Don't Get Cheated On Closing Costs

Some homebuyers are pissed because when the actual line item fees for various closing costs come in less than the estimation, their closing agents are simply pocketing the difference. How do you fight back? This article on LawyersandSettlements says,

Ask if the recording charges are indeed estimates, and ask why. Then demand to see the actual recording fee(s) once actuals are established, and compare them with the estimates. At the very least, insist that you are re-imbursed for the difference once actuals are determined, and demand to see the paperwork after the fact.

Real Estate Overcharges: Others Get Rich on Your Money [LawyersAndSettlements]

(Photo: Getty)

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  1. timmus says:

    “demand to see the paperwork “

    What if they refuse?

  2. Bladefist says:

    Ask for a good faith estimate. Get a couple of good faith estimates around town. Compare/Contrast. Use other GFE’s to negotiate the GFE you actually want. I just went through this 3 months ago.

  3. Bladefist says:

    Everything is negotiable. They cant even move the rate around. They can buy it down, at no charge. Don’t take NO for an answer. In this housing market, mortgage companies are going to be much more flexible to get your business. Say goodbye to origination fees.

  4. Bladefist says:

    cant = can.

  5. mmstk101 says:

    @timmus: kick them in the nuts!

    it may not help with getting money back, but it will probably make you feel better.

  6. laserjobs says:

    Real Estate = 80′s stock broker fraud re-run

  7. Juggernaut says:

    @timmus: If they don’t want to show you the paperwork you’re free to move on… there’s no reason not to see it all upfront.

    @Bladefist: “In this housing market, mortgage companies are going to be much more flexible to get your business.” That’s not necessarily true. Most programs available are so tight that borrowers are going to find themselves unable to find financing in many of the instances that worked yesterday. The A+ borrower (80%LTV, full doc, under 38%DTI, 740 scores) is still the A+ borrower, the rest B, C, D are almost all equally screwed.

    Blanket statements such as yours do a disservice to both lenders and borrowers. Borrowers need to educate themselves a bit before jumping headlong into what will probably be their largest investment. Being a lender, I would say most people should never sign any document until the next day and then only after investigation.
    There’s many sites that explain every detail of the loan process, documents, etc. Ask questions! And most of all ask those same questioins of another lender before proceeding.

  8. Vicky says:

    I had a lot of luck nit-picking on closing costs, actually. “Courier fees? What did you use a courier for?” Gone. “This house was built less than 3 months ago and you had to submit a survey to get the residency permit from the city. Why should I pay for another one?” Gone. And so forth.

  9. Bladefist says:

    @Juggernaut: I was making some assumptions in my statements. More for getting fees reduced

  10. VA_White says:

    I just closed on a house last week. The final closing costs were $1500 or so less than the initial estimate I saw. My check was bigger than the estimate by about $1500. There are still honest folks out there.

  11. Kevin Cotter says:

    I was a loan officer in AZ for a few years. Good Faith Estimates may be worth less than the paper, when written by idiot or unscrupulous brokers, in order to get your business. To really be savvy in the mortgage market you need to learn all the specific laws of your state, and fees typically charged in your region.

    The big trick I saw with other loan officers was to misrepresent the impounds (taxes and insurance) to make the GFE come in lower. The buyer gets the shock a day before closing when told home much the check needs to be.

    In AZ those closing costs must remain true to the actual charges. The mortgage company may not make money on credit reports, appraisals, etc. If you don’t like the title charges, shop the title company.

    Q: How did this mortgage mess happen if all the homebuyers had a professional, paid, fiduciary obligated representative to guide them through the whole process? Everybody is fingering the brokers, how about the Realtors that showed people these houses they couldn’t afford in the first place.

    Kevin
    [investnaked.googlepages.com]

  12. RBecho says:

    I just did a BoA no fee plus (under 6 on the rate, no closing, no PMI, and only 5% down) and I recommend it. Closing costs were just the 5% down, home insurance for the first year, and first months interest.

    As much as people here same to hate BoA, in this case things came out great by using them.

  13. Juggernaut says:

    @RBecho: So for your 95%loan you had no appraisal, no title, no attorney, no tax service, no tax escrows, no other lenders fees? You must have some stupendous scores and income… I guess we’ll see how much you like BoA in a couple of years. BTW, this sounds like the kind of loan that led to…

  14. Juggernaut says:

    @RBecho:

    Just a little investigation as I previously suggested leads you to the following:
    Some limitations that Bank of America includes in the fine print:

    • You can’t apply unless you already have an account with the bank, even if it involves minimal deposits.

    • State and local transfer taxes, property taxes and other government levies aren’t covered by the no-fee guarantee. Nor are prepaid interest or discount points, hazard or flood insurance and homeowner association fees.

    • The program is solely for home purchases — primary or second properties. No refinancers allowed.

    Robinson added that the no-fee approach allows borrowers to choose key service providers such as title-insurance and closing agents rather than settle with bank-designated companies.

    and the full article can be found here:
    [www.dispatch.com]

  15. samson says:

    I am looking to buy a house now. House prices go down. Houses I want to buy in my zip code are coded as declining so I need to pay 5% down. In the past I could of bought a home with no $ down but prices were overheated in my very humble opinion. Rules are tighting because banks are keeping these loans instead of reapkaging them as AAA and selling them to foriegn entitys that trust our rating system. Bad grammer and spelling because I to lazy to correct.

  16. sinfuly Delicious says:

    If you are in Texas they are required to give you a GFE. Good Faith Estimate.

    Many Brokers use a generic GFE That has Mid Level Fees that are actually given to them from title companies and Lenders. However once the house and financing are approved. The corrected Fees should be listed on the HUD. In Texas it is near impossible to pocket anything unless you have a crooked Title Company doing the work up. Or using one of those ALL IN ONE Lending Services. (Banks are bad about this)

  17. RBecho says:

    @Juggernaut: I assumed I would be paying the insurance and taxes on the home I purchased. The other loan companies I was talking to were just going to roll that into closing anyways. If I wanted to escrow taxes I could, but we chose not to (no bank is going to go making money on my money when I can just hold onto it myself).

    Yes, I already was a BoA member (one of the few banks that existed in my college town pop. 40K and my parents home town pop. 35K so I have had that account for a bit now that I am working).

    And I realize that re-fi’s are out of the loan limits, but me and the wife are first time buyers so we didn’t care about that limit. All in all we were very happy with it, and I would recommend in to people in my situation (ie. young with decent / good credit, looking for a first home with a minimal down payment, which is still quite a few people).

  18. BrAff says:

    F
    H
    A

  19. RobinB says:

    I work for a small community bank, and we charge no points and
    account for every fee we collect to go to third parties. All we make is
    a processing fee, disclosed on the GFE. Those of you looking to buy a
    home, call around to your local banks and ask for sample GFE’s. Try to
    find one in which the loan officers/orginators are not on commission.

  20. @Kevin Cotter: Nor can we dismiss greed on the part of buyers.

    No one fact is determinative, but when the fiduciaries aren’t and, even when they do act responsibly the buyer’s don’t listen, things get messy.

  21. Gann says:

    All it will take is a single well run website to make the job of real estate agent obsolete.

  22. nazgul00 says:

    > Then demand to see the actual recording fee(s) once actuals are established

    I thought the HUD-1 form was a mandatory document generated at closing. It always has been in my transactions. That’s where these fees are all documented.

  23. snidelywhiplash says:

    @Gann: All it will take is a single well run website to make the job of real estate agent obsolete.

    Get back to me when that happens. In the meantime, bear in mind that the realtors aren’t the ones screwing buyers here. It’s the mortgage and title & escrow companies.

    Realtors have little ability to actually screw anyone purchasing a home; they can mostly only screw people on the sales side – overpricing listings, charging high commissions, etc. It’s hard to cry that you’re being screwed when sales comissions are disclosed up front.

    (And really, sellers aren’t getting screwed by high commissions, since there are a lot of choices of realtors and other options (FSBO, Redfin, etc) in most areas to get a home sold. Commissions are on their way down nationally, last I knew.)

  24. Juggernaut says:

    @snidelywhiplash: As a lender I’d love to make 6% on every loan I do, in fact I’d burn my money to get what realtors do… making 2k in fees on a 200k loan is a far cry from the 14.4k that a realtor makes on a 240k sale (do the math, I’m figuring an 80% loan on that purchase).

    Is it any wonder a realtor will tell you to drop your purchase price by 20k to get some movement. On the same 240 starting price you lose 20k and the realtor still makes 13.2k. And everyone loves realtors and I’m a scumbag…

  25. stacy75 says:

    @Juggernaut:

    Thanks for the good and thoughtful comments above. I am also not a fan of any blanket statement when referring to RE deals. There are just too many variables!

    I am a Realtor, and FWIW, the “6%” deal is rare. Normally, it’s 3% to the listing agent, 3% to the buyer’s agent. Then, that 3% is split with the broker. These days, commonly, there is a referral fee (35% of that 6%) paid to another 3rd party relocation company before it even gets to either agent.

    So, on a normal deal (with out a relo company)– let’s say your $240K– the commissionis $7200. I have a 60/40 split with my broker, so I take home $4320, after I pay Uncle Sam, my take is $2851. This for a minimum of 30 days work. (Don’t get me started on my out-of-pocket expenses- ouch!)

    To be clear, I am not complaining, and I love my job dearly, but the “13.2K to the Realtor” commission on a $240K house is not always accurate. It still sucks for the seller, but it certainly ain’t all coming to me. :-)

    PS Lending is a tough business- You sound honest and like a good girl/guy– thanks for helping keep our profession respectable (difficult these days :-) )

  26. snidelywhiplash says:

    @Juggernaut:

    You must not have been in the mortgage business very long, or don’t know many realtors personally, because ain’t nobody getting 6% of a transaction by themselves.

    Stacy75 outlined some of it. Let me see if I can elucidate further:

    Let’s say you list a house for $200,000, at 6% commission. Total sales commission is $12,000, which you pay to the listing brokerage. The listing brokerage then turns around and pays the buyer’s agent out of their take. In Stacy’s area it’s a 50/50 split, but here its usually 60/40. So a 6% total commission yields 2.4% to the buyer’s broker, who then splits it with the agent; this is again oftentimes a 60/40 split.

    So the actual buyer’s agent gets 0.6*(0.4*12000), or $2880. And as Stacy says, this is before taxes or expenses, (I’ve yet to see a loan officer out driving clients all over town for days at a stretch), fees, etc. and is for at least a month’s work – often more.

    And if you ever want to see hate, start a thread on realtors on your favorite personal finance message board. People might be hating on you right now, but they ALWAYS hate us.