What is a discount brokerage? Over the years the term has come to be interpreted as discounted cost for discounted service, which is a time tested loser. Discounting service is the surest way to become 'out of business'. Discounting cost is often a strategy of less experienced brokers trying to gain market share...and often futile in attempt.
The blind labeling and stereotyping of a 'fixed fee for services' mortgage provider as a 'Discount Broker' is short sighted, to say the least, without looking further into the facts. As someone who has overseen the origination of over 2500 loans, and fixed my costs to my borrowers, I can factually tell anyone the following:
- Clients like to know what they are paying for.
- Clients don't mind paying for something of relative worth.
- Clients don't like to have to interpret a laundry list of junk fees.
- Traditional mortgage businesses pay way too much attention to the profit side and not nearly enough attention the loss side, of a P&L. Implementing measures to decrease cost can be more effective and efficient than trying to increase gross profit.
- A fixed cost for service is not a 'discount'. It is (should be) a fee calculated on expense, internal efficiency, and focused/local marketing studies to determine a practical price tolerance for all parties. To a client who has a $150k loan amount, the fixed cost will look like anything but a discount, while the $500k borrower will view it as a DEAL!
- Niching your business to predefined types of borrowers improves close ratios, service, profits, and referrals. Trying to be everything to everyone is a frustrating and expensive proposition and dismal experience.
- Charging less to originate a No Doc or SISA loan than a Full-Doc loan makes sense, especially to the client.
- Charging more to originate a loan because the loan amount is higher doesn't make sense, especially to a client.
- Agreeing to a pre-negotiated fee based on work involved protects the broker and the client.
- Exotic sub-prime loans and borrowers that require a mountain of paper and leg-work, doesn't work for a fixed cost model, (see: trying to be everything to everyone).
We all tend to mock what we don't understand. It is only through educated dialog, mature question asking, and further hypothesis, to yield well conceived answers, can anyone hope to fully understand the true nature of an abstract concept. Not everyone is capable of this, but I digress.
Let me finish by saying i've never discounted my services. My time is worth money, good money...and as a fair guess I'll say my 'discounted' appearance pays me more per hour than 95% of other mortgage pros out there. The education and tutelage I provide my clients is second to no one, and is 'paid back' ten-fold every single day.
No fluff and stuff lip service, I prefer to 'keep it real'.....
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Hi Jeff, the term "discount broker" is really not a true statement. If fees and commissions cannot be fixed then the word discount really does not apply. In my business, I compete with less expensive Realtors everyday and sometimes I lose business because I am not willing to reduce my commission. I've never had a problem with lower cost biz models. I feel there is enough biz for everyone. As long as the consumer knows what they are getting, let them decide. I can't help everyone. I do however have a problem with "discounted service" because then I usually end up taking up the other Realtors slack. So as long as someone can provide quality service at a lower price, then I say have at it.
Sorry, I forgot to read the boycott memo:) All things will pass with time.