Real Estate Closing Fees – Save Yourself Money

Why You Should Be Concerned About Real Estate Closing Fees…

Real Estate Closing Fees (also known as junk fees) are charges that any money lender charges borrowers in excess of closing points, accrued interest and pre-paid expenses.  These usually include a myriad of “strangely named” charges.  They can be as simple as an Inspection Fee or Document Review or Document Preparation but the issue is how much is charged for these services.

The inspection of the property is important to protect the lender to make sure a structure is even on the property.  A survey is questionable if the property is inside a community or is over 10 years old.  The lender has the right to protect his investment with whatever documents or inspections are necessary.  The question is whether he makes money on non-essential requirements.  I believe I have seen probably 20 different junk fees on HUD Statements under different names.

For example, should the lender charge for document review when he has been using the same documents he has used for years?  Should he be able to markup the cost of a survey or inspection?  The part of these junk fees that becomes onerous is when the junk fees exceed the closing points for the loan.  If you are not careful you could have 3 points in closing fees and 5 – 6 additional points in junk fees.  Unfortunately you may not see these fees until you get to the closing table.

Some hard money lenders charge a “flat-fee” for all the costs that a borrower would normally be charged.  In one case a lender charges $1,195 for the document prep, closing costs, document review and miscellaneous necessary expenses that the borrower would usually pay.  This lender advertises “No Junk Fees” and properly so.  Other lenders advertise seemingly “Lowest Rates” but may charge excessive junk fees.  Don’t be seduced by the lowest interest rate as it may be the most expensive loan in the end!

real estate closing feesAn investor looking for a hard money loan should check several sources and ask the potential lender what additional fees he will be charged.  Don’t take a short answer like “I charge usual and customary fees” but rather ask, “Can you send me a HUD that you closed recently?”  If the lender refuses it’s likely you saved yourself a lot of grief and aggravation.

What if you are a new investor and you can’t find a hard money lender to work with you?  You have two options, pay what it takes to get the money and do the deal or you could also look for a “private lender” (friends or family members) to loan you the money.  When you explain how much you expect to make, you may get asked to split the profit with them but pay them no interest.  Warning, it will always be much less expensive to borrow high-priced money than to do a partnership with a private lender where they get half of the profit!

If you are in Florida, learn more about our  great transactional funding rates here Best Transactional Funding Rates for Florida and see an actual funding example here with closing statements $91K Profit using Transactional Funding.

To your limitless success,

Dave Dinkel

 

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About Dave Dinkel 27 Articles
Dave Dinkel graduated from the University of Florida in 1968 with a BS in Chemical Engineering. He initially worked for a petrochemical research and development company in Illinois. Later he entered the financial arena as a stock and commodity broker with Merrill Lynch.While a stock broker he became a Certified Financial Planner and later started his own brokerage firms and stayed in the financial services industry for 22 years before retiring to pursue his love of real estate investing. After retirement, and because of his interest in business start-ups, he worked with a small company for a few years while driving their sales from under $12,000,000 to over $150,000,000 annually before going back to full-time real estate investing.Dave Dinkel has been a national platform speaker, contributor to local real estate clubs, mentor and consultant to numerous real estate investors and all the while running his own real estate business. Mr. Dinkel received the following degrees or designations: BSChE, FINOP, CFP, MSRP, RSP, RR, ROP, SROP, MGA, GA, Certified Estate Planner, Licensed Mortgage Broker, and Licensed Insurance Agent. He is often referred to as the “Teacher of Teachers” and his Mentoring continues to produce Students who go on to be national real estate "Gurus". .He has been a real estate investor since 1975 and recently received the first-ever Lifetime Achievement Award for Contribution to the Real Estate Investing Community. While being active in real estate investing for over 40 years, he and his wife Nancy have been married for over 52 years. He is most well known for the development of his Mentoring Program that has been called, "The Best Mentoring Program in the Country" which he continues today.In addition to his Mentoring Program, he started a full-service transactional funding Program so that new investors had the ability to do deals with no money of their own. He challenged the funding industry by making borrowing money very simple with his "One Point Funding Program" which has revolutionized the transactional funding industry and made millions of dollars available to investors who otherwise could not have afforded it. Currently his transactional funding is only available in Florida.Get more information about his real estate investing mentor program at http://www.DaveDinkel.com