AgentMortgage

Are you disclosing your relationship with your lender?

Let your clients know, for RESPA's sake
  • Engrained in our DNA as humans is a survival instinct. This survival instinct causes us to put our own interests in front of our client's.
  • If you’re going to accept financial compensation from a mortgage lender for marketing purposes, then you need to disclose this to the buyer.
  • Agents should disclose to the client or customer to whom the recommendation is made any financial benefits or fees, other than real estate referral fees, the Realtor or Realtor’s firm might receive as a direct result of such recommendation.

Engrained in our DNA as humans is a survival instinct. This survival instinct can cause harm to the buyers or sellers we represent because it causes us to put our own interests in front of theirs.

It’s natural to react this way, and there are many ways to combat it so you can do what’s in your client’s best interest — and one of them is to disclose your relationship with your lender.

A way in which we as agents put our own interest first is in accepting financial compensation from mortgage lenders to pay for a portion of our marketing expenses. Too often I see buyer’s agents pushing their client toward a certain lender, or worse, not explaining to them the full extent of their Realtor-lender relationship.

If you receive financial compensation from the mortgage lender, you are required to disclose this to your client that you receive financial compensation — thanks to a little thing called TRID and the National Association of Realtors’ Code of Ethics.

Article 6 in the Code of Ethics states: “When recommending real estate products or services (homeowner’s insurance, warranty programs, mortgage financing, title insurance, etc.), Realtors shall disclose to the client or customer to whom the recommendation is made any financial benefits or fees, other than real estate referral fees, the Realtor or Realtor’s firm may receive as a direct result of such recommendation.”

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Firsthand, I’ve seen it harm the buyer when a specific lender couldn’t close in the timeframe that the seller wanted. This buyer didn’t understand she had different lending options that could execute for her, and because she was being pushed to work with one specific lender, she missed out on the house.

If this buyer’s agent was acting in her client’s best interest, she would have sought out multiple mortgage lenders who could offer different rates and closing timeframes.

Options are a great thing for buyers to have, and the competition between lenders will lock in the best rate. We have seen monthly payments drop as much as a few hundred dollars when lenders start to compete against one another!

If you’re going to accept financial compensation from a mortgage lender for marketing purposes, then you need to disclose this to the buyer, or you are not doing what is in your client’s best interest.

Encourage your buyers to check out multiple lenders to compare.

The moral of the story is that if you are unsure if you have to disclose something, it’s in your client’s best interest for you to do so — so do so!

Ryan Fitzgerald is owner and Realtor at Raleigh Realty. Connect with him on LinkedIn and Facebook.

Email Ryan Fitzgerald.