You sound like an ethical agent with the best interests of the client at heart.
However, in my opinion, it does not serve the clients best interests to select ancillary professionals for the transaction. Once loyalties and affections develop over time, you cannot be sure the client will get independent expertise at a time when they absolutely need it.
It's just human nature. If you work with a really good home inspector over several years and become friendly, he might become reticent to kill your deal. Maybe he'll ignore a few borderline issues that the client needs to know about.
I get value pressure all the time from mortgage professionals who just need $5,000 more to "make it work". That's just the real world. There is a lot of money on the line and judgements tend to get a little cloudy.
I know that intentions may be very good, but sometimes there is implicit collusion that can develop when close personal relationships mix with what should be a business transaction.
Therefore, while our ethics rules do not address this directly, I personally consider it a breach of ethics to select mortgage professionals and home inspectors for my clients. What I CAN do is show them how to go about making a good choice, but the choice must be theirs.
Ultimately, I just want them to be in good hands. I don't care who the mortgage company is as long as they are honest, reputable, and put the buyers interest first.
I appreciate your feedback but I must disagree. I am a successful Realtor so I do not need any other income options other than my commissions.
Plus, if I am ever recommending mortgage brokers or lenders, I am representing the buyer, not the seller. So the point about forcing a close when it may not be the best case for the seller should be addressed by the listing agent. For me to address it would be interfering with their agency.
As far as the $12,000 average income for CA agents....this brings me back to my original point. It is often these unsuccessful agents that try to supplement their career by doing mortgages. If they are mediocre selling real estate, will they do any better with mortgages?
In todays market, buyers and sellers need full time Realtors who are deicated to their profession. I spend 70+ hours a week selling real estate. I could not represent the lending side with the same level of passion and integrity and maintain the sales side.
I guess the bottom line for me is integrity. Personal integrity. These are only my thoughts.
I appreciate your thoughts and comments.
Certainly, there are companies that slack and title companies are in that group. When I was writing loans, we found certain ones we preferred. One company I worked for tried to get us all to use the company THEY wanted. Keep in mind, this is the company we work for. There were 20 LOs and they all got bent out of shape over it, because they all didn't like that company and some for the reason you point out. Getting a basis title clearance is not a huge time consuming deal. There is no excuse for title work taking more than 2 days, since the work involved doesn't take that long. It is a simple matter of checking public records. I still think it is a conflict of interest to conduct more than one part of the process in the home buying or refinancing market. Just an opinion.... My site does "pre-approvals" by checking certain eligibility factors and shows you the par rate in your state for a specific scenario. It is very comprehensive and only takes about 3 minutes. For Realty people it can give you an idea of your buyers' profile, regarding what they can afford and gives a great indication as to whether or not that person may be eligible for the loan they are looking for.
That is a huge conflict of interest in my humble opinion. I have argued that here, on Trulia.
The realtor wants control of the entire process and THAT is why they do it. They want to make sure that the deal "goes down" the way THEY are used to.
If you have a lender you prefer, USE THAT ONE. But, in fairness to you and the RE agent, compare their Good Faith Estimates and use the one that gives you the best rate and price.
Use my system to keep them honest. Bill's answer is a good one, and as always, so is Marc's.
I believe in most cases an agent referrs a mortgage lender because they know they will get the job done for them. Ask your agent why they want you to use a specific lender. For my clients sake I want to be sure the loan is in good hands and there won't be any unecessary delays. I hope you are getting good information.
I did not read all of the responses, so forgive me if this is redundant . I refer my clients to a particular lender because he provides the best service of any broker I have encountered. He runs his own shop, so the fees are miniscule. His rates are always competitive. He always brings the loan in at closing. His Good Faith Estimates are accurate. I have dealt with bad lenders before, and it is a nightmare. My guy has personally delivered documents in cases where there is a time crunch. On one occasion, he actually got the loan funded on time despite an outstanding condition to closing. He was able to convince the bank to fund the loan while holding his brokerage check as collateral against the condition being met post-closing. The guy is an absolute powerhouse in terms of getting things done. He is aggressive, and I tell my clients that he might rub some people the wrong way, but you cannot have a better ally in your corner. So while I would never demand that anyone use his services, I do stress that they at least have a conversation with him. It's important to note that I receive no kickback or benefit other than knowing I have referred my client to an excellent source. My company actually has an in-house lender whom I do not refer because the fees are not as competitive.
Margins in brokerage are very low. I know the public thinks that agents and brokers are making a killing, but statistically, it's just not true. If many inefficiencies were cut, fees could be less to the public and brokers and agents would make more.....a winining proposal. Brokerages who own affiliates often make much larger margins from the affiliates than the brokerage biz.
As an agent for a large house, when I brought in a contract and had not provided an "opportunity" for the our mortgage rep, I was asked about it. While I was an independent contractor, and reminded them of that, it did become an awkward situation once in a while. Surely I could refuse, but then I was not seen as a good team player. It was a bit of a tap dance.
Through the years, I saw a revolving door move swiftly in the mortgage depts. Every few months there was a new face. A few were excellent. A few felt "entitled" to my customers. When I had an excellent mortgage rep in house, it did make for a winning situation for all. When the rep for the mortgage company was good, I wholeheartedly recommended him/her, and had several in-house deals that went very smoothly. I also had a few nightmares beyond imagination.
You might receive a recommendation because it is expected, by the company, or the Realtor is playing good politics, or because the person the agent recommends is an excellent mortgage representative. If you ask questions, you might be able to determine the motivation.
I am no longer w/ a large brokeage. We are independent and thrive on the fact that we can always make recommendations based upon what is best for our client.
However, most of the time that same Realtor that is asking you to do this (apply to their mort. company) is not requiring you to get your loan through them, they are just making sure that your pre-approval letter is accurate. In a way they are not only doing their client, the seller, a service, they are also helping the buyer. Now if the Realtor is requiring you to get your loan through their company, well... then that would be a warning sign to me and I'm not sure you can even do that.
But most of the time it is simply for verification of the information they were given.
It is a RESPA violation for realtors to force a buyer to use a specific lender or accept a kickback but it is in the buyerâ€™s best interest for the realtor to suggest mortgage professionals that have performed well in the past.
Purchases have a lot of moving parts and a realtor wants their buyers to have a mortgage professional that will anticipate and fix problems if they arise.
I am a Mortgage Loan Originator for a brokerage in Massachusetts with 20 banks so I can come up with several options for the best solution to suit a buyerâ€™s needs. If there is a problem with one lender then I can take the loan to another lender and still hit the close date.
I am an experienced mortgage broker and can talk further with you if you are interested.
To the extent that you allow any of the different professionals involved to form any form of "cozy" relationships, you are probably going to lose some of your protection, and the system of checks and balances will have a higher probability of failure. Some Realtors like to have control of all the professionals so that things will go "smoothly". However, "smoothly" may not be in your best interest. If you let your Realtor pick your home inspector, who is he going to pick? Someone who doesn't rock the boat. Someone who softballs the process and doesn't make waves. Same with the mortgage company. A Realtor uses an "in-house" mortgage company to make sure the transaction goes smoothly. Meaning, the deal closes and the commission is earned. Again, "smoothly" will be bad for you when the house appraiser overvalues the property to match the price you negotiated so as not to spoil the deal.
The bottom line is you should pick your professionals yourself. Let your Realtor handle his part of the process expertly. But pick your own mortgage company and pick your own home inspector. You need each of these professionals to be loyal to you, not to the "deal".
It's usually so they can control the process. Which can be good, because they can usually get you the best rates and a reputable lender. HOWEVER, if any agent should attempt to pressure you, it might be a red flag. You have to be for your own interest when looking for the best rate. I give my clients the choice to shop around for a mortgage. This makes them feel comfortable looking out for they're best interest.
"Erin - how can a loan officer mess things up?" I am asked constantly by my clients. Dishonesty. Lack of Ethics. Laziness. Lack of knowledge. Let me put it to ya'll this way: there are a lot of moving components in a real estate transaction that must all take place within a 30-day escrow period, and messing any of them up can lead to a disaster! I generally refer my clients to a loan officer who I know will do a good job, and represent my client's best interests as they relate to the loan piece of the transaction. My clients certainly do not have to use her...but if they opt to use someone else, I generally micro manage the loan officer until I feel comfy that they are competent and know what they are doing.
Not all loan officers are created equally. Please - on the first meeting you have with a prospective loan officer (which should take place before you start your actual home search), it is imperative you ask many questions and get a lot of information up front. Remember - you will basically be giving all of your private, confidential financial information to these people, and a home purchase is one of the largest and most significant financial transactions most people ever undertake. Just because Uncle Bob is a loan officer does not make him a good choice to do your loan!
Most top producing agents are closing deals on a regular basis. One of the biggest headaches is the loan process and managing the time lines. In Ga it is our experience that If a broker is involved most deal end up having complications. Mainstream lenders have at least a 30 day turnaround and if the Realtor is not checking their client has submitted all te paperwork closing dates end up been extended.
Most Top producing agents have several lenders they work with on a regular basis and they understand and trust the lenedr to get the deal closed on time. Which is good for you and the Realtor. So they are really trying to help you by being able to control the controlable.
Many times a buyer will select a lender based on what they hear on TV or radio and have no experience with that lender. That lender is not responsible to them and they will only be doing one transaction with them and then the lender is off to another loan.
I guess bottom line is the Realtor would rather work with a known commodity than the unknown.
Simple allow the client to choose their own lender and avoid conflict of interest to avoid another housing burst ,
At the end our Fico lower like 30 points for the applications .
Just a first time buyer keep ethic.
If the Realtor has never done business with your lender, we are more hesitant to work with because we aren't familiar with their business.
When I get a client referral from a Realtor, I know I must come through. If I don't, the Realtor will no longer refer me business. I have built relationships with several Realtors by delivering the rates I promise, coming through on approvals, and also being available to them and their clients for any questions.
However if I do not deliver, there is another mortgage guy waiting to take my place. I am not only working for you but also the Realtor. I need to make both of you happy.
So, Realtors are working in your best interest, and theirs, to connect you to a mortgage company that can be depended on.
Bill Turano - Senior Vice President
1715 Route 88 West
Brick, NJ 08724
While there may be some people who live their lives that way, I would like to say that most of us do not. Smooth means for the client period. I want the inspector I know because I know he is the best at what he does and won't miss anything. My client will be better served. I want a mortgage person that has an impecible reputation and stays on top of things. The people I recommend for my clients are the same people I recommend for me. We are all licensed professionals. I don't work with any Inspectors or Mortgage people that would be willing to lose their license to make sure a deal goes smoothly so I can get to the closing table and be done.
With well intended good faith, we want to assure all involved a smooth and timely escrow. Keep in mind, all buyers should feel absolutely comfortable with there lender of choice. Question your lenders experience with similar properties, will they be using local v. out of area sources.
If they are both, mortgage rep and agent, which is legal and perfectly fine once again you should feel comfortable with this situation and it should be disclosed.
Having said that, I will suggest if you do not feel comfortable you can always shop around.
All the other reasons have already been mentioned!
In any case, if the Agent is over the line with pushing you toward any one person, it may be time to change Agents.
and to make sure there is information flow through the deal. many agents stipulate that you MUST work with their mortgage person if you want the house. You as a buyer have the right to choose your own lender. If the lender generates the right paperwork and is an experienced, high quality lender the realtor should not hve a problem with it. I don't.
You can certainly work with any trusted mortgage lender you'd like. No one should ever make you apply with their lender. I do however required my clients have a pre-approval letter from a reputable lender prior to showing them houses. Its to their and my own benefit.
In all honesty many of my clients ask for a mortgage expert recommendation. I always suggest shopping two lenders possibly three. Its so important to work with a person you have complete confidence will be upfront with you, discuss ALL your options, suggest ways they can reduce your out of pocket expenses and answer ALL your questions - even if that means being on the phone for an hour or longer. I always try to match my clients personality to the lender I recommend. If someone is very bottom line, has bought a home before and knows what they want. I'm not going to recommend them to my 1st time Buyer Lender whos ready to sit down for an hour discussing the process and vice versa.
It is important to know the type of lender you are talking to and how they get paid. Don't be afraid to ask them to tell you... It can make a huge difference on your bottom line at the closing table. Remember if its sounds to good to be true - it usually is. And there's not a lender, mortgage broker or mortgage banker I know of that can tell you you can buy a home if they haven't run your credit report and verified your income and debts. Just some thoughts!
I prefer when a buyer(s) goes through a company that I recommend over them using a lender that I have never heard of. I know these companies are reputable, will give you the best deal, and will close it in a timely manner. It is so important in this market, especially when lenders are going out of business left and right. I just helped a buyer(s) purchase a home, and they went with their own lender. One day prior to closing, their lender shut down, leaving the buyer(s) with no financing and at risk for loosing a $16k deposit. I was able to help them and protect their money by placing them with my own lender who I know is reputable and is not in a position where they will be going out of business anytime soon.
You both are right and I am right too. Let me explain. According to current statistics approximately 10% of agents make approximately 90% of sales. So, an average client has a 9 in 10 chance to work with an agent that is not a top seller. The good news for clients is that there are many very good agents among those who are not among the 10% of top sellers.
RESPA requires that consumers receive disclosures at various times in the transaction and outlaws kickbacks that increase the cost of settlement services. It is perfectly legal for a real estate licensee to be compensated for both (real estate transaction and loan), PROVIDED they (the real estate professional) disclose and perform certain services to the client.
Here is RESPA exception: Payment by a lender to a real estate broker for loan origination services actually performed by the real estate broker (or the lender's splitting of a loan origination fee with such a real estate broker as compensation for such services actually performed) is a permitted exception under RESPA.
There are many brokerages today that provide legally both services. I suggest that we take further discussion of â€“line or to a different forum. I am not sure if we are helping Frankie at this point.
My 1st post below refers to RESPA section 8(a) where a Realtor will be violating the rule if he/she receives a consideration (fee, kickbacks, .etc) from mortgage broker for referring business to the mortgage broker. Likewise, a mortgage broker can not offer a realtor the same to get referrals from them.
I was not talking about realtor doubling as mortgage broker. However, since you mentioned that, here is a fairly recent thread talking about that -
Frankie - to reiterate my answer - A Realtor can recommend mortgage brokers to you because they think it's beneficial to you for your purchase if you request that information. However, they can not require you to use other mortgage brokers or have the mortgage broker call you if you did not give them permission to give out your contact info.
Personally I like the One Stop source for Mortgage and Title services as I have found
that it save the client TIME and MONEY.
You are welcome to shop around, but donâ€™t be surprised if you do not get what was offered.
Good Agent Teams have solid relations with people that will make your transaction go smoothly.
I which you all the best.
The Keyes Home Team â„¢
I am big believer that strong agents have the best referral network. This is why they can do the amount of business they do, they put the needs of their clients into other strong industry professionals.
Or it could be that their broker has a relationship with a lender and ask they agents to recommend them to thier clients.
I hope that you don't mind to use your question as a forum to answer to Cindi.
Let me say that I respect your point of view and appreciate a lot of good answers you have shared with Trulia Voices community. However, in this particular case, I have a philosophical disagreement with you.
I believe that not only agents should provide clients with loan options, but that ability to provide other service than closing a real estate transaction takes an edge from the natural conflict of interest each agent has if the only thing he/she does is selling homes. If real estate commission is agent's only source of income it is tempting for an agent to press for closing without analyzing other options. It might be better for a client not to sell. It might better to refinance, or it might be better to rent the house out and exchange later on as an investment property. If agent with no other income options will steer client away from the transaction, he/she might put himself in a difficult financial situation. Can agent afford to be objective in such situation? Some can and some will despite the odds. However, if you consider that the average income of an agent in California (according to CAR statistics) is $12,000 per year (yes per year), I just simply don't believe that clients can get unbiased advice.
Again, it is just a point of view, but I happened to strongly believe in it. Saying that, RESPA rules were invented for a reason so it is critical to set up guidelines and checks for agents to ensure that all legal and ethical rules are followed.
I am a broker and our agents do both, real estate transactions and offer loans. Whenever possible, we offer several loan options to our clients and encourage them to their loan shopping on their own. Clients come to us and ask for help to understand different options. It is in our best interest for client to obtain the right loan solution, even it is not from us.
So, as long as you do your homework and compare loan options available to you from different sources, going with a trusted mortgage broker of a Realtor might be the best solution. Good luck!
By the way - RESPA rules,don't prevent agents from being compensated for loans. They have to do correct disclosures. Very often agents know client situation best and can suggest best loan and best lender for their client situation.
They should not â€˜wantâ€™ you to apply to their mortgage company instead of â€˜your own chosenâ€™ lender. Whichever mortgage broker to use should be your own choice. If they demand that you use their mortgage company, then it could be steering. And if the real estate agent is getting compensation (a thing of value) for referring business to the mortgage broker, then they will be in violation of the RESPA Real Estate Settlement Procedures Actâ€™.
However, as the others said below, from their professional experience, they might have better feel or more confidence about the practices of certain mortgage brokers than others; and could potentially recommend you to check into those who provide services they can trust.
Two examples I heard last year (before the sub prime fell out) of clients using their own mortgage broker - one would not return phone calls after he pre-approved the borrowers; and this guy supposedly did their last loan; the other one is a close friend of the borrowers; the same morning of sigining the loan doc (meaning the loan would be funded the same day and close would be next day), he informed the borrowers that their loan had prepayment penalty. Not much the buyers could do at that late in the game.
So, it might be good to take a look at your agentâ€™s recommendations; but whether to use their service would be entirely up to you.
1. Brokers now say they can only make money if they control the entire transaction...sale, loan, title, insurance.
2. They get referrals from the lender and want to return the favor to the lender.
3. They know which lenders get the job done. There are lots that quote low rates and can't close or close with frustration to the borrower. This often happens when the client wants to shop for their own lender. I am constantly amazed at the my "brother in law" is a loan broker and will get me the best deal deals. Usually in my experience those are the ones that cost the buyer the most money. Rates are normally competitive, but the fees are way high.
Personally I've done years of research to find a good lender that is low/fair on fees, competitive on interest rates and is ALWAYS on time. I've had him have the paperwork to the title company as much as two weeks early. Ask your title company or realtor and find out how often that happens. He also gives updates each week to both me and the other realtor as to the status of the loan. I don't prohibit clients from using a different lender, but rare is it another one can stack up the one I found.
Do you think that you look like an agent that pays attention to details when you respond to a 7 year old question like it was yesterday?
you guys need to open your eyes.
I am sure realtor who is asking you to do that has your best interest in their heart. Oftentimes agents feels that if the lender is in-house or someone they know, the deal can go much smoother than if its someone with whom they have no prior relationship with. It helps the transaction to be always be under close monitoring, and be in safe hands. Its human to trust people with whom you have worked with over a period of time.
Please feel free to contact me incase you have any concerns and looking for guidance.
Weichert Realtors- Exchange Place, Jersey City
251, Washington Street, Jersey City NJ 07302