and investor returns do not increase based on any resale price. The borrower is still obligated to repay the corresponding borrower loan.
*The above is not intended to be a full discussion of all the risks of this investment.