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We are looking for a commercial mortgage of approx 25 million dollars. The broker we went to requested 5k up front in order to do some work and get a term sheet. Once the term sheet is issued they need another 300k to start the underwriting process and then get the approval. If we are not approved they get to keep 250k and only 50k is refundable.
Has anyone heard of such a thing. We own quite a bit of property, however we were never asked for upfront money like this. When I asked them why they stated "to know your serious" my reply was "if the 800k down as a deposit is not indication enough that we are serious than I dont know what is"

jameshogg · Posted: Wed Feb 13, 2008 9:28 pm Post subject: RE: commercial mortgage fees

Hi Jmann,

Welcome to forums.

Have you been given a Commercial mortgage fee agreement? This agreement states whether you need to pay non-refundable fees and by how much. So, if you have received the document, please check whether the fees stated there is similar to what the broker is asking for. If it's the same, then I'm afraid, you will have to pay it.

However, I do feel the non-refundable part in your case is a bit high. So, try to negotiate with the broker if in case he minimizes it.

Thanks

ckalvesmaki · Posted: Thu Feb 14, 2008 6:51 am Post subject:

We are looking for a commercial mortgage of approx 25 million dollars. The broker we went to requested 5k up front in order to do some work and get a term sheet....That is not unusual on a commercial deal....most brokers myself included collect something upfront that is non-refundable because commercial takes a lot of work....... Once the term sheet is issued they need another 300k to start the underwriting process and then get the approval. If we are not approved they get to keep 250k and only 50k is refundable. This is a scam.......There isn't a lender out there who will charge that kind of upfront fee......Has anyone heard of such a thing. We own quite a bit of property, however we were never asked for upfront money like this. When I asked them why they stated "to know your serious" my reply was "if the 800k down as a deposit is not indication enough that we are serious than I dont know what is"

I think you need to find a new broker.....in fact I know you need to find a new broker........this one is giving you the run around and chances are the deal will never close......an upfron non-refunadable fee is normal......on a loan amount this size 5-10k is the norm......then the next out of pocket is typically the appraisal AFTER a prelim loan committment has been issued by the lender.

Can you tell us more about the transaction ie type of property being purchased......cash flow etc......What kind of down payment.....

evolovik26 · Posted: Thu Feb 14, 2008 8:58 am Post subject:

completely agree with cedric
this is a scam
The guy just going to take your money and run
get a broker who has experience and is capable

chrisburns · Posted: Thu Feb 14, 2008 2:28 pm Post subject:

DO NOT PAY NON REFUNDABLE UPFRONT FEE'S

Commercial loans are alot of work.. so are residential loans. Some brokers chareg an application fee for residential loans as well, however I would NOT recommend using them.

A broker should only be paid if your loan closes.

The only legitimate fee's should be an upfront processing fee at the time your term sheet is issued. This is for appraisal, title work, and othe processing related fee's. Any unused portions should be credited back to you at closing.

DON'T PAY A BROKER AN UPFRONT FEE

There are too many good brokers that will do the work for you and get paid as they are supposed to, at the closing table.

lisascherzer · Joined: 04 Jan 2008 Posts: 755 1.12 Dollars($)

Jmann,

I agree with the others here that you should not be charged that much as good faith. Actually you shouldn't be charged anything as a good faith other than the deposit you made on the signing of the purchase agreement. However, you will have upfront costs that can be substantial on a commercial property such as appraisal, title, etc. These upfront costs should only be for third party services that will actually be rendered, not as good faith money. These third party fees will only be requested AFTER you are pre-approved. Work with someone that is trustworthy.

ckalvesmaki · Posted: Fri Feb 15, 2008 6:17 am Post subject:

Lisa Chris...

I am going to disagree with you......Having just closed a 50 million dollar resort construction deal......There is an upfront fee.......because there are upfront costs......if you go to a direct commercial lender it can run as high as 1% depending on the type of property and what is needed......is enginerring reports,soil reports, dunn and bradstreet ratings etc.....etc.....and on and on......so once an application has been recieved and reviewed and placed with a lender.....THEN there is an absolute need to have an upfront fee.....to be accounted for at close....but it is non-refunadable because these exspenses have to be paid for.......

chrisburns · Posted: Fri Feb 15, 2008 7:37 am Post subject:

Why do you state you disagree with me and then repost the same exact information I posted.

So I guess you should restate and say that you do agree with me that the only upfront free should be for due dilligence on the part of the lender after acceptance of a legitimate offer from the lender.

The upfront fee's would include appraisal, title, invironemental, and other processing related fee's.

To charge an upfront fee as a broker to the client just for the priveledge of having them review and possibly submit your loan to various lenders is shoddy and unacceptable. I feel bad for your client if you are doing this. Professionals time is always worth money, however we are not in the business of collecting fee's for reviewing documents. We are in teh business of collecting fee's for accomidating the funding of deals. If you can't do that then you should either decline the client or accomodate the financing.

To take a fee upfront should raise a red flag that you are NOT going to be able to accomodate funding for them, and you are trying to mitigate your financial loss by collecting arbitrary fee's from your client.

My advice holds. DO NOT PAY UPFRONT FEE'S TO BROKERS on commercial projects.

YES there are fee's. But they should be dictated by the lender in their letter of interest or commitment to you the client, spelled out in details as to what they will apply to, and you should be able to collect any unused portion of your fee at closing.

I Too have funded large construction projects such as a Sheritan Hotel in excess of $25M. I did not collect an upfront broker fee to arrange the financing. The lender DID collect a processing fee at comittment for due dilligence and processing. Anything else is unacceptable.

ckalvesmaki · Posted: Fri Feb 15, 2008 8:12 am Post subject:

I think we are saying the same thing.....maybe in a different way......A cpl of the lenders I work with......Will not order some of the reports needed.....and put that on me as the broker to order and pay for.....some will order it themselves......

So when I say there IS an upfront cost on commercial mortgages.....I am talking about the exspense associated with processing the file....AFTER the initial lender review......because at that point you should know exactly what is needed to get a committment.......So I think it's a case of how you or your company handles those exspenses.....for my company (depending on the lender of course) deposits go into an escrow account and are fully accounted for if we as the broker are handling all of the due dilliagence stuff....if the lender is handling it directly.....then the lender gets the upfront fee's......

So where I disagreed with you is on the flat premise........that there is never a reason to pay a broker up front.....when in fact there are times where it is needed......because not all vendors take CC's etc......and some won't take a check from a consumer.....

So again I think we are saying much the same thing but not the same way.....

charlesarmbruster · Posted: Wed Feb 20, 2008 1:16 pm Post subject:

Find another broker, Dude!

homeandfamilybills · Posted: Tue Feb 26, 2008 4:35 am Post subject: Commercial Mortgage

System detected duplicate content. Changed into image.

larry · Joined: 27 Jun 2007 Posts: 3322 474.67 Dollars($)

Hi homeandfamilybills,

Welcome to the forum.

Good information Smile

. Why Don't you introduce yourself and let the community know about yourself at http://www.mortgagefit.com/introduce-yourself.html

Hope to see in you frequently in the forums.

Best of luck,
Larry

homeandfamilybills · Posted: Fri Mar 14, 2008 4:55 am Post subject:

Hi larry,

Thanks for your suggestion,I have introduce myself here as u suggest me

U can find more information from "http://www.homeandfamilybills.com/commercial-mortgage.php" Very Happy

[Link deactivated as per forum rules. Thanks.]

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