Three or four times a month I’ll get a email from someone extolling the advantages and riches of serving my client as both their real estate agent and their mortgage loan originator. Combining the duties and responsibilities of real estate agent and loan officer into a single person is a practice acceptable in a number of states, including Arizona.
The topic comes up for debate frequently in real estate blogs. It’s not difficult (at all) to find solicitations for “agent originators” posted on an almost daily basis.
Does it make sense for one person to serve as both real estate agent and mortgage originator on the same transaction?
In my opinion, the answer to that is a resounding NO!
My primary issue is with one person trying to do the work of two. I am a real estate expert. I understand a lot about financing a real estate transaction, but I am by no means as expert as a full-time mortgage professional. Buying a home is likely the single largest financial commitment a person will ever make. You should demand that a lending professional help you through the process. Someone that originates loans “on the side” is likely not the best person for the job.
As a full time real estate agent, I simply do not have the time to gain a thorough understanding of the nuances of hundreds of available mortgage products. I don’t have time to monitor the financial markets and economic trends so that I can properly advise a client when to lock a rate.
Some people have claimed that an advantage to one person handling both jobs is gaining absolute control of all aspects of the transaction. That’s pure poppycock. For me to gain absolute control over a real estate transaction, I’d have to represent both the buyer and seller as real estate agent (which I abhor), I’d have to originate the loan, I’d have to inspect the home, I’d have to repair the home (trust me, you don’t want to see me with a hammer anywhere near your house), and I’d have to be a title company, an escrow officer, and heck — might as well toss County Recorder into the mix too.
I don’t feel any loss of control over a deal when I’m working with lenders. Oh, believe me I’ve worked with plenty that I wanted to beat senseless, but part of my job as an agent is to work through issues with everyone involved in a real estate sale. We’ve worked with dozens of lenders ranging from the brilliant to the not-so-swift. We’re happy to recommend multiple lenders to our clients and we encourage them to interview multiple lenders — just as they should interview multiple agents. Buying a house is a big deal, it’s not something to approach with a “they’re all the same” attitude. Sacrificing expertise to gain some level of control is a lousy reason for doing business this way. A good agent will work closely with a lender to ensure a successful close.
The sub-title of this post is, “One-Stop Shopping, or Half-Assed Service?” Let it be noted for the record that I’m sure there are some “agent originators” out there that can serve their clients equally well as experts in both of the diverse full-time positions they are taking on. They are called Polymaths, and they are few and far between. (Think Aristotle, Da Vinci, Blaise Pascal, Ben Franklin, Thomas Jefferson). More likely, you will find someone who is fairly competent in both professions. Quite possibly you’ll run across someone of complete incompetence in either or both professions.
I prefer to do my job and refer my clients to superior lenders so they can do theirs. We’ll work together to serve the client’s best interests.
[tags]real estate agents and lenders[/tags]
The Phoenix Real Estate Guy was started by Jay Thompson, and I have a little blogging problem... he liked to say...
Jay,
I'm glad to hear you're response. I am opposed to the dual function inasmuch as leaves too much of an opportunity for conflict of interest. Fraud goes where familiarity grows.
Agents could serve the interest of the transaction and neglect to secure the best-suited financing for a buyer. Conversely, imagine a dual agency transaction by an agent who is also writing the loan. Would she be protecting the lender's interests, also?
There are just too many reasons to segregate the functions. Your reason, expertise, is the most glaring
Preach it, Brother Jay! Very nicely done.
Yeah – I am here to list your house. As an added benefit, I am also going to plan your daughter's wedding, pet sit your dog, take your family pictures, and landscape your yard. None of these will be done very well, mind you. Really – what do you expect? How can I possibly be expected to do any one thing well if I am juggling so many other things?
Just sign the listing agreement here…crazy.
Good job, Jay.
Beautiful post, Jay, I couldn't agree more. I'm very happy to have found your blog via Facebook-you're bookmarked!
I wish I knew who "anonymous" was, it was a great comment!
Teri / April – as always, your comments are appreciated!
Lisa – Facebook! I've found myself hopelessly addicted to that thing. At least now I can say it generated a new reader. Nice blog you have there, I added it to my reader! I also requested you as a Facebook friend!
Jay,
My office has entertained this set-up before. They've even gone as far as to align themselves with a specific mortgage lender. It didn't last very long. I was initially jazzed about the idea, but my excitement fizzled out for the reasons you give above.
I'm not and don't want to be an expert when it comes to lending. I'll leave that up to the experts.
Any recommendations when it comes to lenders?
Alan wrote: "Any recommendations when it comes to lenders?"
It'd be hard to go wrong with:
Shailesh and Aimee Ghimirie, CTX Mortgage (480-516-1819)
Jayme Self, Nationstar Mortgage (602-453-7783)
I haven't actually used them yet, but I *really* liked what Andrew and the Chandler eLoan office had to offer. I am NOT a fan of "internet lenders", but these guys are more a hybrid, combining tech tools with a brick & mortar office. I don't have his number handy but will add it later.
And I've actually never used Brian Brady, but I know him. He's physically in San Diego but hails from here and can do loans here. I wouldn't hesitate to recommend him either. (800) 977-8923 x2318
Thanks for the tips. I'm adding them to my contacts right now.
I agree with you 100% (and then some)! There are times when I have over-qualifed clients who don't want their agents to know their personal details or who only want to buy up to a certain point. Using the same person for two jobs takes protection and service away from the buyer.
All I will say is "well put."
Hey Jay,
We have seen a bunch of half-assed Realtors.
WE have seen a bunch of half-assed Loan Officers.
We have seen a bunch of half-assed Agent/lenders or Hybrid Agents.
My opinion a Hybrid is a car. Not a Agent.
Do not worry.
All of the Half-assed people in this industry will eventually leave.
To do something else half-assed.
Sincerely,
Patrick Mahony
Realtor, Loan Officer.
I.T.S. Inc.
http://www.ITSRealEstateAZ.com
480-543-9899
I am a little late but, agree with Pat 100% A hybrid is a car not a real estate professional. When I see Realtor/"Loan Officer" on a busniss card….I know their client is in for a long ride and read it as "Cant make a living at either". Great blog AZ real estate guy!
Hello,
I have a real estate website that has been online since 2002. I would like to exchange links with your website and know it would be mutually beneficial.
Here are two real estate web sites that have automated link directories. You may add your links at any time you like if you're interested in getting traffic from us.
Here are the real estate sites:
USPropertyAdvertiser.com
FreeRealEstateAdvertiser.com (On this site you can add all your real estate listings for free too).
I wish you the best in 2008!
Sincerely,
Edward
I find it very unfortunate that many in the real estate industry are not entrepreneurial. There's absolutely nothing wrong with customizing ones business by integrating both real estate brokerage and mortgage origination. This is especially true since both specialties are interdependent.
What's also interesting is that many in the business fail to realize the opportunity that exists by practicing both, not only from an income perspective, but also from a professional development perspective. Before I started practicing mortgage origination, I was ignorant of the lending process and couldn't help myself or counsel my clients or at the very least get them prepared to obtain a loan, which is a tool that requires some aspects of financial planning in order for borrowers to truly reap the benefits of it.
And the sad reality is that not all practicing mortgage professionals are adept at their craft despite the fact that that's all they do. In many instances, mortgage professionals receive limited or no training at all. So, to conclude that it is reprehensible for a real estate agent (who does get the initial training and continued training) to also practice mortgage origination is truly a misjudgment.
Obtaining mortgage training contributes to a practitioner's financial knowledge tremendously to the extent that one becomes appreciative of the value that financing provides. Additionally, the RESPA laws only pertain to residential real estate, not commercial. So, commercial real estate practitioners can also originate commercial loans on behalf of their clients' interest and manage the real estate activities all within the same transaction which translates to a benefit that many investors and commercial users/clients are able to enjoy, and that is – convenience!
Real estate is a relationship business and let's face it clients like to do business with advisors they're already comfortable with. Personally, when I'm acting in the real estate agent role on a residential transaction I work with other mortgage professionals who handle the role of financing or loan originator. However, from a business perspective, there's nothing wrong with growing ones business through lateral expansion or adding value by obtaining new skills in an allied area that will enable a practitioner to serve his/her clients in a new and improved way.
In my opinion, that is just good business.
I think you hit it on the head with this one. It is tough enough to do one thing good forget trying to do both. I always wonder of the agents who do both are they truly getting the best financing deal for their clients.
I also prefer to recommend clients to excellent lenders that I know will take care of them and get them the best deal on financing.
Nice post. "One Stop Shopping" is a misnomer. Kind of like dual agency. What we really need is to remove all the conflicts of interest from the real estate transaction.
One Stop Shopping doesn't just breed incompetence, it breeds reverse competition. If the client has one stop shopping, I believe that they are far less likely to shop and compare. When competition has no competition, prices go up and quality goes down. Its a basic monopolostic principle.
In addition, one stop shopping in any form removes the checks and balances so necessary for vulnerable real estate consumers. If the title company, inspector, or appraiser works for the real estate firm, exactly how many red flags can they throw out there before they kill the deal and lose their referral business? Who do they really work for – the client or the real estate firm?
So, when it comes to home inspections, loans, title and real estate, avoid the conflicts and don't do it yourself. Better yet, don't use anyone affiliated with your firm either as that has the appearance of a conflict of interest (at the very least) and removes the most important checks and balances that independent servicers provide.
Remove conflicts (even appearances of conflicts) from the transaction and consumers will perceive a much higher level of professionalism from all the players.
Acting as both the agent and loan officer on the same transaction has both the potential to be a great thing and a very bad thing. The key difference between a very good experience for you and your customers and a very bad one is based on the support the mortgage company provides you. I have listed some questions you may want to ask the mortgage company before entering any agreement. These are important because you do not want to spend all your time working on loans when you should be out selling another house. These are also important to know because you want to ensure a good experience for your customer so that you can get referral business from them and have them as a returning customer.
1.Who will price out the loans for my customer? You are on the right track if they will do this for you or if they provide you with software that will.
2.Who will run the loan through the automated underwriting system once the application has been taken? The mortgage company you work with should always do this for you because learning all the different systems is tough and must be done correctly upfront.
3.Who will send out RESPA documents to the customer? Make sure the mortgage company you work with understands how you acting as both the agent and loan officer must be disclosed when sending out the documents and ensure they have a document specialist sending them out.
4.Who will process the loan? Most mortgage companies have their loan officers process their own loans and you don’t want to waste your time with this. Make sure they have a processing staff to handle your deals.
5.Who sends out closing documents for the closing? The mortgage company or the company they brokered the deal to may handle this. If they are a correspondent lender, make sure you are not required to prepare the docs.
Now for some general tips if you decide to become a agent/lender.
1.Get set up with a company that handles almost everything for you so that you don’t need to be an expert to give your customers great service.
2.The more investors or banks a mortgage company works with the better the odds are that they will be able to provide your customers the best deal possible.
3.Correspondent lenders generally can close loans faster than companies that broker their deals out. This can be important if you have a rushed closing that needs to take place.
To address conflicts of interest. Both the agent and the loan officer already have the same goal which is to get the loan closed so what is really the difference? There will be an underwriter that reviews the file one way or another and their job is to try and catch fraud and ensure the deal is good based on the product’s guidelines. I would say that any company who has agent/loan officers should have somebody else order the appraisal. Past that the loan is based on income documents, asset statements and credit reports which despite what you may think are very hard to forge well enough to trick an underwriter. I won't get into details about how to check and see if documents have been foged or not for obvious reasons but this is something they are trained on.
Questions or comment? just post
Jason – thanks for the detailed comment! It makes me glad I have no desire to be a combination agent / loan officer….
Hey Jay,I couldn't agree more. As a Realtor, I find it tough keeping up with just the real estate side. I don't know how these one stop people can have enough knowledge to do both properly.
Hey Jay,I couldn't agree more. As a Realtor, I find it tough keeping up with just the real estate side. I don't know how these one stop people can have enough knowledge to do both properly.