Private lender practices

[Luke Saglimbeni]

Is it normal to ask for origination fees before loan documents are concluded? A private lender approached me saying to pay a fee before documents are released and before closing.

It seems like a scam. I told lender to take fees out of amount borrowed or at closing he will receive his fees....

Thoughts?

[Jeff S.]

Considering the amount of time most real estate investors spend finding properties, I would never call a potential borrower a time-waster. Deals fall through all the time due to no fault of the borrower. This is just a cost of doing business -- and hopefully a minor one at that.

If a lender believes so many loans are falling through that they must enact punitive restrictions in their loan process, like charging up-front fees before closing, I’d suggest they tighten their marketing up to attract more suitable prospects. This is the lender’s problem, not that of their borrower. Too many service providers forget who their customers are.

Of course, if you have no idea who this lender is, @Luke Saglimbeni, perhaps because you found one another online, then this could simply be just a scam. Either way, I would insist, as you have, on paying everything at closing. If not, and your deal is viable, you should easily be able to find another lender.