By Beau Brincefield and John Hartnett
The Northern Virginia REALTOR®
Most REALTORS® have heard the term “creative financing” applied to imaginative new ways to finance real property. It appears, from time to time, that lenders can be equally creative in coming up with imaginative new fees to charge for making financing available.
Everyone is familiar with the customary lender’s fees for appraisals, credit reports, PMI premiums, and loan placement and discount points. NVBR’s Real Estate Finance Committee has compiled a list of some of the less common and more imaginative fees imposed by some lenders:
Document preparation fees ($75-250) are becoming more common, where lenders prepare some of the settlement documents such as the Note and Deed of Trust. Sometimes an additional charge ($50-100) will be imposed if settlement is postponed after the lender has prepared a set of documents. Where the lender does not prepare documents, a fee will sometimes be charged for reviewing documents prepared by others ($50-250). Some lenders recently have begun to assess a settlement fee ($100-200) even though they don’t conduct the settlement.
Some lenders charge an inspection fee ($25-150) and/or a photo fee ($15-35). These inspection and photo fees should not be confused with the final compliance inspection fee ($25-50), which may also be charged.
Some lenders also pass along underwriting fees ($50-100) and/or warehousing fees ($50-100).
Sometimes you may see charges for long distance telephone calls to make credit checks ($1-15) or courier or delivery charges to get documents from there to here and back again ($20-50).
An amortization schedule may cost between $1-5. Quite a few lenders also charge a tax service fee ($28-40).
The creativity which gives rise to these fees is matched only by the imagination needed for deciding who will be asked to pay them. Some lenders, for example, charge the tax service fee to the purchaser/borrower. Other lenders charge it to the seller. The seller could be asked to pay the inspection fee. Sometimes document preparation charges may be assessed against both purchaser and seller.
Although this list is certainly not exhaustive, it does commend itself to the careful agent who wants to know up front what all the fees are going to be – who is going to pay them -in connection with the origination of a loan.
Since the seller is normally not a party to the purchaser’s loan application, agents must take special care to see that the sales contract adequately protects the seller against unexpected lender charges at settlement. The sales contract should specify exactly which lender charges each party will be responsible for paying at settlement and it should state that the seller will not be responsible for paying any other lender charges which are not specified in the contract. Putting nebulous terms in the contract such as -seller will pay customary lender charges (it settlement is a real disservice to the sellers because it exposes them to all kinds of unfair and excessive charges which may not be disclosed to them until settlement and should not be imposed on them at all.
In general, whenever agents undertake to advise or to assist purchasers or sellers with mortgage financing, they must do so in a professional and proper manner. They owe it to both parties to emphasize the importance in getting complete quotes from mortgage lenders when they compare and contract for financing.
Reprinted from The Northern Virginia REALTOR®, March 20, 1985.