What do you do when a client tries to cut your commission before closing?

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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
1y
Quote from @Erik Estrada:
Quote from @James McGovern:

I walked away from banks and hard money lenders due to burdensome underwriting and now only use private money lenders who employ more of a common sense underwriting approach 


 That works up to certain amount. Maybe for the small time investor doing a few deals a year or smaller deals. 


James clearly is not your target borrower.. this is just RE  1 0 1 .  I just had one of my high frequency clients as about my fees.. And I was just up front and said I cannot. gave a few reasons why like over head  MY speed  NO junk fees NO appraisals close in 2 to 5 days etc etc my business is relationship based. NOT fee based IE who is cheapest but I am only doing short term bridge / fix flip .. And I only work with experienced folks.

In your line if your doing a lot of DSCR which I have to think you are then of course there are 1000 brokers out there doing the same thing. and some folks just will move a file over .25 bps and not blink and Eye.. I personally have been with the same banker for 33 years now and while I will negotiate fees I get cold called by other local commercial banks looking for our deposit relationship and would never move over a few bps.. relationship in this business is far more important.. Now for you were you might only do one loan every 2 to 5 years with same entity loyalty is much harder for you.. And like i said a guy like James and his attitude about how you earn a living is not you target.
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  • James McGovern
    Flipper/Rehabber · Bloomfield CT · Member since 2020 · 1k+ posts · 408 votes
    1y

    How does this happen with a closing attorney involved doing all of the processing based on signed agreements? We are missing something 

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    • Erik EstradaBusiness Member
      OP
      Lender · Member since 2022 · 6k+ posts · 1k+ votes
      1y
      Quote from @James McGovern:

      How does this happen with a closing attorney involved doing all of the processing based on signed agreements? We are missing something 


       On the lending side, some clients still shop even after ordering an appraisal and going through the due diligence period. They will then present you a term sheet from lender B to see if you can cut your points before closing on the loan. 

      OR they will try to make it seem like you did not disclose your fee structure even though you have MULTIPLE emails confirming how much the points are and the client agreeing to said terms. They then will state that normally lenders charge x amount and will try to negotiate your fee, even though you spent 40+ hours a week making it all work for them. 

      It's so annoying. 

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    • James McGovern
      Flipper/Rehabber · Bloomfield CT · Member since 2020 · 1k+ posts · 408 votes
      1y

      @Erik Estrada what alternative exists for them to get the best deal without impacting your commission?

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    • Erik EstradaBusiness Member
      OP
      Lender · Member since 2022 · 6k+ posts · 1k+ votes
      1y
      Quote from @James McGovern:

      @Erik Estrada what alternative exists for them to get the best deal without impacting your commission?


       It depends on what "best deal" means to the client. 

      I can ask the same for you when you sell a flip. What's going to make it where you are happy with the profit you make and your buyer is content with their new home purchase? 

      In the lending space, we care about repeat business. All a shopper is telling us, is that you do not value business relationships. When I am shopping, I'm not purely looking at just the bottom line. I am looking at, how can this relationship benefit me in the long run. 

      Maybe you have been burned in the past and you feel that you need to haggle your way down and make it a win-lose situation. But there are plenty of amazing lenders out there, that will tell you how much they are actually making on a deal and will make deals work for you as long as it makes sense with the current market. They will tell you straight up if a deal is closable or not. 

      When you position yourself as a transactional person, that's all people will see you as. Just another number in their pipeline. This is still very much a people's business. Until AI completely erases the human aspect to Real Estate, learning how to cultivate strong relationships is how you will get the "best deal". Not calling around and seeing who can make the least amount of profit. 

      Heck you might even get a few deals by operating this way. There are times where I have clients ballooning on their notes and can't sell on the MLS and can't refi. Do you think I would refer that client to someone that only sees me as a number or a good client that values my partnership?

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  • James McGovern
    Flipper/Rehabber · Bloomfield CT · Member since 2020 · 1k+ posts · 408 votes
    1y

    The shopping for loans concurrently makes a ton of sense as lenders have a way of burning a lot of time before an answer is given. If the first answer is given they should take the next step in the process until a better deal comes in. I understand why buyers behave this way and you should as well

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    • Erik EstradaBusiness Member
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      Lender · Member since 2022 · 6k+ posts · 1k+ votes
      1y
      Quote from @James McGovern:

      The shopping for loans concurrently makes a ton of sense as lenders have a way of burning a lot of time before an answer is given. If the first answer is given they should take the next step in the process until a better deal comes in. I understand why buyers behave this way and you should as well


       That makes no sense. You mean to tell me you expect a full underwriting approval on a loan, without having title, insurance, appraisal, conditions, etc..? 

      And you expect a lender to work for you for free? 

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    • Erik EstradaBusiness Member
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      Lender · Member since 2022 · 6k+ posts · 1k+ votes
      1y
      Quote from @James McGovern:

      The shopping for loans concurrently makes a ton of sense as lenders have a way of burning a lot of time before an answer is given. If the first answer is given they should take the next step in the process until a better deal comes in. I understand why buyers behave this way and you should as well


       Nobody burns time when they are paid at closing LOL.. It is usually the buyer that fails to disclose important information, property having issues that were not known upfront, lack of insurance,  or the title not being clear/insurable. 

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    • James McGovern
      Flipper/Rehabber · Bloomfield CT · Member since 2020 · 1k+ posts · 408 votes
      1y

      @Erik Estrada we expect underwriting to be ceremonial where a lot of it is automated with AI. The time lag of reviewing everything is about protecting the lender but provides no value to the borrower. The process of underwriting needs to be accelerated 

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    • James McGovern
      Flipper/Rehabber · Bloomfield CT · Member since 2020 · 1k+ posts · 408 votes
      1y

      @Erik Estrada every one believes their steps in a process provides value while a borrower believes otherwise. Throw a **** ton of documents over the wall, sit and twiddle your thumbs and wait till someone gets back to you. It will feel like there is no real choice but to play the game in a broken process 

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    • Erik EstradaBusiness Member
      OP
      Lender · Member since 2022 · 6k+ posts · 1k+ votes
      1y
      Quote from @James McGovern:

      @Erik Estrada we expect underwriting to be ceremonial where a lot of it is automated with AI. The time lag of reviewing everything is about protecting the lender but provides no value to the borrower. The process of underwriting needs to be accelerated 


       What is a Ceremonial process? 

      The lender is loaning you millions of dollars and you only put 3-20% of your own money down. They sell these loans to other investors in the secondary markets, and the reason why they have conditions to begin with is to provide a full package to the end buyer. 

      How is there no value in loaning you a huge sum of money, when you otherwise would of not had access to unless you are loaded with cash or have a wealthy uncle? 

      Maybe AI could help speed up the application taking process, but there are far too many variables for it to be completely done by AI for now. I can see it happening with drive by appraisals and some risk models. 

      But what's going to happen when you send in a crappy picture of your W2 and the AI can't read it LOL. 

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    • Erik EstradaBusiness Member
      OP
      Lender · Member since 2022 · 6k+ posts · 1k+ votes
      1y
      Quote from @James McGovern:

      @Erik Estrada every one believes their steps in a process provides value while a borrower believes otherwise. Throw a **** ton of documents over the wall, sit and twiddle your thumbs and wait till someone gets back to you. It will feel like there is no real choice but to play the game in a broken process 


       I don't know which lenders YOU work with that stick chewed bubble gum at a wall, but I know for me, I make sure to see if a deal is worthwhile and is closable. I ask all the questions/ collect documents upfront and based on that information I will make sure the loan will close with B lender. Now if there is any new information, the buyer did not disclose or do their due diligence, that's on them, and of course it will cause delays as we will need the necessary exceptions/documentation to pivot. 

      If it's not closable, there is no point in spraying and praying. 

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    • James McGovern
      Flipper/Rehabber · Bloomfield CT · Member since 2020 · 1k+ posts · 408 votes
      1y

      @Erik Estrada what if the underwriting process asked for less information and was aligned to Gods laws and was more aligned to be Kosher or Halal do you think your challenge would disappear?

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    • Patrick Roberts
      Lender · Charleston, SC · Member since 2019 · 1k+ posts · 1k+ votes
      1y
      Quote from @James McGovern:

      @Erik Estrada what if the underwriting process asked for less information and was aligned to Gods laws and was more aligned to be Kosher or Halal do you think your challenge would disappear?

       wtf? I cant tell if this is sarchasm or if youre being serious. 

      1Reply
    • Erik EstradaBusiness Member
      OP
      Lender · Member since 2022 · 6k+ posts · 1k+ votes
      1y
      Quote from @Patrick Roberts:
      Quote from @James McGovern:

      @Erik Estrada what if the underwriting process asked for less information and was aligned to Gods laws and was more aligned to be Kosher or Halal do you think your challenge would disappear?

       wtf? I cant tell if this is sarchasm or if youre being serious. 


       He's just trolling on the forums. I guess there aren't many moderators like before. 

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  • James McGovern
    Flipper/Rehabber · Bloomfield CT · Member since 2020 · 1k+ posts · 408 votes
    1y

    I walked away from banks and hard money lenders due to burdensome underwriting and now only use private money lenders who employ more of a common sense underwriting approach 

    0Reply
    • Erik EstradaBusiness Member
      OP
      Lender · Member since 2022 · 6k+ posts · 1k+ votes
      1y
      Quote from @James McGovern:

      I walked away from banks and hard money lenders due to burdensome underwriting and now only use private money lenders who employ more of a common sense underwriting approach 


       That works up to certain amount. Maybe for the small time investor doing a few deals a year or smaller deals. 

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    • Jay HinrichsBusiness Member
      Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
      1y
      Quote from @Erik Estrada:
      Quote from @James McGovern:

      I walked away from banks and hard money lenders due to burdensome underwriting and now only use private money lenders who employ more of a common sense underwriting approach 


       That works up to certain amount. Maybe for the small time investor doing a few deals a year or smaller deals. 


      James clearly is not your target borrower.. this is just RE  1 0 1 .  I just had one of my high frequency clients as about my fees.. And I was just up front and said I cannot. gave a few reasons why like over head  MY speed  NO junk fees NO appraisals close in 2 to 5 days etc etc my business is relationship based. NOT fee based IE who is cheapest but I am only doing short term bridge / fix flip .. And I only work with experienced folks.

      In your line if your doing a lot of DSCR which I have to think you are then of course there are 1000 brokers out there doing the same thing. and some folks just will move a file over .25 bps and not blink and Eye.. I personally have been with the same banker for 33 years now and while I will negotiate fees I get cold called by other local commercial banks looking for our deposit relationship and would never move over a few bps.. relationship in this business is far more important.. Now for you were you might only do one loan every 2 to 5 years with same entity loyalty is much harder for you.. And like i said a guy like James and his attitude about how you earn a living is not you target.
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    • James McGovern
      Flipper/Rehabber · Bloomfield CT · Member since 2020 · 1k+ posts · 408 votes
      1y

      @Jay Hinrichs no junk fees and fast process are value add.@Erik Estrada never mentioned this type of value 

      0Reply
  • James McGovern
    Flipper/Rehabber · Bloomfield CT · Member since 2020 · 1k+ posts · 408 votes
    1y

    Borrowers always want the best deal but are denied that due to latent underwriting practices that are lethargic by design. Clients aren't trying to deny anyone their commission but rather focusing on what is best for them. What are the alternatives for them to be assured they are going to get the best deal

    @Erik Estrada

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  • Marcus Auerbach
    Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
    1y

    Yeah that's frustrating. That's why you see large lenders issue a no-effort pre-approval and they just throw enough spaghetti on the wall to see what sticks. And then ask for details later, which of course can mean that after review the client may not be able to finance as much as they tought and loose the deal.

    I work with local banks and my lenders provide a fully underwritten PA you can rely on. Sellers will accept their offer based on a local lender's PA they trust and then the buyer shops for the cheapest rate online. Not fair to the lender (and sometimes not fair to the seller when a deal goes bad on financing) with worstmortgage.con

    2Reply
  • Patrick Roberts
    Lender · Charleston, SC · Member since 2019 · 1k+ posts · 1k+ votes
    1y

    "I told the lender its a great deal and I make tons of money and have great credit - how dare they ask me for documents that verify what I'm just saying. How dare they waste time getting a title report or appraisal. They should just give me their money for free and be grateful for the opporturnity to do so." Yeah, these borrowers get fired immediately. 

    Same goes for the ones who want to shop after all the work is done. I explain everything up front when the initial application is complete and I have provided a quote, and I advise them that if they want to shop around, now is the time to do it. I explain that I cannot commit time and resources to analyzing their deals with them or processing and underwriting their loan if they cant commit to working with me before I do so. If they wont provide a verbal commitment, I stop everything there and let them know I cannot work on their deal until something changes. If they do give their word and then later try to retrade or "shop rates" after all the work is done, then they are fundamentally dishonest, and I dont work with dishonest people. The second this happens, I cancel the loan wherever it's at in the process and refer them out to someone else. 

    It's a two-way street - I do what I do because I enjoy it and because it allows me and a client to work together for mutual benefit. I have no interest in being a "top producer" or closing loans just for the sake of closing loans. I personally invest my time and resources into every deal, and I expect reciprocal commitment from a borrower who's receiving this in good faith from me. If they just want the lowest rate/fees and a corporate slave to do their loan for free, they can kick rocks and can take their loan to some corporate shop. Not coincidentally, they'll come on here afterward and complain about how all lenders are scams and wont just give them free money and bait and switched them blah blah blah. Play stupid games, win stupid prizes. When you go looking for cheap, dont be surprised when you find it.

    I have far too many other ways I'd rather spend my time to allow it to be spent working for free. Do I walk away from some viable loans with this philosophy - yes, probably, but I dont really care about that. I enjoy helping honest people and creating win-win situations for them and me, and I enjoy the challenge of getting a tough deal done. I have no interest in playing games. 

    Something I learned working around other entreprenuers - 30% to 40% of leads/prospects will be people you do not want to do business with. I try to weed these people out as early as possible to not waste time or resources on them. This is the equivalent of the proverbial "FU quote" from a contractor. 

    3Reply
    • James McGovern
      Flipper/Rehabber · Bloomfield CT · Member since 2020 · 1k+ posts · 408 votes
      1y

      @Patrick Roberts I can visit an insurance site and enter data once and get multiple committed quotes at the same time in a comparable manner. The insurance companies go get DMV, credit and clue reports in the background and don't require the request or to send them anything. Mortgages inconvenience the requesters and therefore deserve what they give

      0Reply
    • Patrick Roberts
      Lender · Charleston, SC · Member since 2019 · 1k+ posts · 1k+ votes
      1y
      Quote from @James McGovern:

      @Patrick Roberts I can visit an insurance site and enter data once and get multiple committed quotes at the same time in a comparable manner. The insurance companies go get DMV, credit and clue reports in the background and don't require the request or to send them anything. Mortgages inconvenience the requesters and therefore deserve what they give


       You can do this all day long at big banks and rocket mortgage. You dont need a lender like me or Erik for this. These lenders already exist. You can input all your information on their website and get a rate quote instantly. You dont even need to provide any documents. 

      0Reply
  • Michael S.
    Huntsville, AL · Member since 2018 · 577 posts · 864 votes
    1y

    @Erik Estrada - like Jay alluded to, it looks like you need to change your client screening process.

    I work with several local banks - I am transparent with all of them on who I am working with, and who has notes on which properties.  

    If I have a property I need a note on, I will simply send it to one of the banks, and "trust" that they will give me their best terms.  In return, I don't shop the loan.  If they violate my trust, they've lost my business.  If they think I am shopping the loan, they will drop me for wasting their time.  It's a very high functioning model.

    We had a recent acquisition that was atypical for multiple reasons - as such, I did not know which bank(s) would be interested.  So I sent the same email to three banks about the deal, and put in the email clearly that I was sending it to 3 banks intentionally because I knew it may not work for them.  One bank said no, one bank didn't respond (aka we don't want it, but if you beg us, we'll probably do it), and one bank said we've got this - send us the contract.  The other two banks thanked me for offering them the opportunity afterwards.

    1Reply
  • Mike Klarman
    Specialist · NJ · Member since 2022 · 1k+ posts · 653 votes
    1y

    For bridge loans, I go over pricing right away. For DSCR loans, once appraisal, insurance is in I get final pricing and go over everything. All origination and costs.

    At closing I'm not sure if anything can be changed. HUD has been prepared? Loan terms set? Unless they ask you to send some back post closing? Once a loan has gone through the steps application >>>>> processing >>>>> Underwriting >>>>> Approval >>>>> Closing

    Once it is approved and then you want to change something, the loan would most likely get rolled back and get delayed and new docs may have to be drawn up. 

    I'd rather talk them into going through with it and on the next one you'll do it for less.

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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    1y

    We have them sign a term sheet in advance that has the terms of the deal - I have never had a borrower come back and ask us to take a cut 

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  • Brandon Croucier
    Lender · Nashville, TN · Member since 2024 · 700 posts · 284 votes
    1y

    Some borrowers just have no respect for the work we put in. 

    I've had borrowers double lap me, claim to have "found a buyer last minute" and find out 2 days before COE they're not using me... LOL

    0Reply
  • Joe S.Pro Member
    Investor · San Antonio · Member since 2020 · 3k+ posts · 3k+ votes
    1y
    Quote from @Erik Estrada:

    I am honestly curious how other lenders and brokers handle this? Working an escrow for 30-45 days all for a client to try to pull a fast one on you. 

    So several years back when rates were better, I done quite a number of Loans from DSCR Lenders. Understand when I say lenders I mean brokers the kind middleman I'm assuming the OP is.

    So I got a property under contract that I assume my  exit strategy was going to be I was going to buy it with a bridge loan and then refinance out into a rental loan. Well, after studying the deal a little more, I realized the rent was a lot less than I originally thought. 

    So I talked to a gentleman ( private Lender) that said he would finance the property and allow me to wrap his first lien to an owner finance buyer.


    I told The DSCR broker that we were going to hold off on getting a loan through him and the dude wanted to end the friendship/relationship. Keep in mind I had closed multiple deals with the same guy before and had other deals with him in the works to close. I told the broker I said "I'm not sure what you'll make off of this transaction, but I can send you a check anyway It's just not the right product for me after all."

    The guy was so upset all he knew is he wanted to be mad and stay mad no matter what. I guess he got it in his mind. I was using another DSCR Lender, which was not the case. Sometimes later, he reached out and asked if I would give him a good review which I did.

    0Reply
  • Account Closed
    Lender · Los Angeles, CA · Member since 2025 · 40 posts · 17 votes
    1y

    Erik,

    I feel your pain, aside from being dishonest, its a time consuming process that could be better spent working other loans. I think a big part of the screening process is how your company may process quotes and/or interactions. In my corner we are very direct with clients from the onset, nothing is negotiable after agreements have been made. Like some colleagues state, the bigger lenders just throw spaghetti against the wall to see what sticks and hook a client, but our approach is the quote we give you, will be the quote that will be upheld. All to say, you get what you pay for with us, which is transparency, fiduciary approach to all our clients and long term relationship building. Screen / Screen / Screen is what I suggest. You can learn a lot about someone with just simple conversation and a few tactically placed questions.  You're not alone in these type of experiences, I assure you.

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