When the Deal Sours, How Much Can the Broker Keep?

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September 4, 2006

"I took an advance of $500 from the customer, locked the loan, sent the loan file to the lender, and ordered the title and appraisal. Because the borrower’s credit was weak, the lender imposed numerous conditions and document requests, which annoyed the borrower and caused him to drop me and go to another loan provider. Given my investment of time and money, can I keep the $500?"

This type of situation is governed by contract law. You can keep the $500 if your agreement with the borrower regarding the purpose and disposition of the money stipulates that you can. I assume, however, that you don’t have a written agreement with the borrower, and that your oral agreement was ambiguous.

If I was arbitrating such a case, I would allow you to defray any out-of-pocket costs you incurred on behalf of this borrower. On the other hand, I would not allow you to retain any payment for your time and effort. If you expect that, you should have a written agreement that states it.