A transactional fee means different things to different transactional lenders.
The fees that transactional lenders charge are usually, but are not limited to the following:
1. A funding fee that is a percentage of the actual amount a transactional lender funds for the A-B closing, i.e., $100,000 at 1% = $1,000.
2. A wire fee to cover the expense the transactional lender pays for his wire to the closing agent varies greatly depending on the bank the lender is using.
NOTE – you should always check to see what minimum fee the transactional lender charges because for an amount less than $30,000 as an example, the rates range from $350 to $1,795.
From here on it gets “interesting” because the following fees are also so-called junk fees to be watched out for:
1. A fee to enter the transactional lender’s system which is non-refundable if the deal doesn’t close – remember a high percentage don’t close and not because of anything the investor did or didn’t do.
2. A cancellation fee is charged if the deal doesn’t close even if the lender didn’t send any money.
3. A processing fee which is another name for the entry fee above and is unnecessary but very profitable for the transactional lender – it may be charged on the A-B leg or the B-C leg.
There shouldn’t be any other fees but make sure you ask the transactional lender what fees there are and if there are any others after he gives you his percentage fee.
In no case should you be paying more than one percent (1%) of the funds for the A-B closing unless your transactional lender will not negotiate a lower rate than he quoted you or the amount you need is over one million dollars ($1,000,000).
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