Which Closing Costs Can I Contest / Reduce?

Question

Can someone help me figure out which closing cost fees I can reduce or eliminate?

Here are all the fees I'm seeing:

Loan Discount Fee - Seriously, *I* have to pay money to get a *DISCOUNT*? What kind of discount is that!?
Verification Fee (if Required by My Employer) - In what universe could this possibly justify costing $100? I even sent them a copy of my W-2 and my most current pay stub. Isn't that verification enough?!
Document Pre Fee - $145 for the company to fill out stock templates? I pay my accountant half that much to do my taxes.
Title - Abstract Fee - If your fee is so abstract you can't describe it, then I don't want to pay the $275.
Title - Examination Fee - I have no idea what this is
Mortgage Recording Fee - I get that you need to go to the County courthouse and make the changes. But how is this very easy service worth me paying $115?
Deed Recording Change - OK, how is this different from Mortgage Recording Fee, and why should I pay $60 more for it?

I'm currently looking to get pre-approved for a 30-yr fixed conventional mortgage to acquire my first rental property. I'm shopping around, and one lender gave me a sample "Fee Worksheet" based on some rough parameters. It had all these fees listed that just confounded me

Thanks for any help you can provide - Cheers!

Russell Brazil · Answer

You dont have to pay a loan discount fee. You can take whatever rate they offer you. Recording your deed and mortgage are government fees, they are non negotiable. A title abstractor will typically go to the court house and pull the entire chain of title on your property, then the title attorney will review the work of the abstractor. If you are paying your accountant half of $145 to do your taxes, lets say I wouldnt be super confident in your taxes holding up under audit.

Steve Morris · Answer

"like document preparation fees. Do I need to pay those, since that kind of sounds exorbitant to me?"Nah, just go prepare your own docs even if you have no experience doing it. Hopefully, you do it right, since you'll only have yourself to blame if it goes wrong.You sound kinda whiny about minor charges.

Eric Veronica · Answer

Ask for a loan estimate. Make sure to compare the costs that the lender can control which is actually far fewer than you may think. The lender controls the rate, term, and origination charges. These costs should be on page 2 of the loan estimate under "origination charges". I included a snip of a sample loan estimate or "LE" below. I also included a link to the CFPB which provides some detail about how to read a loan estimate. https://www.consumerfinance.gov/owning-a-home/loan-estimate/

Steve Morris · Answer

"I can then pay their awfully expensive title work and survey fees or shop for my own"So you're going to get lender A to accept another lender's paperwork pertinent to the immediate loan. Especially if the other lender has no obligation or involvement on the loan.Besides a very recent appraisal, you must be kidding.

BJ Marshall · Answer

@Steve Morris, I do plan on asking the lender about the charges, so thanks for that advice. I guess before I asked them I didn't want to sound like I was completely off my rocker, so I came here first.

BJ Marshall · Answer

@Steve Morris, I'm new at this. I don't understand what the charges entail. In my mind, all they have to do is fill out stock templates, which doesn't seem worth two weeks of groceries.Maybe I'm wrong, but I'm trying to find out what I can waive or negotiate.I need help understanding what these fees really are and where there is wiggle room. I don't need condescension or sarcasm

Isaac Pepper · Answer

@BJ MarshallTo start, every bank is different. But what every bank has in common is that they make their money on fees. I'm currently in the process of closing a cash-out refi on a property I bought with cash in February. I was referred to this lender by a member of my local REIA, and have a HELOC thru him now on my primary residence. The initial documents the lender sent me were any and all possible fees they could charge for this loan. This does not mean all fees will be charged. So from there I request the appraisal ($500 non-negotiable). And then once the appraisal comes back, we sit down and hash out the exact amount in closing costs that will be subtracted from the closing amount. If we move forward I cant negotiate the cost of flood determination ($6), credit report ($50), tax service ($75) wire transfer ($25) or commitment fee ($899). I can then pay their awfully expensive title work and survey fees or shop for my own. I chose to shop for my own and saved considerably. It has been my experience that you can negotitate how much is held for escrow as well. If we dont agree, I pay for the appraisal and go on my way. If the next bank accepts the same appraiser I dont pay for it again. In the case of a preapproval it has worked for me similarly. Just speak to the loan officer/originator and ask for an explanation of the fees and if they will be necessary to close. If you feel your being jerked around or get the "you just have to pay them" or similar, seek a different lender. Hope this helps!

BJ Marshall · Answer

@Rick Pozos, thanks for that insight and perspective. As someone looking for my first deal, maybe I'm looking to pinch too many pennies that don't need to be bothered pinching. I think you nailed it when you mentioned it gets WAY easier over time to pay others.You definitely helped put it in perspective. I look forward to the time when I'll secure more and more properties to the point where I'll have to pay thousands for tax prep and the like.

Rick Pozos · Answer

This is a business. As such, people do different jobs to help you get to where you want to be. These people have to get paid. Who do you want to NOT pay?? Just wait until you do more deals in 1 year and your tax preparation turns into $500 or even Thousands of $$. My bookkeeper is with the same company as my accountant. $300 per month for bookkeeping. I hate bookkeeping so I don't mind. My corporate taxes were done in about 10 minutes because they share information. Over time, it gets WAY easier to pay people to do work for you as you make more money. I never believe in wasting money because I am the Frugal Real Estate Guy, but I have a much easier time paying people to do things that I don't want to do or CANT do. If I did not have the money to pay a bookkeeper, lawn guy, oil changes, house cleaner and a few other things, I would and have done them myself. But again, as you make more money, it gets easier to pay others. Believe it or not, I have done closings on my own. I have prepared deeds, deeds of trust, promissory notes, called to get payoffs and a number of other things in the past. I took the docs from other transactions that I had done and typed up the documents for the current deal. I recorded docs with the county clerk. Got a mobile notary to notarize docs and done. I did it all. NOW, I would never do any of that because I make more money finding deals and rehabbing properties. DISCLAIMER: I do have a finance degree(concentration real estate), and I had at least 3 years working for a property manager and developer. I had my real estate license for several years. I had gone to several closings with my parents and had already closed several properties on my own before attempting a closing on my own. Bottom line: If you don't know what the hell you are doing, pay someone. Even if you do know what's going on, pay someone.

Steve Vaughan · Answer

Those fees seem legit except the verification one I guess. To record a document in my county min is over $100 each time. They are using a diversionary tactic. Wait until the origination fee and lenders title and the appraisal fees hit. Smallest fee on that list is $400 if a single-family. 1% origination, lenders title can be $1200, ÷etc. But focus on the $60 to the county... The only way to truly reduce costs I have found is to buy solo and use a private lender you know. Ive been doing that for years. My current transaction has a cost savings of over $57k that way.