To Brokers and Lenders: Is Negotiating Broker Fees Acceptable?

[Dante Craig]

I'm a direct hard money lender, and my company is relatively new. We work primarily with brokers as we continue to expand our outreach. Most of our broker relationships are strong, and they bring us a good amount of business.

However, a common issue we encounter is brokers adding excessive fees, which can kill a deal and just take advantage of a borrower. When this happens, I sometimes try to get the broker to lower their fees, as our lending price is fairly set due to investor commitments and capital costs. Sometimes this works, other times it doesn't, and it can occasionally strain our relationships.

I'd love to get some input from current hard money brokers. As a lender who wants to close a deal, is it appropriate to negotiate with a broker to shave off 0.5 to 1 point when they are already making at least 1 point on the deal?

What are your thoughts on this from a broker's/lenders perspective?

[Doug Smith]

My wife and I had dinner just last night with a fund rep and we discussed this very thing. Brokers with no background charging 4% - 6% for an introduction. It's my philosophy to build long-term relationships and actually provide value. We actually work the deal and stack the file. We also only charge 1% to 1.5% and try to be the first and only call an investor makes. If we screw them on the first deal there won't be a second. If they know we have their best interests at heart, we become a trusted advisor. It's ethical and it's good business.