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Which costs are potentially negotiable in closing costs

Asked by Trulia, San Francisco, CA Sat Mar 3, 2012

Are there negotiable and non-negotiable closing costs?

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Steve Boucher’s answer
Closing costs are one of the more confusing topics in the transaction. The term can be used to describe a lot of different items. Is it lender closing costs or prepaid items or both? To answer this question in detail would take a half hour phone call to discuss each closing cost and explain how you can shop etc

I do agree with Danielle that to simply answer no they are not negotiable is confusing to the consumer.

Lets look at title insurance for example. Some attorneys charge 2.75 per thousand for lenders and others 2.50. Some offer a 10% discount to first time home buyers on owners title. Some attorneys charge $895 settlement fee and others charge a $595 settlement fee. As a mortgage consultant we can select the closing attorney for the bank which means we do have a say in negotiating fees. You can also choose to waive owners title insurance as that is optional but we are still required to disclose it. I have seen some estimates from out of state lenders that have not disclosed it though so you have to be careful with estimates as Andrew states.

fees might not be negotiable but you can still shop for the best deal. As a mortgage banker we are allowed to credit funds back to the consumer for anything over our target pricing. Recently I locked a client into a VA loan at 3.75% with no closing costs. The other quote he was looking at was 3.875% with 6 grand closing costs.

So you can still shop around for the best deal!!
2 votes Thank Flag Link Sun Mar 4, 2012
The reality is if the loan officer negotiates fees you should run away from them, the fees that are negotiable are clearly indicated on the Good faith.

I think the average person reading this thread would think that closing costs are negotiable at the loan officer/lender level.

The truth is always in between. Consumers need to shop, but they need to focus on the correct things to shop for...the lowest rate fee combination could backfire...in a big way!
1 vote Thank Flag Link Sat Mar 3, 2012
Andrew, I agree with you on some things - especially that the consumer should be factoring in the loan officer and their service to the equation as well. I always advise my client to work with local lenders and a loan officer who can meet you in person to sign paperwork, not someone who answers an 800 number across the country. I should have mentioned that in my post.

However, as you state, it is true that some lenders have higher fees. If all else is comparable - personality and rate - why not save those dollars?

This is a staff question, but I am answering as if it was a consumer or a client asking me personally. So, I agree the technical answer is No. However, I'm assuming from a buyer standpoint they may not understand the term "closing costs" completely. The truth is that they can shop around for all these variables and if someone was to see this post and read its non-negotiable they may not opt to do that. In the end, I feel like I'd be doing my clients a dis-service to give a flat out No to this question which is why I answered like I did.
1 vote Thank Flag Link Sat Mar 3, 2012
Danielle,

The well informed customer has lost with the new legislation and will only continue to lose as the remaining 75% of the act gets implimented. At the end of the day who do you think is going to pay for that huge settlement that was just agreed too?

The lender sets the fees and they are not negotiable and the loan officer cannot discount those fees legally.

Different lenders may have different costs but the reality is if you find a big discreptency between fees you need to ask why.

Way too often people shopping for loans choose to focus on lowest rates and fees rather than shop for a loan officer. You find a good loan officer you will end up with a much better experience and very likely the same deal you would have gotten chasing the lowest rate/fee offer that you could find.


No magic loans, no magic rates and Nobody works for free!
1 vote Thank Flag Link Sat Mar 3, 2012
As others mention below, the Dodd-Frank Wall Street Reform was a major statute that created a more even playing field for consumers securing a real estate loan (and many other financial services). Due to this I noticed many are ansewring NO, costs are not negotiable.

However, my answer however is YES. Why? Because, there are still some misc. items you can shop around for that contribute towards "closing costs". Ask the mortgage broker to take you through the GFE (which you should receive a few days after applying) and point out each line explaining what the fee is, where it comes from, and if its something that is fixed by their company, fixed by regulation, or an item that can be shopped around for. If you are shopping between lenders themselves compare the GFEs. More than likely, the GFE you get from one lender will differ from the GFE from another and here is why:

1) Legal fees - sometimes you can avoid paying additional attorney fees by having your lawyer represent you and then work as the closing agent for the bank. Additionally, the closing agent has the ability to lower the fee they charge the bank and thus change this line on the HUD.
2) Appraisal, Credit, and administrative/underwriting fees - ask your contact if they are able to give you any kind of credit towards these expenses.

Ask them! It can't hurt to ask.

Taxes, and recording fees are obviously set by the town you are buying in and are non-negotiable.

I've added a link to the Wikipedia, which provides a great overview of potential line by line costs you may see on your GFE/HUD. It's a resource I use for my clients as well.

Best of luck!
1 vote Thank Flag Link Sat Mar 3, 2012
The actual costs are not negotiable. Every loan officer has the ability to increase or decrease the interest rate you choose which will impact the cash you need to pay out of pocket, but it does not change the fees associated with closing a loan.

Prior to Frank Dodd a loan officer had the ability to absorb costs and pay those costs out of their commission split. That is no longer legal for a loan officer to do.
1 vote Thank Flag Link Sat Mar 3, 2012
I suppose it depends on what you mean by negotiable. Different lenders handle things differently and you have a right to see the breakout of all your costs and you can compare them with other packages.

So ... it may not actually be a cost that you are negotiating, but a specific service or item in a package.

Title search, title insurance, courier fees ... etc. etc. While costs are not actually negotiable ... perhaps you are wondering what parts of whole list of items billed to closing are optional versus mandatory?
1 vote Thank Flag Link Sat Mar 3, 2012
I think the question is tough because my subsequent response would be that every mortgage company has different programs to fit your specific application. One company may offer a higher rate but has low closing costs. Another mortgage company I work closely with has a program that keeps the current rates, but pays for ALL application fees, lender title costs, credit fees, attorney fees, recording fees, etc etc!! Very unusual for that kind of program these days, but they do exist! Shop around after you get recommendations from your trusted Realtor!
Web Reference: http://www.MAhome.com
1 vote Thank Flag Link Sat Mar 3, 2012
They aren't. There are some ways to get the seller to pay for some of those, but essentially that's still coming out of your pocket as it is factored into the purchase price at initial negotiation.
1 vote Thank Flag Link Sat Mar 3, 2012
The side effect of Frank Dodd...Closing costs are really not negotiable anymore. they may be different between lenders but individual loan officers no longer have the ability to absorb costs for the consumer.
1 vote Thank Flag Link Sat Mar 3, 2012
Curious why you would choose to work with an attorney that didn't offer all your clients the best value and terms?
0 votes Thank Flag Link Sun Mar 4, 2012
Work with your buyer agent and mortgage officer. If not using a buyer agent give me a call.

thanks,
Kenzo

617-233-9651
0 votes Thank Flag Link Sat Mar 3, 2012
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