Characteristics of the Agreement The fee agreement of a commercial mortgage broker outlines the compensation that is due to him, for helping the borrower procure a commercial mortgage loan for the property under consideration. A commercial broker fee agreement contains details regarding proposed financing, compensation that is due to the broker, and the fee charged by the lender. Considering that the borrower pays points for procuring the loan at a favourable rate of interest, it's only fair that the broker's commission should not be influenced by the decision of the former. Else, he is entitled to the full amount of commission, regardless of whether the borrower actually procures the loan. It is evident that the fee agreement needs to be detailed and plug all the loopholes that may allow the borrower to evade brokerage. The borrower uses the services of a broker, who strives to find a suitable commercial mortgage loan program for the former. He is entitled to a processing fee that is non-refundable, irrespective of whether the proposed transaction is completed. He is also entitled to a commission, that is calculated as a percentage of the loan amount, irrespective of the closing costs or points paid to the lending institution. It would be prudent to consult an attorney, who is knowledgeable about commercial mortgage transactions for further details. The broker is entitled to verify the borrower's credit score, credit history, business income, assets, and other documents as deemed necessary. Provision for the arbitration of disputes and other borrower covenants constitute an important part of this agreement.
The broker spends hours putting together a deal that is not closed, and to top it all, he/she does not get paid for the work that is done. For instance, the borrower may try to shop around for other mortgage lenders who charge lower points, and may decide to back out of the deal just before closing the same. They rarely pay a referral fee and expect brokers to earn a fee outside escrow. It also contains the non-circumvention clause that prevents the borrower from circumventing the broker, and applying directly to the lender who has accepted the broker's loan application for the same. This may happen due to a number of reasons. Else, he is entitled to the full amount of commission, regardless of whether the borrower actually procures the loan. Provision for the arbitration of disputes and other borrower covenants constitute an important part of this agreement. Although, he is allowed to work with other co-brokers and share the commission as deemed appropriate, he cannot evade brokerage by working with a co-broker or with the lender who has accepted the broker's loan application. The borrower is not allowed to fill out another loan application or withdraw the original loan application without prior consent of the broker for a period of 36 months from the date of the agreement. It is evident that the fee agreement needs to be detailed and plug all the loopholes that may allow the borrower to evade brokerage.