Home : Blogs : John Lockwood : Elite Properties Sacramento - Broker's Blog

Wearing Two Hats: Experience with being Realtor & Lender

I would be interested to hear from Brokers and / or experienced agents who have experience with doing both real estate sales and loans, whether you do that personally or have different companies (or divisions) set up to do it with different people in each. Also, if that's not you, but you know anyone in ActiveRain who fits that bill, please invite them in to weigh in on the thread.

What I'm nost interested in are things like:

How you feel consumers like having a one-stop shop.
What RESPA issues you learned about and how you stayed on the right side of federal and local law.
Whether you know of any legal precedents or cases where a perceived conflict of interest was decisive (or any other risk management things I should be aware of).
Whether you let a single agent do both, or whether you keep it as separate companies.
Any resources you can recommend on this issue.

If you just have a knee-jerk "that's not a good idea" feeling, that's OK, too, I guess, but I'm more concerned with actual liability than with how other agents might love me or not.

Thanks!

Posted by John Lockwood on 06/11/2007 11:46 AM

Comments (12)

real estate, lending

12 Comments on Wearing Two Hats: Experience with being Realtor & Lender

JUN

2007

I don't know about you, but I have enough to keep track of on the real estate side. I'd much rather find two or three great lenders and let them manage that side of the transaction.

John, while I don't offer both services, I've had many years of builder experience where the buyers were financed "in house". Rates were provided, and if the buyers took advantage, they would get a competitive rate in exchange for an incentive from the builder. While it was largely successful, I wouldn't recommend it for a company that is reliant financially on the lending side (I'm reading that you're a local company). For a large builder to occasionally eat points due to competition was common, I would guess that a less well funded entity might not have that flexibility. Do I like it? Nope. If you're servicing the buyer/seller, it presents yet another opportunity for dissension in an already fragile experience. Why should a buyer/seller have to come to you (after having stressed about it) and tell you that they don't like or want your rate/program, in favor of another- it happened alot. If you can't easily manage whatever the competing rate is, I'd avoid it altogether and stick with a real estate only focus.

I agree with Laurie. I am opposed to Realtors and lenders being one in the same. The car business proves this can be a very profitable marriage (you go to the dealership and finance the car there), but it isn't what is best for the client. How many people love going to dealerships to buy cars?

A Realtor/Loan Officer combo does neither well. I know, I have been both, but not at the same time. It dilutes your focus, and creates conflict of interest and the client deserves better than this.

Guys, thanks for that.

Greg, I do have two or three great lenders managing that side of the transaction. Actually I have more than that, really, because I have agents who have whoever they like, too. From a low-headache perspective it's probably the way to go. However the down side is that I don't make any broker bucks on the loan side of the transaction, and I need to be making enough money to finance my mid-life crisis. :)

However, if I'm reading Laurie correctly, you're saying that I run the risk of more transactions falling out, i.e., decreasing customer loyalty, with both aspects than with only the real estate side?

More input is definitely welcome. Readers?

John, I'm very interested in this too. I'm interested to see more responses.

Janet, I appreciate the note, and I anticipated at least one reader writing what you did, so please don't think I'm picking on you, it's just that you got there first.

First of all, what conflict of interest? My interest as a Realtor is closing a transaction, and as a lender, same thing. Sure, in principle if you have two parties on the transaction, they provide checks and balances, but how many agents actually review Good Faith Estimates, for example? Or for that matter, how many lenders will run the comps for the buyer and tell them if they paid too much, after a Realtor has referred them? No, what a client might hope for in terms of checks and balances more often than not turns into two sharks circling the same victim.

If I only hire and keep honest and ethical agents, it seems to me that controlling both aspects gives me more of an opportunity to ensure the client is treated right, not less. No, people don't like going to car dealerships to buy cars, but I daresay that's because the worst of the used car salesmen work the same way the worst of the used house salesmen do, not because of the financing options. Frankly, I like the fact that I can get 0.9% financing (or whatever ridiculous rate car dealerships offer) versus the eight per cent I can get from the bank because the bank lacks a "conflict of interest". I'm not sure why paying eight percent would be better, or how the absence of in house financing would make Harry Hardsell go away.

John- what I observed was that if the builder rate seemed high, it impacted the buying process, as well. While the builders, in order to satisfy a disgruntled customer, would sometimes break even on a loan in order to solve the issue, if as a small company you're not ready for that, it seems like a gamble. Despite being separate entities, if you have a higher rate, and it's blanketed under your company, you risk a buyer looking at the entire process negatively, not just the mortgage experience (even if you know, as the lender, that the rate offered by a competitor is baloney). Deep pockets solved many problems.

Yes, I defnitely think the best "con" argument (for me) is if you have to start giving away loans -- but (for the consumer) see above my remarks about 0.9% financing. What I'm getting a sense for from everyone is that I should really take a hard look at whether the headaches / liability justify the extra revenue. My sense is that they would once I've got the right manager in place on the finance side, but I'm definitely open to more remarks . . .

I have know several agents that are just plain good at managing both aspects of the sale. It truly takes an organized person to handle both tasks, but in all they love the challenge and their career. I respect it. They are Real Estate agents primarily, but have a vast knowledge of the mortgage business and put all the focus on the client's best interest. Nothing wrong with that. Great post, I notice this subject is brought up often.

Wow, thanks -- hey, we found someone on the "pro" side.

I would think this is a popular topic. I'll have to check the archives.

JUN

2007

I always say "pick your battle." I'm a lender who is licensed DRE, so technically I could work as both the agent and lender. In my opinion, I feel that acting as both requires enormous skill and balance. Personally - I know that I would not have the patience that is necessary to be an agent. On the flip side, I've had many agents tell me that they couldn't imagine having to deal with numbers, etc on the mortgage side, (I wish they'd remember that when they are complaining about the "easy job" of the lender!)

A good agent/lender team allows for "good cop" / "bad cop". We all know that in a RE transaction, Murphy's Law applies and being able to share in problem solving alleviates a tremendous amount of stress.

Nicely argued, Jodi. I argue elsewhere that one should do what you know, so one could say this is just another case of that. On the flip side of the coin, as I see myself more and more as a C.E.O., I begin to think more and more not so much of doing what I know, as hiring what I don't.

Leave a response…

Name:

Email:
(optional)

Comment:

What does the graphic say?

Wearing Two Hats: Experience with being Realtor & Lender

Leave a response…

Featured Listings