Not dangerous but more conflicts. Sometimes listing agent doesn't take it very seriously. As I am listing agent, I would prefer to work with two different parties which are the Realtor and loan officer differently. Good luck with your purchase.
One thing to consider as you are shopping for loans is you need to do it on the same day. If you get a quote from one lender/broker on one day and another on a different day you most likely are not going to be comparing apples to apples. Think of the stock market, the cost of funds (money available to borrow) change daily just like stocks. You will want to get a good faith estimate from each lender based on the same type of loan and compare the APR plus the other "add on fees" to get a true picture of value.
Keep in mind that your goal and situation is different from others. You may want to pay a higher interest instead of buying down your loan so that you can write off the monthly interest and possibly have a better tax advantage. This is something to talk with your tax advisor about.
I too have had good and bad experience with Agents who do both. This goes along with professionalism and experience. The best way to save money is to look at the whole picture, the negotiation on the price, terms and conditions of your purchase. The experience of the agent to bring to your attention of areas which could result in loss of value of your home and areas of repairs which could be costly. Understanding what is typical and standard for the area you are purchaing in to avoid paying for something that perhaps the seller would pay for. Using a Buyer friendly purchase contract. Selection a loan which is appropriate for how long you will stay in the house, how long you will keep that loan before refinancing, the terms of the loan in the event you have to sell quickly (pre payment penalties). The way the loan is structured to maximize your tax savings, interest vs PMI.
Yes a lot of variables and that is where the professional, experienced agent and lenders can earn your trust and referrals.
On one hand, you could negotiate a commission discount, indeed, but this have some undesirable causal effects. For instance, an unethical agent/lender may push for more house than you are comfortable with to raise the commission up... or he/she could get you into a loan, when in actuality the opportunity cost of shopping around for the best rates could offset the commission payment.
My advice? Ask your agent for a Net Sheet outlining all the financials involved in the transaction. Sometimes the best value is not what you expected.... and on occasion, paying full commission price can SAVE you money in the long run... crazy but true!
If you aren't in a rush, there is a new web site that, among other things related to lending, will give you a better handle on what loan agents make on each transaction. I hope to be one of the realtors beta testing it. If you want more info contact me offline or make another post and I'll let you know when it will be up an running (i'm not sure i'm allowed to give out the web address yet).
Also, I was told be one of my loan brokers that there also is legislation in the works that will require loan brokers to fulling dislcose what they make on each loan. Once this info is public, you will have a better idea whether the loan agent is steering you towards a good loan or one that makes the loan agent more money.
If you are in a competitive offer situation, do not use your agent as a buyer's agent and the loan agent. Why? Appearences and the likelihood that the listing agent will discount what your agent says in the offer presentation. If it appears to the seller that you are trying to cut corners and "save a buck." The seller begins to wonder what might come down the line if you get in contract. Remember, you want the seller to have the perception that once an offer is accepted, the deal is done. I would rather not have the seller questioning whether your agent can do both jobs and close it in time. That's a chance I wouldn't take. Yes, the listing agent may recommend having you double app with the listing agents lender, but why create more work for yourself when the payoff isn't that big (if any). If your current agent objects, tell him/her your uncomfortable and have them explain why you should do it. Then listen very carefully.
Secondly, how are you going to know what is the appropriate discount? With real estate commissions, what an agent gets paid is fairly straight forward and well known However, with mortgage fees, how do you know what the loan agent is getting paid. Are they steering you to a loan that pays them more so they can "discount" it back to you. I know I'm focusing on some negatives, but that discount that you thought was so great is likely not so. I say keep em' seperate.
To me the question would be whether or not the professional is a mortgage professional or a real estate professional? Lately, when I talk to my lender colleagues they are telling me that the lenders are changing requirements almost daily. IMHO it is probably as important to shop for loans as it is homes. I am not saying it can not be done but as many have pointed out below, conflicts can arise. How much commission will be saved? Compare that to the investment of a home and years of mortgage payments and you might find the value may not be there. If you do go with the same person, it may be good advice to have a back up loan as well.
1) The Realtor's commission is a set percentage and will be paid by the seller.
2) No one is going to work hard on a loan for free.
I would get different people to handle each part of the deal.
I believe it is to your advantage to have your real estate broker to facilitate your loan because he/she has total control of your transaction and will give you sound advice , and save you some money since he may be able to give you discounts on the loan,as the escrow goes on. I have been doing both and I sleep good at night knowing fully well that I will close this transaction in a timely fashion, But if you still have doubts, you can always get a back-up loan. The only constraint is you have to pay for double appraisal and might also pay for processing fee.
All the best to you,
I do both too and believe that it is in the best interest of my clients. I am encouraging my clients to do their homework as well provide the information on lenders that can get them a better loan than I can. The objective is to have a happy client. But what is more important, better I understand their financial situation, better I can help them to find what they are looking for or explain alternatives.
I am both a Real Estate Broker and a mortgage loan officer in CT . When working with a buyer client I stress the very competitive nature of the mortgage business and that no one really knows for sure what the best deal is on financing since it is so much of a commodity these days. I can't say that I have the lowest rate, fees or best approval procees because I may not. But I do know that I earn a fair income in any mortgage I provide and never have to defend it as excessive.
I sometimes have people choose to have me do both. In some cases I have offered to do the mortgage with no income (this is not a standing offer).
In all cases, I have represented the client with the greatest level of service I could regardless of whether I was earning 1 commission or 2 . The priviledge of representing someone in the purchase of their home and the responsibility it carries to do the right thing for the client should be in the forefront of any practitioner who is able to provide both services.
One observation I'll make when it comes to the mortgage business in 2008 is that there are some lenders out there offering great deals for purchases. As a Realtor I want my client to know of those lenders even though they don't work with mortgage brokers. A satisfied real estate client is far more valuable than a satisfied mortgage client.
You should keep in mind the fact that you as the client always have the right to switch to another loan officer for your mortgage for any reason. You may have seen an ad with a better deal or may have found the service on the mortgage application to be less than you desired. Local customs may require you to pay a fee up front with any application, check this for your area before applying with a second lender.
Happy House Hunting to You!
I agree with Karen. I think you are better off working with experts in each area - lending & real estate. This way you have someone who is arms-length from the transaction telling you how much you can afford. Besides, you should not be paying any commission on either the purchase nor the loan. The loan has fees & costs, but having the right lender can save you money by putting you in the best loan for you, not the loan that will make them the highest commission.
An ethical agent will also have your best interest first. And they can potentially help you negotiate a better price or terms to the purchase that will make up for any "saved" commission working with someone who is not as familiar with the purchase contract as an experienced agent. I could name a list of transactions where my knowledge of the contract saved my clients thousands of dollars!
Good luck on your quest. Let me know if you need any further assistance.
Alain Pinel Realtors
Having been on the mortgage processing side and on the Realtor's side of this business, I wouldn't categorize it as dangerous, but do you feel that the person you are working with is keeping your best interest in mind. If you feel, at any time, that the Realtor/Mortage Broker has put THEIR best interest ahead of yours, you may want to get a 2nd opinion on the financing.
I know of agents that also doing financing, but I think it is wise to have an arms-length transaction.
Kind of a checks & balance in place. Just my personal comfort level.
You may in fact get just as good a deal by having a separate lender.
One thing I was taught a long time ago, is to always put the clients' best interest ahead of my financial gain. If the Agent/Broker is doing everything, they would have a vested interest to get the deal done (no matter what) .
If you feel uncomfortable, don't do it...
Good Luck to you!