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Are You Ready To Serve "Happy Meals®"?

Are You Ready To Serve "Happy Meals®"? by Bill Roberts

There is a debate going on in our industry on the "role" of Realtors® and mortgage brokers. You can read some of this debate on Brian Brady's post Can Realtors Clean Up the Lending Business? You Betchya They Can!

Now I personally like Brian but I think he is just a little off-base on this one.

We (real estate brokers) are in a time of great change. Our roles are being re-defined as we sleep. The Internet has changed everything. Gone are the days when we "controlled" the marketplace by our ownership of the multiple listing services (MLS). A virtual MLS exists on the World Wide Web. The Realtor® that defines himself as a "marketing expert" for real estate has just been marginalized.

In order to compete in this new century we must be more than real estate marketers. We need to help our clients with their biggest financial transactions, their purchase of and investment in real estate.

It's all about money. Theirs and ours.

And the source of a lot of this money is in the form of a mortgage.

Mortgage brokers are calling themselves Mortgage Planners these days. They want our clients to utilize their mortgage to improve themselves financially. I'm all for this.

But they want ALL the business. They don't want Realtors® acting as mortgage brokers.

Under California law real estate brokers can act as mortgage brokers, but lenders licensed under Department of Corporations statutes (CFL) cannot act as real estate agents. You see the problem? They (CFL) see us as a threat.

The debate rages over who is better qualified to make these mortgage loans, individually licensed real estate agents or unlicensed CFL loan officers.

I don't think that the CFL lenders can win that debate so they throw up the "issue" of "conflict of interest." Well, I don't think so. There is a unity of interest. Get the best deal for the client at the lowest cost and make the transaction close.

Too many times real estate agents have found themselves "stymied" by the actions of a lender that just didn't "get it" or was even "hostile" to the real estate agent.

LOs see the amount of commission that real estate agents get and a certain amount of jealousy develops. In the worst cases the LO either charges an exorbitant fee (hidden from direct view by YSP (rebate) that may not necessarily have to be disclosed, or he "kills" the deal by omission or co-mission.

NOTE TO REALTORS®: IN MOST CASES THE LONGER THE PRE-PAYMENT PENALTY THE HIGHER THE REBATE.

Now the real issue as I see it is the shape of the emerging market. Banks want to get into the real estate business. They have already gotten themselves back into the securities business (from which they were banned following the 1929 stock market crash). It's just a matter of time, and not too much time at that, and they will be in the real estate business.

The major financial advisory firms are in the mortgage business. They too can enter the real estate business quite easily.

Financial services, including real estate are going to be served up like Happy Meals® at McDonalds®. If we don't join them, they will beat us.

Realtors® must not only continue to be able to do mortgages, but provide good sound investment advice to our clients as a one-stop financial service.

Posted by Bill Roberts - "Baby Boomer" Retirement Planning on 09/25/2007 01:01 PM

Comments (19)

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19 Comments on Are You Ready To Serve "Happy Meals®"?

SEP

2007

Bill, I'm actually on the fence with this one. There are quite a few REALTORS(R) in my area that also do mortgages. I had very good experiences with some and terrible experiences with others. The biggest area of concern for me is the amount of money the agent/mb has in the game(commissions). It's very easy for a MB to "make things work" when he has a large financial reward awaiting him if he does. A good buyer's agent gives the buyer one more layer of protection. So while it may be beneficial to a broker to be able to do both the sell and the loan I'm just not convinced it's in the best interest of the consumer.

I think I'll sit back and see how this conversation unfolds. Good topic Bill.

BB, thanks for sharing your feelings on this. We are in the midst of monumental changes in our industry. If the FREE MARKETPLACE works then the changes will be in the consumer's interest.

Bill Roberts

Bill - "NOTE TO REALTORS®: IN MOST CASES THE LONGER THE PRE-PAYMENT PENALTY THE HIGHER THE REBATE." That is very true, especially troublesome is the fact that there is even more of a rebate by having a 3 year pre-pay on a 1 or 2 year fixed interest rate.

As far as the topic you bring up again Bill, I'm not on the fence. Personally, I think it is a conflict of interest. Though, I'm all about a Free Marketplace so as long as the consumer wins in the end, I'm all for it.

Jason, I know where you stand on this. I read your comments on Brian's post. The free marketplace will decide, we just need to "air" the conversation.

Thanks for contributing.

Bill Roberts

On this one, I'm straddling....while I firmly believe that I could sell real estate better than many realtors, as I've been often told to handle that part of the transaction as well, I tend to err that human nature trumps logic and reason, meaning that while you SHOULD provide a savings by bundling the services, often times, you lose flexibility, and often times end up paying more. Let me explain:

We facilitate transactions, based on our knowledge and experience. To that end, we have to concentrate on being experts at what we do, which frankly, I don't see happening if the intent is to handle the finance AND real estate sides. Now that does not mean that each of us shouldn't be highly knowledgable in what the other does, and frankly, challenge each other if there is a question, as long as it serves the best interest of the client. That also requires a highly efficient person, which I am, based on all of the projects I have going on at one time, yet I still don't feel that I could adequately serve my clients in both capacities. Am I being too hard on myself and others, or just being a realist? That I do not know, but I suspect that I am correct in NOT wanting to have dual responsibilities of realtor and mortgage banker or broker, except in very special or specific circumstances. What I do know is that I highly respect how thorough my business partners are, and feel that as a whole, the industry is better off keeping the two transactions separate.

Bill, I appreciate your position. Thank you for commenting. You are the type of person that this industry needs to handle both parts of the transaction.

The Internet is in the process of winnowing out a lot of unqualified agents and agents that are stuck in an out-moded business model. Consolidation is not an option. It is what is happening.

We both agree that higher standards are needed. That means less people would qualify to do our business. Maybe a unification under existing real estate license laws would be a step in the right direction.

Real estate licensees are legally agents of the client. This is a far superior model than the CFL LO who is an employee of the lender (how do you say ADVERSARIAL RELATIONSHIP?).

Times are "a changing." We can either be ahead of the curve or behind it.

Bill Roberts

Re-defined Indeed! We are in the middle of a revolution and the winner is? With the Banks, it has always "Have it your way", as long as you choose catchup, mustard, pickes ,relish. If you want lettuce and tomatoes, that is a differnt product and you gotta pay more.

The DOJ is in hot pursuit of the MLS and the reshaping is well underway with each breath we take and what the end product will look like isn't so important as the fact that we will all be servants of yet another master. I don't understand how people don't get the idea that a license was required to obtain the information in the first place and unless the laws changed when I was asleep, any mishandling of the information is still a liability of the brokerage. Yet the DOJ is of the strong yet untenable belief that the information should be part of the public domain, just doesn't make sense.

The banks, the mortgage brokers et all, took advantage of Wall Street's greed and provided windows of opportunity to licensees that flew in from a cookoos nest and seized on the public like they were prey in the wild. The unlicensed LO's weren't exactly turning business away either. Once the feeding frenzy ended and the prey looked contaminated, they now want the other half of the profession to pick up and bury the bones and make it all just go away to start up again another day.

Gaul, takes on a more egregious definition day by day.

Sorry for the errors. I have to post and then do a spell check and the corrections. Otherwise, the comments are lost

William I read your comment on Brian's blog. It sounded completely different than this one. i guess it is safe to say that we are in the midst of change.

Just how it all shapes up is going to be interesting. If BofA starts listing real estate at a discount, where will these CFL lenders be with their argument for "separation"?

It is a time to come together.

Thanks for chiming in.

Bill Roberts

Fascinating discussion...I'll be back to check on this one. I learned how to originate mortgages because I wanted to understand the process so I could facilitate transactions on behalf of my clients more effectively. This knowledge has NEVER made me want to cross over and become a full-time loan officer...I was always somewhat uncomfortable with the implications and potential for a conflict of interest. AND also...my job as a real estate broker is challenging enough. :) But...that's just me...

Lola, I hear agents say "conflict of interest" But I don't see it. You are facilitating the transaction for your client. I see a unity of interest. As for your job as a real estate broker, it is in a state of flux. Exactly what it will become will be partly determined by the marketplace and partly by legislation and court decisions stemming from our so-called crisis or "meltdown."

Please come back and contribute to the conversation. Thank you.

Bill Roberts

Bill,

Simply put, I see it as a conflict of interest. My opinion....but I think Lenders should lend, and Realtors sell/facilitate a sale. Keep the pot clean, and the soup will taste better :) :)

SEP

2007

Kathy, thanks for sharing your opinion.

Bill Roberts

Bill- A very interesting debate. We will see how it plays out. Banks entering the real estate industry is not a good thing for the consumer. They are order takers and while they still will get their share of the pie and those agents that are just order takers will need to find another career because they will be ousted. I believe that it depends also in which market you are serving. We deal with sophisticated people, upper income brackets, who look to us more as consultants than agents. They do not have the time nor do they want to take the time to market their properties. That is when they hire us. I feel we've got a good 10- 12 years left in the model that we are working and then we are going to retire, so then , to tell you the truth, I am not going to care what the agent's role is, sounds crass, sorry! Enjoy LIFE! Katerina

Katerina, of course there are niches and you have obviously found yours. However, I think Nestor might be a little more "adaptive" than you say. But all in all twelve more years is a long time 'til retirement. What are you going to do with all the money?

Thanks for commenting.

Bill Roberts

Bill this is a great post and I have several positions on it. I think that Real Estate Agents commissions are seriously misinterpreted. Statistics say that agents who are in the business 5 years or less make less than $5,000 a month on average. What's really telling is that agents who have been in the business for more than 10 years only make $10,000 a month. This means that the average agent is closing very few homes, even those who have been around for a while.

On the jealousy issue, I think that the Agent training model and the pricing structure is completely broken. It's expensive to be a Realtor. I had a conversation with one of my fellow loan officers yesterday about this same issue. He commented that he has never understood why Agents make all the commission while he does all the work. What we don't see is the number of hours spent driving clients around prior to when the deal actually gets written and closed. At the same time, some loan officers are way overpaid for what they do.

What I see happening is that mortgage companies will start getting and operating under Department of Corporations licenses and allowing licensed agents to close loans under that license.

There is no question that an overabundance of "financial advisers", most of which have no real life experience or mentoring are offering life altering financial advise to clients. This in an of itself undermines consumer trust and "Happy Meals®" the product. The only real answer is required education on behalf of all types of financial advisers whether through banking channels or mortgage channels.

The banks are likely to win on this issue, at the expense of the consumer, simply because they have a stronger lobby!

Kate, the real issue is that the public sees the pricing model as "broken" also, and they control the purse strings. Expect changes. A supermarket approach to the business is inevitable with supermarket type pricing. Bundling of services is just around the corner. Better to be proactive than reactive.

And higher standards for real estate agents and loan officers is also inevitable.

Thank you.

Bill Roberts

DEC

2007

Bill:

Thank you for the link. I'm really not decided on this issue. I see both points of view. However, I think the banks wins this one in the very near future.

As long as the consumer wins at the end...that is what really matters. Making sure the consumer really wins is a whole different story...

Jessica, You didn't say if I won the prize.

Of course the consumer is going to win. It is the consumer who is going to decide this one.

Thanks for showing up at my place.

Bill Roberts

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