Lender Change Fee
Ask the Real Estate Lawyer: Real Estate Law Q&A
REM #LAW 739
By Ilyce R. Glink and Samuel J. Tamkin
Summary: A ThinkGlink reader put a deposit
on a lot in order to build a new home. Now the developer would like an additional
deposit and is including a lender change fee in the contract. Ilyce and Sam
explain why developers charge you for changing lenders and give tips to the
reader for completing the deal.
Q: I reserved a lot in a community by paying a non-refundable $1,000 deposit.
I was told at the time of the initial deposit that no further deposit would
be necessary until closing.
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Now, the developer wants me to sign a contract and I have been told that I
need to put down another non-refundable deposit of 3 percent, and I must commit
to a lender.
If I change my lender between signing the contract and the closing, I was told
I’ll be charged another $1,500. Is this normal and ethical?
A: It would be highly unusual for a developer to sell a lot and only require
a $1,000 deposit. But you are correct to be annoyed or angry at the misinformation
given to you.
You have a couple of choices: You can confront the individual that gave you
the misinformation to make sure this person does not give out bad information
in the future. Or, if you are really angered by the misinformation you were
given, you can demand the return of the $1,000 due to the misinformation.
But before you talk to the developer, why don’t you take a look at the
document you signed when you handed over the first $1000. It’s possible
that this document contains other information relating to what would be expected
of you after the initial deposit.
If the initial documentation outlines an increase in the deposit, you should
have read the document and questioned the salesperson further before you signed
on the dotted line. In general, a 3 percent down payment requirement is quite
Many developers want to make sure that a buyer not only has the desire to buy
the property but has the financial wherewithal to actually close on the purchase.
Clearly, this developer wants to make sure that you apply for a loan and follow
through with that lender. The developer might have been burned in the past with
buyers who switched lenders late in the game and then were not ready to close
on the purchase on time.
In other cases, some lenders request information from the developers to approve
the project and the loan. In approving the project, the developer may have to
complete some forms and return them to the lender. Switching lenders just before
closing can mean the developer has to resend the information and get the development
reapproved by the new lender.
While that may be the rationale you’re given, it certainly poses limitations
on what you can do, and that may be uncomfortable. It may even be unacceptable.
The real issue is whether it is normal in your area to charge that “lender
change fee.” While it’s not a particularly common fee, you should
try to determine if all other developers in your area charge it, or something
similar. If not, you can object and if the real estate market has balanced out
or swung to be more of a buyer’s market (where there are more homes for
sale than there are buyers willing to buy them), you may prevail.
But first, go back and look at the document you signed. If you don’t
understand what you’ve agreed to, please consult with a real estate attorney.
Samuel J. Tamkin is a Chicago-based real estate attorney. Ilyce
R. Glink’s latest book is 50 Simple Steps You Can Take To Sell Your
Home Faster and For More Money In Any Market. If you have questions for
them, write: Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022
or contact them through Ilyce’s website www.thinkglink.com