Disposition and Refinance Fees in a Syndication
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A disposition fee pays the sponsor for handling the sale of the property, and a refinance or financing fee pays the sponsor for arranging a new loan. Both come out of the deal's money when the event happens, both are optional, and both must be disclosed in the offering documents. Investors question them because they are paid at the moment of the transaction, before investors know how the deal turned out. We do not quote typical percentages, because we have no dated source we can stand behind.
This post is part of our guide to real estate syndication. It completes the set with the acquisition fee and the asset management fee. Rules are as of October 2026.
What is a disposition fee?
A payment to the sponsor, usually stated as a percentage of the sale price, for running the sale process. It is separate from any real estate broker's commission. If a sponsor affiliate is the broker, say so. The sale also triggers the waterfall: investors receive capital and any preferred return first, and then profits are split. See the waterfall and promote and selling a syndicated apartment.
What is a refinance or financing fee?
A payment to the sponsor for arranging a loan, at the start of the deal or on a later refinance. The work includes choosing a lender, negotiating terms and managing the closing. Compare it with what a third-party mortgage broker would be paid for the same task, and say whether the sponsor is also paid an acquisition fee for work that overlaps. See refinancing a syndicated apartment and cash-out refinances.
An illustration
This is an invented example for illustration only. Suppose an operating agreement says the sponsor receives a financing fee of 0.5% of the new loan on a refinance. On a $5,000,000 new loan the fee is $25,000, paid at closing of the refinance. If the refinance returns part of investors' capital, the fee is paid from the same proceeds. If the refinance was needed because the old loan came due and the property is struggling, investors may reasonably ask why a fee is paid for the rescue. Neither the example nor the percentage is a benchmark.
What do investors question?
- Fees for events the sponsor could not avoid. A refinance forced by a maturing loan.
- Double charging. A financing fee plus a closing fee for the same work.
- Fees on a sale below the investors' capital. Some documents pay the fee only if investors are made whole first.
- Undisclosed affiliates, such as a sponsor-owned brokerage.
A sponsor can address these by deferring the fee, paying it only after investors receive their capital, or setting it at zero.
How do you disclose them?
List each fee in the private placement memorandum, the operating agreement and the deal page, using the same words. State the base, the rate, the timing and whether the fee ranks before or after investor distributions. See how to read a PPM and syndication fees explained. Remember that a sale and a refinance may have tax effects for investors; see depreciation recapture on a sale.
How DoorRaise fits in
DoorRaise's own fees are flat and do not depend on a sale or refinance: $1,500 to set up (non-refundable), then $5,000 a year from closing (only if the deal closes). Any sponsor fee for a sale or refinance is a term the sponsor writes into the deal's documents, and it is shown to investors as entered. See pricing and offering documents, or start a deal.
The fees side by side
| Fee | When it is paid | Usual base | What to disclose |
|---|---|---|---|
| Disposition fee | At the sale, from the proceeds | A percentage of the sale price | Rate, base, and whether it comes before or after investor returns |
| Refinance fee | At a refinance, from the loan or proceeds | A percentage of the new loan | Rate, base, and whether it applies to every refinance |
| Acquisition fee | At closing of the purchase | A percentage of the purchase price | See the acquisition fee guide |
We do not quote typical percentages. The point for investors is that each fee is a separate line with its own trigger.
Related guides
- Acquisition fee
- Asset management fee
- Refinancing a syndicated apartment: sponsor steps
- Sell a syndicated apartment: wind-down checklist
FAQ
Is a disposition fee the same as a broker's commission?
No. The sponsor's fee pays the sponsor for managing the sale. A commission pays a licensed broker. Documents should list both.
Can a sponsor charge a refinance fee and an acquisition fee?
Yes, if disclosed. They are different events, but the same lender work can be counted twice, so investors check.
Are these fees required?
No. They are choices a sponsor makes and discloses.
Who approves these fees?
They are in the operating agreement that investors sign. Changing them later usually needs the consent the agreement describes.
Is a disposition fee paid if the property sells at a loss?
If the documents say it is paid on a sale, it can be, which is why investors question it. Some sponsors subordinate it to investors recovering their capital. State your choice in the documents.
Do these fees appear in projected returns?
They should. Leaving them out overstates what investors may receive.
Sources
- SEC: Private placements under Rule 506(b)
- Investor.gov: Investor bulletin on private placements
- 17 CFR 240.10b-5: Employment of manipulative and deceptive devices (Cornell LII)
This article is general information, not legal or investment advice. Talk to a securities attorney about any offering. Every investment can lose money. DoorRaise is not a law firm, broker-dealer, investment adviser or funding portal.