Home Selling in 90706>Question Details

Gary C., Home Seller in Acton, CA

After offering to pay all closing costs, is it reasonable for my buyer's loan agent to present a bill for $13,497 for underwriting a $348K FHA

Asked by Gary C., Acton, CA Fri Dec 31, 2010

loan? I'm selling my family home in Bellflower 90706. I'm not in a hurry. I recently received an offer that asked for a bit too much back in costs, so I countered. I offered to pay ALL closing, costs both seller and buyer (Chicago Title - $4830.), termite and home inspections, appraisal, and transfer taxes. When speaking with two different mortgage companies yesterday, using my buyer's credit scores, they both offered to write the 4.75% 30yr FHA loan for ~$1300 appraisal. So I also offered to pay $2k toward the loan. The buyer's loan agent just sent me her good faith estimate of $13,497 for origination, funding, taxes, and insurance for the loan. Even if I gave the buyer $10K more, he'd still owe more than he has in the bank. Is it reasonable to ask the buyer to find another lender? His choice is going to ruin the deal. And yes, $7K IS the difference... between this deal working or going south. Would you tell the buyer that he's being overcharged if YOU were his realtor?

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Gary - here's the problem. You agreed to pay ALL closing cost plus another $2,000. Why? You should have agreed to a specific dollar amount. Now you may have created a run away train. Speak with your Realtor on exactly what you agreed to and make sure it was put in writing.

I'm confused on why you are calling lenders on your buyers scores. Also, there are more rquirements to getting a loan than just a FICO scores. If you have questions on your buyers qualifying please speak to your Realtor.

If you weren't in a hurry to sell, why have you agreed to so much. If you have signed a contract to pay ALL closing cost and it turns out to be more than you thought, that is not the buyers problem and you may be bound to pay more than you thought. I'm sorry to sound so harsh but your situation may turn out to be a big headache. Some are mentioning seeking a lawyer - Oh my - then you have more cost. My suggestion - speak with your Realtor. Know all the facts, then let your Realtor help with the situation.

I tell everyone - know what you are signing/agreeing to!!!!

If I can be of further assistance, please call me at (661) 255-3335.

Cheryl Garner, Mortgage Expert
Fairview Mortgage Capital, Inc.
Email: cheryl@cherylgarner.com
Web Reference: http://www.cherylgarner.com
1 vote Thank Flag Link Sat Jan 1, 2011
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0 votes Thank Flag Link Fri Jul 24, 2015
The buyer neither has all the cards, nor am I paying ALL his closing costs indiscriminately. Let me clarify to some who may have misread my previous statements. Nothing changed. I offered to pay a very well defined set of closing costs based on hard numbers that included both the buyer's and seller's escrow, title insurance, transfer tax, appraisal, home and termite inspection. Not "normal?" Unorthodox? Also very cost effective. I also select the people for those jobs and that means I they are working for me, not the buyer. I gave up zero control of those items.

Second, I offered to pay a defined amount toward the buyer's loan origination, a set dollar figure, based on estimates obtained from FOUR mortgage lenders, using the information the buyer provided. If he didn't tell the whole truth on the information he provided, that is not my problem. The buyer is free to choose any loan product, just not at my expense. If he can work with what is written into the deal, great.

Based on the reaction here to the loan specifics, I offered to pay some but not nearly all of those fees. Again, it was a set dollar figure, not a blank check. And the BUYER is left to decide how much he wants that particular loan. The excess is out of his pocket, not the net.

Doing the math, I offered to pay a grand total 2.08% of the purchase price. That is the contract I offered. The deadline is the close of business today.
0 votes Thank Flag Link Tue Jan 4, 2011
Gary,

Indeed the credit given should have been capped, but the rest of the story is that FHA loans cost more than conventional ones - at least when you total up all closing costs.and here is why:

FHA loans mandate that the buyer develop and maintain an impound account. Remember that with any home purchase, part of the closing costs are 12 months worth of insurance upfront - but an impound account (dependent on the time of the year) as for 2 months of additional insurance and anywhere from 0 to 9 months of taxes upfront. With 6 months of taxes and a couple months of insurance, that could easily add about $2400 to the closing costs.

How can you save money? First check on the points. Unless the borrower could not qualify at a higher rate of interest, there should be no need to pay points. Ask about a zero point loan - that could save an additional $3480 off the top.

But given all of the above, most closing costs on any loan will run $7k to $10k or so dependent on points, interest due, impounds and so on. Title is a large part of that.

If the buyer does not have any money at all or little still, it may be adviseable to go with a higher rate and ask for zero points and a credit from the lender. Keep in mind this can only be done with a much higher rate - but that is an option as well.

Best of luck --
0 votes Thank Flag Link Tue Jan 4, 2011
So you had numbers and you agreed to it? You offered it, they accepted it, so you have to pay it. It should've been capped . Period. I don't know all the details, but if I had been the Buyer's agent, I would've been ecstatic to get such a deal. My guess is you'll be able to negotiate at this time, but as far I can tell, the Buyer is holding all the cards.

FYI, in most cases real estate agents and mortgage brokers are completely separate. RE agents have nothing to say about the commissions the mortgage broker charges.

Gary, we are feeling for you. Keep us posted on how you resolve this.
0 votes Thank Flag Link Sat Jan 1, 2011
Gary, The buyer's agent represents the buyer and if the buyer does not have to pay from his pocket and the seller is paying closing costs he may not tell him it is too much. However lenders allow only a certain percentage of sale price and only for certain things. If the item is not covered , the agent may tell the buyer if he thinks he is being overcharged. Buyers usually talk to more than one lender .
Depending on your state laws, d id you get an attorney review of the contract? When a seller offers to pay allowable closing costs they mention the percentage and maximum that they will pay and do not give a blank check.
Go to http://www.hud.gov and you will be able to read about closing costs and what is allowed.
Web Reference: http://www.gitabantwal.com
0 votes Thank Flag Link Sat Jan 1, 2011
Gary the 1% rate buy down should be on the buyer. The reinspection fee may go away. As for the 1% buy down be glad they stopped at a 1% fee for a rate buy down and did not try to buy the interest rate down lower they could have went crazy with a blank check in the contract.

Reinspection fees are becoming more normal in my area with FHA loans due to the lenders going through appraisal management companies. Any condition that can be spotted as an FHA issue the appraiser can call for a reinspection as a condition and get a little more pay as most have seen a 35-40% reduction (fee to the management company) in what they get paid for doing an appraisal.
0 votes Thank Flag Link Sat Jan 1, 2011
Thanks again for all your replies. The conversation answered many of my questions, the least of which was the reluctance of agents to criticize the commissions of another.

Armed with hard numbers for title, escrow, inspections, reports, warranty, appraisal, and realistic loan fees provided by 4 different lenders, I countered offering to pay all closing costs, both buyer's and seller's. It will either get the message across or put an end to a rather weird negotiation at the Christmas low ball price and let us all move on to a more prosperous Happy New Year.
0 votes Thank Flag Link Sat Jan 1, 2011
Gary, from what I see, those fees are not unusual. The question is which of those you expected to pay, and that should've been spelled out by someone at some point. To answer your question, I would not counsel my client to shop further because I don't think it's going to be much different anywhere else. FHA loans are known to be quite expensive upfront. Plus, if the Seller accepted it, it's in the contract.

I think the reason many agents are talking about the Seller's agent so much is that we are confused why you are even considering this particular offer if it is putting it outside your comfort zone. So instead of accepting the fixed amount they asked back in costs, you are offering to pay an unknown amount. And it seems there are more than one offer and this is the best one you got? We just don't have all the details, and it seems to us you are considering a deal that you don't like at all.

If you haven't signed anything yet, you aren't "walking" from the sale. You are just not accepting it. So it's up to you, whether you want to counter or just not accept.
0 votes Thank Flag Link Fri Dec 31, 2010
Dyanna made some excellent points regarding your loan costs. I usually tell my buyers to expect about 3 to 4% in closing costs. I am surprised your agent didn't put a cap in there on what you would pay. As an agent I would always suggest that a buyer get a second opinion. Sounds like the buyer (or their agent) is pretty savvy in including the buy down - that is not a set loan cost but an option for the buyer to elect.
0 votes Thank Flag Link Fri Dec 31, 2010
Gary you seem angry that no one gave you the answer you wanted. We are all on this site to help and give our advice. If you are being "represented by an agent who both listens well and is actively negotiating the deal", then you wouldn't be on this site asking us questions. So let ME be blunt... as an agent I would not tell the buyer he is being overcharged by the lender if his fees were at 3% of the purchase price, in this case it would be $10,440. Therefore there are some fees on here that I as a BUYERS AGENT would ask to be lower on behalf of my buyer and those fees are 1% buy down of interest rate. If the buyer wants to buy down his rate, then he should pay out of pocket for it. Now you agreed to pay for his closing costs, your closing costs are obviously going to be paid by you. Also, the buyer usually pays for his own home inspection but your "agent who both listens well and is actively negotiating the deal" SHOULD have known that and protected your interests better. It’s as simple as this, pay for the buyers closing costs as you had agreed to or cancel the deal, you're not in a hurry anyway!

Dyanna
You can reach me directly at
dyannaavila@hotmail.com
0 votes Thank Flag Link Fri Dec 31, 2010
Phil and others, thanks for the replies. I promise to be fully aware of any contract I sign. Right now, today, all offers have expired.

This is a breakdown of this lender's fees directly from the loan officer.

1% origination
1% buy down of interest rate(subject to change depending on market)
595 processing
450 underwriting
455 funding fee
150 CIR appraisal fee(in case appraiser needs to reinspect property)
20 credit
700 15 days interest(approx)
700 12 mos insurance
175 3 month impound ins
3,267 9 month impound taxes

Sally, we are doing exactly as you recommend. I'm represented by an agent who both listens well and is actively negotiating the deal. I have also found a good local escrow officer and have solid estimates of the costs associated with the transaction. We are currently addressing what appear to me to be buyer's usurious lender's fees.

Emily, my agent and I have made a couple of counters that were both reasonable and crystal clear. Demanding more from me in order to pay for the dubious list of lender's fees above is going to wreck the deal. I'm sure that buyers have asked you for many things, some were reasonable and others, less so, but as a seller I shouldn't need to restate the obvious. I always have the option of saying no. Just because there is an ongoing negotiation, there is no mandate that we meet on the middle ground.

Lynn, educate me. You're saying that these fees are set and I must pay them? I think you're wrong. I think a buyer should be able to shop for a better loan.

I've either invested or wasted hours of my and my agent's time in ruminating and negotiating. It's going to be tough to sell me that these fees are reasonable and I should pay them all. It's down to this - he changes lenders or I walk. The difference between this lender's fees and other lenders the difference between an acceptable and unacceptable purchase price.

Let me restate my original question since no one answered it the first time - if YOU were the buyer's agent, would you tell the buyer that he's being overcharged by the lender? More bluntly, is this just a game where, buyer and seller be damned, everyone is protecting everyone else's commissions?
0 votes Thank Flag Link Fri Dec 31, 2010
Your Realtor should have made a Max Percentage in closing costs to be paid out, like 3% max or 4% max. Technically an FHA borrower can ask for up to 6% to go towards closing costs, this is because with FHA there is a Mortgage Funding Fee that is pretty hefty, about 2% of the purchase price, which most FHA borrowers finance into their loan amount vs. paying for it up front or having the seller contribute to paying for it up front.

If you agreed to pay a blanket amount of just "all of the buyers' closing costs", it's my opinion that you're opening yourself up to paying more than necessary.

You really should have a copy of the GFE (Good Faith Estimate) & see what the lender is charging & where the fees are going. You may possibly find that the lender is taking advantage of this & is charging a higher than normal loan origination fee or other junk fees to pad their own pockets.

Your buyer seems to be getting about 3.88% from you to go towards their closing costs. 3% would have been more 'standard' to ask for a credit to the buyer, but I have received offers where buyers are asking for 4%.

Get that GFE, or ask your escrow officer for a HUD settlement statement showing BOTH sides (you may have to get the buyer to approve your receiving a copy of this)

EmilyKnell1@yahoo.com
562-430-3053 cell
Realtor Since 1996
0 votes Thank Flag Link Fri Dec 31, 2010
$13,497 you just answered your own question for fact you can't change any of the following;

Tax
Insurance
Origination
Funding

All these are set fees.

Lynn911 Dallas Realtor & Consultant, Loan Officer, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
972-699-9111
http://www.lynn911.com
0 votes Thank Flag Link Fri Dec 31, 2010
How was the contract written? In Colorado, you have to put in a specific dollar amount for Seller Concessions. Do you have a listing agent representing you? This should have been addressed when the offer was presented to you.
0 votes Thank Flag Link Fri Dec 31, 2010
Good Morning Gary;
I would try; but I would suggest that you advise your agent to contact the buyers agent and see what can be done.
I've been in this position before; but I stipulated on the contract that a Good Faith Estimate of the buyers closing costs be presented with the contract prior to its execution. Then my client (the seller) would know what they were paying for prior to signing the contract.
Web Reference: http://www.321property.com
0 votes Thank Flag Link Fri Dec 31, 2010
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