Real Estate Closing Costs: Beware of Hidden Fees

Seattle, WAIt was supposed to have been one of the happiest times in your life: the day you bought your first home. You saw the house and fell in love with, put in an offer on the house and were successful with your bid. But, like many first time home buyers, you may have forgotten (or maybe you did not know) about closing fees for your real estate transaction.

However, you see the closing costs and they seem a small price to pay for owning your dream home, so you agree to pay them. You do not necessarily understand the closing costs but you assume they must be along the lines of what everyone else is paying. It is only when it is too late do you realize you paid far too much for your real estate closing fees.

This is how unethical real estate professionals get away with overcharging people for closing fees: they know that many people do not understand closing costs and are unlikely to question the fees, so they tack a little extra on the bill. They know that buying a house is a long, drawn out process and by the end buyers often have their heart set on the home of their dreams so they are unlikely to back out of such a major deal over a few extra dollars, or even a few hundred extra dollars.

Lenders are required to provide a good faith estimate of charges to borrowers following the application for a loan. However, information on closing costs does not have to be provided before the application is filed, meaning that a person is already applying for a loan to buy the house, and likely has his or her heart set on owning that home, before knowing all of the closing costs.

Furthermore, some real estate professionals overcharge on extra fees. For example, some may charge borrowers for any courier bills incurred when important paperwork is sent back and forth. But they may be charging the buyer more than the courier company is charging them. Again, they believe people will not notice an additional five dollars for courier charges when it is added to the closing costs.

Some professionals also charge "junk" fees — fees that are excessive because they are already being charged. For example, you may be charged twice for paperwork: once for "paperwork processing" and once under another paperwork designation. Buyers should not be charged two times (or more) for the same service.

Unfortunately, unscrupulous real estate professionals try to get away with overcharging on closing costs. In some cases, they get away with it for a long time, until someone finally looks at their fee breakdown and realizes that something is not quite right. By then, however, the culprit may have taken a lot of extra money from a lot of homebuyers.

If you have been overcharged for closing costs related to a real estate transaction, you may be eligible to file a lawsuit against the person or organization that overcharged you. Contact a lawyer to discuss your legal options.