Financing in San Diego>Question Details

William Beth…, Other/Just Looking in San Diego County, CA

Is it legal in California for a broker to be the buyer's agent and also the mortgage broker in the same transaction.?

Asked by William Bethard, San Diego County, CA Wed Mar 20, 2013

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14
As long as it is disclosed, shouldn't be a problem!
2 votes Thank Flag Link Wed Mar 20, 2013
It is both legal and ethical. Loan officers and real estate agents are among the most regulated professionals who exist, especially in California. If there was a shadow of doubt about the efficacy or moral code behind serving the dual capacities, it would be expressly unlawful.

On the contrary, by assigning a single contact to take charge of both the real estate and mortgage transactions together, you may realize substantial savings, simplify the entire process, and receive meaningful information with great service.

Many terrific agents focus exclusively on the real estate component, referring clients to tried and true lenders. No worries there. Meantime, other agent-only professionals lean on specialists to handle things “that fall outside their scope”… out of an insecurity stemming from profound ignorance. This is understandable. Their entire livelihood depends upon the outcome of an integral component, over which they have no influence.

But I would challenge anyone considering this notion to ask this latter type of agent… how many of their deals fall apart due to financing? I would venture to guess many.

The number one reason deals fall out of escrow is because the loan falls out. Is it ethical to hide behind ignorance to move unqualified buyers through a process that raises false hopes? Or put deposits at risk? Or spend money on wasted inspections? Or cause financial hardship to sellers, other agents, and support professionals? While the agent, per se, is not at fault… how could it be construed as unethical to strip away the ignorance that could prevent this outcome?

Competent loan officers have a ZERO fallout rate due to financing… because they help Buyers underwrite "approvability", and more importantly… affordability… even before they look at properties.

As a Buyer, would you prefer your agent to be removed from aspects that are beyond their control... or have them step up and be accountable for getting your job done right? Which agent would seem better positioned to deliver authentic value?

To do it right, executing both real estate and mortgage transactions together, takes a great system, and a great support staff. But consider the value it creates where the rubber hits the road.

Just ask the agent-only professional how that new car payment will impact your credit approval… or the difference in pricing between conforming and agency jumbo loan limits… or what the current limits even are… or how your monthly payment is affected when rates tick up right as you are about to make an offer in a competitive bidding situation on a Saturday afternoon. And when the agent defers to some great loan officer, note how long it takes to get a reply, since banking hours don’t start until… well… when this property has already gone to escrow.

I have no problem with folks focusing upon a specific segment of an industry. But let’s please not discount great service and acumen out of misguided fear.
Web Reference: http://www.sethchalnick.com
1 vote Thank Flag Link Fri Mar 22, 2013
Jeff,

What you said is untrue. You could not do both because you have no NMLS license. Having a Broker's license alone no longer enables you to originate mortgages. Only someone who possesses BOTH a DRE and NMLS license could do this.

I am curious why all the agents "advise against" this. Is it because it cuts into your commission? IF someone is license for both and experienced in both I don't know why it would be an issue. There are also plenty of lenders that will allow this. It seems only the people who don't hold both licenses are the ones opposed.
1 vote Thank Flag Link Thu Mar 21, 2013
It is my understanding that it is currently legal but it is not necessarily ethical.

I would use a different mortgage broker or Realtor so that there is no conflict of interest.

Just my 2 cents!

Theresa Mack
Coldwell Banker
(858) 230-4850
theresakmack@gmail.com
http://www.mackrealestate.com
1 vote Thank Flag Link Wed Mar 20, 2013
It is not illegal but FHA does not authorize the agent to be the lender for the buyer and some conventional lenders also don't fund loans when this situation happens.
0 votes Thank Flag Link Sat Mar 29, 2014
Yes it is legal as long as the buyer/borrower consents to it
0 votes Thank Flag Link Thu Mar 21, 2013
Yes, it is legal. However, I do not advise. I am a broker and could do both but I don't feel it is in my buyers best interest. My speciality is helping buyers and sellers find and sell homes, not doing loans. It would be like a quarter back playing on the defense as well as being the quarter back. No bueno!If you need a really good Realtor to help you find a home, don't hesiate to give me a call. 619-887-2800 Jeff Discher
0 votes Thank Flag Link Thu Mar 21, 2013
It is legal but some lenders will not fund a loan when this situation occurs.
Marilia Cathcart, GRI, e-Pro
Broker/Owner
City and Coast Properties
619 -300-5008
marilia@cityandcoastproperties.com
0 votes Thank Flag Link Thu Mar 21, 2013
It is legal but some lenders will not fund a loan when this situation occurs.
Marilia Cathcart, GRI, e-Pro
Broker/Owner
City and Coast Properties
619 -300-5008
marilia@cityandcoastproperties.com
0 votes Thank Flag Link Thu Mar 21, 2013
It may be legal but is it in your best interest? In this age of maximum oversight and regulation you'll find many investors will not accept a dual role of real estate agent and mortgage broker because of the potential risk they would face. You put a roadblock in your path at the start.

Find a professional in both industries and you will receive the maximum benefits since each field is unique and ever changing. As a mortgage professional I am constantly educating myself to stay ahead of new regulations and product changes to make sure my clients get the proper financing for their transaction. The real estate agents I know do the same thing to stay on top of their game.

Still it's also important that your real estate agent and mortgage broker understand each industry so you have a team effort and a smooth transaction. Many mortgage brokers are licensed by the department of real estate as well as having an NMLS license. In California you will find mortgage professionals licensed by either the California Department of Real Estate (CA-DRE) and/or the California Department of Corporations (CA-DOC) plus their NMLS license.

Most importantly ask family and friends for recommendations and check out reviews on this site or others and then decide who best understands your special requirements.

You have received a lot of food for thought from many here and I wish you every success in moving forward.

Michele Kole
Senior Loan Officer
Land Home Financial
NMLS#248631
858-344-5998
0 votes Thank Flag Link Thu Mar 21, 2013
We did it ONCE...... never again...... we lost nearly 1/2 million dollars in the deal.....
Flag Sat Mar 23, 2013
First let me say that I am not one to do this, but I see nothing wrong with it. In fact, it makes perfect sense. California is a unique state where there are different levels of loan officer. One aspect is that to be a DRE licensed loan officer you need to maintain BOTH your NMLS license and DRE. Considering that loan officers on average close 10 times more transactions than an agent just by nature of the business, they are well versed in all aspects of real estate transactions. The loan officer is probably not going to be of much use if you require assistance in picking an area, property, school district, etc, but if you already have a home in mind then I would argue that a seasoned DRE loan officer with hundreds, if not thousands of transactions closed would be an asset. Having one point of contact for all your paperwork with someone well versed in this would be a good thing. DRE licensed loan officers have the same fiduciary duty to their clients by virtue of their license. To say it's "unethical" makes no sense in a buyers agent/LO setup. Obviously it would be a conflict to represent the seller as the agent and the buyer for the loan, but representing the buyer for both the purchase and loan can be a less stressful and much easier process "IF" you have the right person doing it.

And yes, Wayne is right, this excludes FHA originations where this is not allowed.
0 votes Thank Flag Link Wed Mar 20, 2013
Be careful in this situation. You asking that question indicates that you are skeptical and for good reason! Unless you have absolute trust in this particular agent you may be wise to go another direction. Please let me know if you would like further clarification on the many issues that may arise.

In any case you want to make sure that the agent you choose has adequate experience to represent you as a Realtor or a mortgage broker. You would not want to use a surgeon who has only performed 4 surgeries...or a mechanic that has only repaired 3 cars.

Don't hesitate to interview several real estate agents and several mortgage brokers. It is important for you to know that you are going to be well represented before you decide to plunk down your hard earned cash :)

Jessica Hart
858-232-1002
0 votes Thank Flag Link Wed Mar 20, 2013
Hello William~

You have already received some good answers. Yes it is legal, if disclosed. From my experience a Mortgage Broker or a Real Estate Agent are generally much better at what they do if they focus on one or or the other. Most Brokers for major Agencies will frown on this as well. Not to say that a very gifted talented person could not do both, but in general, it is best to chose an agent and a seperate mortgatge broker. Can we help you with anything else?

Chris Gorno
Windermere Real Estate SoCAL
(619)788-4345
0 votes Thank Flag Link Wed Mar 20, 2013
In most cases, Yes, as long as it is disclosed. However, if you are doing an FHA loan, it is prohibited by HUD.

That said, some lenders frown on this, and as their own policy may not allow it.

Hope this helps.

Wayne L. Brown
Mortgage Banker
Security National Mortgage Company
NMLS # 343946
Company NMLS 3116
0 votes Thank Flag Link Wed Mar 20, 2013
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