Ask Texas REALTOR®

Q   The new Third Party Financing Condition Addendum (TAR 1901) provides for a maximum amount of Loan Fees that a buyer will be obligated to pay as part of the buyer’s financing condition. What fees are included in Loan Fees, and how do we determine the percentage to be inserted in the addendum?

A   Loan Fees is capitalized in the TREC contracts, which means that this is a "defined term" in the contract. The definition of Loan Fees is found in the Buyer’s Expenses section of paragraph 12 of the appropriate main TREC contract forms. Loan Fees includes loan origination, discount, buy-down, and commitment fees.

REALTORS® will want to become familiar with the current loan fees charged by lenders in their area for the type of loan to be used by the buyer. Once they have determined the likely loan fees to be charged, they can compute the percentage to be inserted in the addendum. Remember that the percentage figure used will be the maximum amount that the buyer will be charged under the financing condition. If the loan fees exceed the stated amount, then the buyer’s financing condition would not be satisfied, and the contract could be terminated.

Have a question about finances, licensing, technology, marketing, or other real estate issues? Ask Texas REALTOR® by sending e-mail to texasrealtor@texasrealtors.com or fax to 512/370-2390. Not all questions can be answered.

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