The real estate nonfiction book genre should be broken down into two subsets: (a) how-to and (b) who-caused-it bubble-burst re-enactments. Books in the latter category aren’t pure nonfiction, though, in my experience.
Sprinkled throughout you’ll usually find some of the more persistent, pervasive and, in my opinion, fictional (at worst) or exaggerated (at best) tales of real estate industry conspiracies.
I realize that there have been individual instances of agents and mortgage brokers, inspectors and appraisers joining forces in an evil marriage to take advantage of the little guy. But I’ve read more than one book recently that flat-out accuses real estate professionals who have a preferred list of service providers of forming a profit-fluffing, consumer-exploiting real estate cartel.
And that is simply not an accurate representative of why the average real estate agent prefers that their clients work with mortgage, escrow, inspection and even appraisal professionals the agent knows and has worked with before.
I’m not perfect — no real estate broker or agent is. But I am riotously passionate, borderline excessively zealous in my devotion to serving my clients’ best interests, and I know many other real estate pros who are, too. I take seriously the loyalty element of my fiduciary duties to my clients, and I personally define "loyalty" as putting my clients’ interests above those of everyone else in the transaction, myself included. I have — and will — throw my own interests and earnings, under the bus before I will allow my clients’ interests to be injured on my watch.
As part of my efforts to protect my clients’ interests, I advocate that my clients work with lenders and other service providers that I know and trust. With every year that goes by, I feel more strongly that my clients should work with the providers I recommend. I know that this is usually a Q-and-A column, but many of the questions I’ve been receiving lately involve:
- how to select service providers during a transaction;
- whether a real estate agent’s recommended service providers are inherently biased and untrustworthy; and
- the broker-appraiser disconnect created by the recent Home Valuation Code of Conduct (HVCC).
Since I feel so strongly about these matters, I thought I’d take a few weeks away from the Q-and-A format to help you rethink this issue.
There are dozens of legitimate, pro-client reasons a real estate professional would want their buyer clients to work with the agent’s preferred service providers. From mortgage brokers to inspectors and escrow officers, there are valid reasons why a collegial, repeat working relationship between an agent and a service provider serves the client’s best interests.
Please note: I am not talking about any sort of paid referral arrangement. In fact, I constantly take care to let my buyers know that, while it’s not illegal for a real estate broker to take a referral fee from a mortgage broker with the proper disclosures, I have no such paid affiliations.
My preferred mortgage broker is world-class. She’s as honest as the day is long. Actually, she does loans for a district attorney who investigates real estate and mortgage fraud — that’s how I met her! She’s also rabid about getting the best rates, lowest closing costs and best terms for our mutual clients. Her business is built on referrals, not just from me and other Realtors, but on the repeat and referral refinance transactions generated by her clientele.
She’s a tenacious troubleshooter, closes every deal she says she can close, closes them on time, works with legitimate lenders (vs. the fly-by-night banks who would pay her more) and takes seriously the fact that our clients rely on her word to remove their loan and appraisal contingencies, rendering their deposit money nonrefundable. Her processing team rocks, too.
And the rocking they do is in stark contrast to many, many of the other mortgage brokers I’ve run into. The mortgage business is very similar to the real estate business in that there is a vast range of competence, ethics and interpersonal skill level possessed by practitioners. You can get vast brilliance or vast dimness, depending on who you work with.
Every once in awhile, I work with buyers who already have their own mortgage professional and choose not to work with mine. Almost every time, the neglect, incompetence or crookedness of the outside mortgage professional has been some sort of major, deal-threatening glitch that me and mine have to work hard to unravel, often by bringing in my mortgage buddy, who could have handled the deal in the first place. From these experiences with other mortgage professionals, I’ve gleaned this list:
Legitimate Reasons My Buyers Should Work with My Preferred Mortgage Broker
- Empowers me to mediate and advocate more effectively on your behalf. If you work with my mortgage broker, I can better communicate your wants, needs and priorities for you — even when you’re not there. Another mortgage broker doesn’t care what I say and may make choices for you without consulting me. …CONTINUED
- Empowers me to help avoid and resolve glitches and provide you with better customer service. In a recent transaction, my buyers came this close to losing a property (and their deposit money), because their mortgage broker gave dangerously incorrect instructions during the underwriting and appraisal process. Had I not been able to spot the problem, my clients’ money and dream home would have been gone with the wind.
- Reliable advice regarding contingency removal. Once you remove contingencies, in most states, your deposit money becomes nonrefundable. One of my buyer’s mortgage brokers advised us to remove contingencies before underwriting was actually done — in spite of my repeat questioning about whether it was OK for us to do so! But for the grace of you-know-who would have gone their deposit money, if not for some mortgage triage.
- Empowers me to help you review and trouble spot your loan documents and closing costs. When you work with another loan officer, I have no way to know what you were promised. So, at closing, I’m not as effective in helping you see whether the rate, terms and payment you got is what you discussed with the mortgage pro earlier. I also can’t make the call for seemingly excessive closing costs and fees reduced or removed when I’m working with a mortgage broker I don’t know.
- My mortgage broker is a great shadiness detector. I’ve had her review other brokers’ good faith estimates and find a dozen exorbitant and above-market-rate costs to which my clients would have fallen victim had they not had her in their corner.
- My mortgage broker often can renegotiate your rate if rates have lowered since you locked, and can often negotiate a free rate-lock extension here and there when an escrow is delayed due to no fault of the buyer. This has literally saved my clients thousands of dollars per transaction on bank-owned property sales that ran way longer than planned due to bank delays.
- My mortgage broker knows local standards and closes deals on time. When you work with an 800-number loan officer or one who works for your bank, you’ll pay just as much as you’d pay my gal, but the long-distance broker will have no idea of or respect for the speed at which local transactions move or the local transfer taxes and other fees that they must be included in your cost estimates. If you’re buying a bank-owned (REO) property and have a per diem late fee per your contract, a mortgage broker who closes a week or two late can cost you a grand or two.
Time after time, working with my preferred mortgage broker has saved my clients thousands of dollars, scads of stress and even been the difference between getting "their home" or not.
The interests of ethical real estate agents and their clients are often aligned, not opposed, on this point. The shared aim of both agent and client is for the deal to close, on time, and for the financing element of the deal to be favorable to the client (who is obviously more likely to refer business to both agent and mortgage broker, the happier they are with the transaction’s outcome).
It’s time to rethink the real estate cartel fiction and trade it for the more realistic, though admittedly less entertaining, reality of a client-centered real estate and mortgage broker partnership.
Tara-Nicholle Nelson is author of "The Savvy Woman’s Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Ask her a real estate question online or visit her Web site, www.rethinkrealestate.com.
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