Additional Information on Fees
Third Party Report Fees
It can say unequivocally that borrowers are always responsible for third party fees. Appraisals, environmental reports, feasibility studies, legal opinions and other consultant reports are always paid for by the borrower. The third parties preparing these types of reports require payment prior to issuing their findings or conducting their research. Some lenders have third parties pay vendors directly but most collect third party fees from borrowers and make payments through their corporate accounts. The reports that third party professionals create generally remain the property of the lender even though the borrower paid for them. Borrowers get copies but usually can't use them in future deals.
Unfortunately, in the world of commercial mortgage lending, borrowers have no leeway in the matter of third party fees; they must pay and they must pay before the service is rendered. Asking a lender to cover third party fees is a futile gesture. Not only will they refuse, but they will consider you inexperienced and unserious just for asking.
Borrowers are entitled to know what reports are required and how much they cost. Most lenders will provide an itemized third party expense report and credit any overpayment to the borrower at closing or issue a refund of the unused money if the deal falls apart.
Due Diligence Fees
A lender will devote significant time and effort into underwriting a commercial mortgage loan. This process is referred to as conducting their "due-diligence". Unlike third party fees, due diligence is an internal expense. Some lenders consider due diligence part of the cost of doing business and they build its value into their overall pricing. Many, however, require the borrower to cover some or all of their due diligence expenses. If an investor has a particularly attractive deal they would do well to shop for lenders with the most advantageous due diligence fee arrangements. It's also not considered unprofessional to question the price of due diligence and negotiate a due-diligence fee.
Avoid Lenders who require a due-diligence fee just to review a loan or take an application, paying someone simply to look at your loan is wholly unnecessary. But, if they like your deal and issue a letter-of-intent or term sheet, don't' be surprised when you see a due-diligence fee requirement before they get down to the serious business of crunching the numbers and checking out you and your project.
Travel Costs
It is common for private lenders to insist on one or more site visits and a face-to-face meeting with principal borrowers. Conventional lenders tend to hire third parties to do their inspections but, especially on large deals, may need to conduct off site meetings with principals. If a representative of a lender needs to fly in to inspect a building or job site or attend a meeting, the borrower may very well be billed for the flight and a hotel room. These costs should be reasonable and stated up-front before the travel takes place.
Not all lenders bill for travel, but if a property owner is dealing with a private firm or a small shop, or if a particular trip is extraordinary, the question of travel costs needs to be addressed.