Red flags on private deals: the ones that cost brokers the file
A declined deal costs you the commission. These three cost the relationship, the fee, and sometimes a dispute — which is a different order of problem.
1. Verbal advice on whether consent is required
This is the expensive one.
On one file a borrower was told, verbally and repeatedly, that a deed of priority and senior-lender consent were “not applicable.” A caveat was lodged on that basis. The senior lender then refused consent.
The borrower disputed liability for the establishment fee — with screenshots of the incorrect advice as evidence — and demanded the caveat be withdrawn within 24 hours. The deal was void, the fee was in dispute, and the reputational exposure sat with the brokerage rather than the lender.
Confirm consent requirements in writing before a client signs an indicative offer. Not verbally, not “I’ll check”, not on the basis of how the last one went. In writing, from the party whose consent is actually needed.
The underlying rule: a deed of priority is effectively mandatory for any registered second mortgage. A statutory obligation on a first mortgagee to make title available for registration of a further mortgage is not the same as that mortgagee’s consent — registering without a priority deed in place risks the borrower being treated as in default under the senior facility. Start the process with the senior lender’s securities team as early as possible.
2. A round-number estimate of the exit cost
Borrowers and non-finance colleagues routinely underestimate what it costs to exit a private facility, and a broker who repeats a ballpark inherits the error.
On one file, a colleague’s estimate of roughly $50,000 to exit turned out to be closer to $160,000 once it was itemised:
- Establishment fee — roughly $80,000
- Legals — roughly $20,000
- Accrued interest — roughly $60,000
That is a threefold error, and it was discovered by someone else.
Always break the exit cost into components rather than quoting a round number. And check separately whether the existing lender already holds caveats on title that would complicate a new party simply stepping into second-mortgage position — that is a structural problem, not a cost line, and it does not appear in any fee schedule.
3. Title that does not match who controls the project
On a near-complete four-townhouse development refinance, registered title was held by the builder’s daughter and son-in-law — not the builder and developer actually running the project.
That is not automatically fraud or bad faith. Family holdings, succession arrangements and asset-protection structures produce this legitimately all the time. But it changes who can offer the security, who must guarantee, and whose consent is needed — and every one of those questions is better answered at enquiry than at documentation.
Confirm registered title matches the controlling party before proceeding. Where it does not, map the beneficial-ownership position and address it in the structure early rather than discovering it at settlement.
The pattern underneath all three
Each of these is a case of an assumption carried forward without being tested — consent will be fine, the exit will cost about this much, the person running the project owns the land.
The cheap version of testing each is: get it in writing, itemise it, pull the title. All three take under an hour, and all three are considerably cheaper than the alternative.
Four more worth watching
- “From X%” pricing in a written term sheet. A rate quoted verbally at 14.5% has appeared in writing as “from 18%”, with a previously agreed broker fee omitted. Query both in writing before the term sheet goes to the client.
- A funder that may be re-broking someone else’s capital while presenting as lending its own. It changes the certainty and speed of the pitch materially.
- Advertised speed and LVR claims from a counterparty with a difficult history. Weigh those claims against your own firm’s experience of them before referring a client.
- A security requirement struck from a term sheet on a promise it will be “worked through legally” later. Get clarity on what replaces it before execution. Security is far harder to negotiate once the facility is in place.
General information only, prepared for finance industry professionals. It is not legal advice, credit assistance, financial product advice, or an offer of finance. Security and priority arrangements have significant legal consequences — obtain your own legal advice. Examples are de-identified observations over 2024–2026.