First-time home buyers often are appalled by the number of fees and charges, such as for credit checks, appraisals and pest inspections, that must be paid at the closing of the sale.
But beware, say some mortgage bankers, lest your real estate agent slip in still another, a referral fee, or a charge for having steered you to the lender who agrees to finance the purchase.
That issue has set off a conflict in an industry where builders, sellers and lenders often see eye to eye, mostly taking the same stand on legislative and other matters in which they have a mutual interest.
They don't agree on referral fees, or the practice of sales agents using their influence with lenders to obtain mortgages and then charging home buyers a fee for the service.
"You should be aware of them," says Willard Gourley Jr., president of the Mortgage Bankers Assn. of America. "They are fees you don't need to pay for services you don't need to have."
That isn't quite the way the National Assn. of Realtors sees things.
"We are opposed to naked referrals," says Lois Clinton, explaining that such a referral is one in which the agent does little more than supply a name. But when the agent does something more, she said, a fee is justified.
"We believe our position is forthright and honest. It's not something unethical, as the mortgage bankers seem to imply," she said. With changing technology, she explained, agents are more involved in the mortgage-origination process.
Increasingly, real estate agents offer a computerized service in which the home buyer, without leaving the real estate office, may obtain a review of the loan offerings and interest rates of mortgage providers active in the area.
Is that a "naked referral"? It's hard to say. To simply provide the name of a bank active in mortgage lending comes under the naked variety. But any activity beyond that is a cloudy area, one that appears to involve a matter of judgment.
Gourley says: "Lenders have special deals with certain real estate agents--meaning the real estate agent has a special interest in not only completing the home sale, but in where the borrower gets a loan."
As he sees it, and has so stated in material prepared for the media and distributed as a pamphlet, "real estate agents can make extra income by using certain lenders, even though that lender's mortgage rates may be higher."
It's not just the free market at work, he says. Home buyers may pay an additional fee to the real estate agent of up to $1,000 on a $100,000 mortgage "for no service, just for 'referring' the borrower to a lender."
And there's more to it than that, Gourley says. Not only does the borrower pay a fee, but there's a chance the borrower might also pay half a percentage point over market because the lender must recover money paid to the agent.
He calls some referral programs "blatant and illegal kickbacks to real estate agents," and he fears that in a competitive marketplace they will flourish, with one agency or lender copying the other.
According to Gourley, who also is vice chairman of Barclays American Mortgage Corp., Charlotte, N.C., one lender's printed promotional flyer offers real estate agents as much as $120,000 a year for referrals. Other programs, he says, offer luxury trips to exotic sites.
He is urging that the Department of Housing and Urban Development or Congress act quickly to end referral practices. Otherwise, he says, "the integrity of the mortgage market will be damaged."