You're missing a lot.

In researching for a future article on "hybrid agents", I recently asked one of my wholesale reps how many loans programs exist today.

After some debate about what constitutes a difference--for instance is a 5/1 interest-only a different program than a 5/1 amortized loan--we concluded that there are hundreds if not thousands.

I can barely keep up with new programs and changes to existing guidelines, and I get a lot of practice.

Sure, agents can squeeze more money out of every transaction by doing loans, but will that be good for the client?

Good agents will figure out how to do more deals; lousy ones will do a lousy job at both.

Hi Marc,

Thanks for stopping by and commenting. :-)

Love your blog at http://www.lendingclarity.com

You bring up two really interesting points.

1. Real Estate Agents would have problems placing loans due to the number of programs out there?

On the loan program issue... that's what a good loan program database or professionally designed lender list is for isn't it?

2. It would be bad for the end client to work with a real estate agent that also originates?

I guess it's all about transparency and treating the client right.

I can actually see situations where the real estate agent could afford to not charge as much a mortgage broker does because of the bundled income.

It would of course be disastrous to any mortgage broker that live on real estate agent referrals if his or her top 4-5 referral sources started to originate themselves.

I don't see that happening in a big scale in the near future for the reasons I mentioned in the entry.

Looking forward to reading the article you're working on!

Thanks again,
Ola

Hi Ola,

Thanks for checking out Lending Clarity!

A couple more comments:

A good lender list is a starting point. Different A paper lenders, for instance, have different commitments with Fannie Mae and Freddie Mac, allowing one to approve a loan that the others cannot. Could you claim to be providing the best possible service to the client if you were unaware of that? How many agents would know that?

Sure, it's about transparency and treating the client right, but that requires more than a nice smile and good intentions. It requires competence in your discipline, knowledge of the changes constantly taking place within the guidelines of each of those hundreds of loans, and the ability to apply your experience to create a plan that appropriately addresses the client's needs.

I think you are correct that a limited number of agents will try this. Most good agents will find their time more profitably spent getting another listing.

thanks!

Hello Ola- good article.

I've been approached by a lender to originate loans, and after thought and consideration, I chose not to.

One reason is the multitude of programs out there and the knowledge needed to effectively present them.

The other reason is the potential conflict of interest... and my real estate fiduciary responsibility to my client. Would the program I could present REALLY be in the client's best interests? Or would another lender have lower fees/ closing costs/ interest rates?

Would the fact that I can make extra money influence that decision?

By referring a client to at least two or three lenders, that conflict of interest does not exist. And there's no possible liability issues from a one-day future client who threatens to sue because "you gave me a higher rate and ruined my life only to make money on me" scenario......

Ola,

Great Topic! I have asked this as early as 2005 when we started to see the trend. While being in Southeast Michigan, I know of only a couple of real estate agents that at least attempted the duel functions. Most of the items I had to follow related to this subject were from west coast. When I asked why most were not looking into the option of offering additional services and in turn allowing the consumer savings I found two primary responses or I should say positions from the real estate agents and brokers.
First a lot of them did not know what I was talking about.
Second the brokers did not see the benefit and did not support or encourage their agents to partake in advancing the business to be more of a one stop service. Do not get me wrong, many have claimed and such, but only a few are true in my eyes when I think of a one stop. There were many different reasons given by brokers, none that I found to make a strong argument to be honest. The one that I found to be interesting was if real estate agents got into the loan business then the banks would get into the real estate business and that would not make the NRA happy. To this I say Ok.
Third, the real estate sales agents gave just as many reasons of their own, one being time, and once again they demonstrated the lack of understanding of outsourcing as a small business.
Fourth, the mortgage brokers resisted and I can even see where some loans where hampered or future referrals harmed should a real estate agent do the business.
Fifth, a complete and absolute misunderstanding of RESPA.
Needless to say that just the little bit of time that I spent in the study of this was enough to show me that I could almost go into business just promoting the idea. A couple of major broker houses own their own mortgage companies, and others house lenders in the same building as a one-stop option.
So why would I do the research, simple because my customer base in homeowners and I have seen the effect of specialized labor in the American Big Three. I fully understand the benefit to the consumer and the industry. Now the key is to educate the consumer and let the consumer press the issue, but really, who has time for that?

I have no desire to originate loans. It costs about $800 bucks here in MN to become a mortgage broker. From my point of view it is wonderful to work with an experience mortgage pro.

As a realtor in Florida we already wear a number of hats, Marketer, Negotiator, Real Estate Lawyer, and Source for Professional Services. I work closely with our in house lender but receive NO compensation for it and so can unilaterally speak for the fact that he provides excellent service and a quality product. I also recommend another lender when the client has other issues that may cause them to have financing problems.

The rest of the time I work 60+ hours a week helping people to buy and sell homes which is my career. Could I branch out? Dilute my time? Make more money? Maybe - but I would rather focus on doing one or two things well rather than doing many things poorly!