Private mortgages are commonly structured on short terms — often around a year — because the situation that brought the borrower to private money in the first place (a closing timeline, a temporary credit or documentation issue, a bridge to another transaction) is itself usually short-term in nature. Matching the term to the actual problem, rather than defaulting to a long amortization-style term, keeps the deal honest about what it's for.
A property can appraise at a strong number and still be genuinely hard to sell quickly — because of location, condition, an unusual layout, zoning complications, or a thin pool of buyers for that specific property type. A private lender who only checks the appraisal number without asking how fast this specific property would actually move is missing the more important question.
Worth weighing directly: how many recent comparable sales exist nearby (a thick market with lots of recent activity signals a faster likely sale than a thin one), whether the property serves a broad range of buyers or a narrow niche, its condition and any deferred maintenance, and any legal or zoning issues that would slow a sale — an unregistered secondary suite, for instance, ties back to the rental-file wrinkles covered in Rental & Investment Property Underwriting.
A shorter term on a highly marketable property is a comfortable combination, because an exit sale, if needed, could realistically happen within the term. A short term on a hard-to-sell property is a much riskier combination, because the fallback plan — sell it — doesn't actually fit inside the timeline. This tension is exactly why marketability, not just value, belongs in the underwriting conversation.
Before agreeing to a term length, a broker should be able to answer: if this property had to be sold within the term, realistically how long would that take in the current local market, and does the term leave enough room for that to happen without forcing a rushed, discounted sale.
Two properties appraise at the identical value. Property A is a standard single-family home in an active suburban market; Property B is a highly customized rural property with few comparable sales nearby. Why might a private lender treat them differently despite the identical appraised value?
Marketability — how quickly and reliably a property could actually sell — is a distinct risk factor from appraised value, and it's arguably more important in equity-driven private lending, where the property is the real fallback. The "appraised value is the only thing that matters" option is the tempting simplification this module exists to correct — two properties worth the same on paper can represent very different real-world risk.
The intro and first module are free to read. Add your name and email once and the rest of this course opens — along with every other course on the site. No card, no trial.
Already unlocked on another device?
