UPFRONT FEE?

Hard money loan

Should Commercial Mortgage Brokers Charge Borrower’s an Upfront Fee? This is a hotly debated topic, with many investors, borrower’s, and real estate ‘gurus’ insisting that any upfront fee is a scam. Brokers want to charge a commitment fee to ensure borrowers are serious, and that their work, time and effort is not for naught as the borrower ‘shops’ the loan all over the internet. As a direct lender here is my take on broker upfront fees An upfront fee is justified if any of the following:

1. The broker puts together a ‘professional loan package

2. The broker is instrumental in obtaining financial records for the borrower or the property

3. The loan or property is unique and going to require more time and expertise on the brokers part than a more conventional loan scenario

4. The borrower has been shopping the loan and the broker need a monetary commitment from the borrower before spending his time on the deal We are talking about upfront fees in the $2000 to $5000 range.

*This does not include third party fees for appraisals, title reports, inspections, environmental reports, or surveys. Many borrowers want all fees ‘rolled into the loan’ . This is, of course, not realistic.