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Beware of the Trickery of the One Stop Shop

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Real Estate Technology with Content, coding, marketing, host.

Since the beginning of the boom there have been many "one stop shops" to spring up across the nation. Not surprisingly many of these originated out of California, Florida and Texas where real estate investing was the largest. It is possible that this posting is moot with the sudden decrease in real estate investments and real estate investment lending guidelines being cut to the bone.

There is one group which appears to still be growing but I doubt their sustainability based on their business model even though their founder and CEO is an experienced financial industry participant. What disturbs me is that I have spent nearly a decade teaching people the RIGHT way to invest in real estate, spending hundreds of thousands of dollars doing so and now this newbie is coming to town stirring up the same old mess I've been combatting for years. So I shall continue, at my own cost, protecting the prospects I value so highly.

Let me state it plainly so I can later say "I warned you."

NEVER buy a property, get an appraisal, borrow the money, and hire the company to manage your real estate when all services come from the same company. Why? Simple, you'll be had one way or another. There is a reason the feds are all over one-stop shops such as builders who have in-house brokers and closing attorneys.

So before you fall for the wholesale release of your freedom of choice ask yourself how wise it is to choose the same representative to handle ALL of your transactions. 

Just a little heads up, I'm not mentioning the company by name for obvious reasons but I will say they are out of California, are now in about 4 or 5 states with most locations in California, are opening in Georgia, are headed by a man with good credentials on the finance side and have a fairly slick presentation. They depend on excitement and emotion to get you involved, they claim a MUCH higher number of participants than they actually have active and consider you a crop to be harvested. 

Copyright(c)2007 Ken Cook. Ken is a real estate investor, trainer and author as well as a prolific real estate blogger and Director of Operations at Novation Mortgage. Novation specializes in real estate investor financing, FHASecure Refinance, Georgia Home Mortgages, Florida Home Loans, and small commercial lending nationwide.

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I started writing on Active Rain in 2006 when I was representing the mortgage industry. I am no longer in that industry and many of the older posts contain outdated information. Please do not contact me for LENDING or MORTGAGE questions but rather contact a licensed mortgage professional from your area. I have always been in marketing and branding and that is still what I do. Thanks for reading!

Comments(22)

Bob & Carolin Benjamin
Benjamin Realty LLC - Gold Canyon, AZ
East Phoenix Arizona Homes
Agree. It's not a good idea to have all the eggs in one basket.
Dec 28, 2007 03:48 PM
Ken Cook
Content, coding, marketing, host. - Marietta, GA
Content Marketer/Creator
Bob/Carol thanks for your comment!
Dec 28, 2007 03:51 PM
Marlene Scheffer
Realty Station - Bremerton, WA
Realtor to Kitsap County, WA

I agree with what you are saying.  I will add, though, that what drives new agents as well as clients to these places is the money.  For agents, they can make a lot more money doing all business is one place, since they can get some sort of fee for "referring" business to people within the company.  For clients, it "appears" that the fees are better in the short-term, not realizing that it can cost them so much money in the long run.

I worked at a place in California (wondering if it is the same company) where the agents were told that if they filled out the loan app, they got 25% of any commission.  That's all the agent had to do, and because they were performing a "service", it was perfectly legal.  I kept my mouth shut, and quietly left the company.

Yes, it's legal, but is legal the same as ethical?  I'm sure in some cases it is, but not in all cases....

Dec 28, 2007 04:14 PM
Christina Williams. REALTOR® TN property search & local insights
First Realty Company - Crossville, TN
I have read up on this a little over the last few months and I'm glad you posted about it. We have a couple here in TN. Thanks for the advice and heads up.
Dec 28, 2007 04:16 PM
Ken Cook
Content, coding, marketing, host. - Marietta, GA
Content Marketer/Creator

Marlene - thanks for your view from the inside. In Georgia anyone getting paid from the mortgage side must be a W2'd employee of the mortgage broker or lender. Starting in 2008 they will also have to hold a separate mortgage license to even take the application. So, it's not exactly legal everywhere. This company started in 2002 from the mortgage side and spread to the other. I'll admit I had a stake in a real estate company for a while but the two NEVER mixed.

Christina - I'll stay on top of it until all their secrets are told.

Dec 28, 2007 04:28 PM
Katerina Gasset
The Gasset Group & Get It Done For Me Virtual Services - Provo, UT
Amplify Your Real Estate & Life Dreams!
Ken -There are agents that force their clients to use their one stop shop at their brokerage and that is just plain wrong. I wish I could make my clients use my mortgage person so the deal will get done instead of fall apart or wait til its falling apart before getting them moved over, but that is not my call to make. The buyer is free to go with who they want to go with. Katerina
Dec 28, 2007 04:40 PM
Brian Block
RE/MAX Allegiance, Managing Broker/Branch Vice President - McLean, VA
Northern Virginia & D.C. Real Estate
Ken, it's like that expression "Jack of all trades, master of none."  I think some of these companies believe that by offering a "one stop shop" they'll attract more consumers and keep the business in-house.  However, it is difficult to be competent in all areas and bundling services like this does not always benefit the end-user.
Dec 28, 2007 10:31 PM
Bryant Tutas
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time

Ken, I just read an article yeaterday in Realtor mag talking about the benefits of having a "one stop shop". Of course the lady that wrote the article owns one. Anyway, in the article, it was telling us how to respond when a buyer comes to you who is already prequalified/approved. Her suggestion was to say this: paraphrase "Well that's great! We do however offer a free service through our company. Let me make an appointment with our loan person so they can review what you have"

Doing the buyer a favor of course.

Dec 29, 2007 12:12 AM
Ken Cook
Content, coding, marketing, host. - Marietta, GA
Content Marketer/Creator

Katerina - I wish every borrower would use my company, too, but that's not realistic. When Homebanc was around and paying $3500 per month rent for a 100 square foot office inside of real estate offices there were many MANY times the borrower came to us even though the agent had "suggested" they use the in-house person. We beat them every time. You never know who the "other" lender is.

Brian - if you read Debe's reply she insinuated that the atmosphere may lead to the "do anything to get it closed" environment. I am no longer a wholesale lender (retail only) but I would be suspicious of files from a one-stop shop because people working together in one roof where a file may not close are more likely to conspire to find a way to "make it work" if you know what I mean.

Bryant - what did she mean by free? Are they going to do the loan for free? Or is there just no application fee like everyone else? From my experience we have always been able to beat any "in-house" loan officer without even modifying our normal pricing. Then again I've always been cheap! 

Dec 29, 2007 01:58 AM
Bryant Tutas
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time
Ken, She was saying the review of the current prequal is FREE. Basically just trying to get the buyer in front of the in house lender to try and swipe the loan. I just feel that is a very unethical practice to be teaching in a REALTOR magazine. This issue just happened to have the COE in it as well. Go figure. 
Dec 29, 2007 06:52 AM
Ken Cook
Content, coding, marketing, host. - Marietta, GA
Content Marketer/Creator
Bryant - I'm thinking for sure that is STEERING which is not just a COE violation ... it's a Federal Law violation--I'm guessing in the anti-trust arena.
Dec 29, 2007 07:28 AM
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

One stop shop = Affinity

Affinity = Kickback

Kickback = Steering

Steering = No consumer choice.

Nuff said.

Dec 29, 2007 08:36 AM
Renée Donohue~Home Photography
Savvy Home Pix - Allegan, MI
Western Michigan Real Estate Photographer

The first brokerage I worked for was a small independent but a one stop.  Drove me nuts as they constantly shoved the <inadequate> mortgage and title services down my throat.  I tried mortgage on my MIL and they rate jacked her. 

I tried title on another client and the title lady was an emotional train wreck who was breaking up with her boyfriend and would cry on my shoulder everytime she saw me.

They got another mortgage company in there and I had another client use them for a bridge loan which turns out the company owner was the financier and the day after it closed he screamed at me: WHEN ARE YOU GOING TO GET THEIR HOUSE SOLD and was pressuring me.

Hells no!

So maybe it was just me that had a bad experience but I like customer service and choices for my customers :)

Dec 30, 2007 03:48 AM
Sarah Eubanks
Hill Valley Financial Services - Oregon City, OR
Preferred Oregon Loan Consultant & Notary Public
Hi Ken ~ Excellent points and ones which I wish could be changed by legislation.  Then again...let the buyer beware is known for a reason!
Dec 31, 2007 05:44 AM
Ken Cook
Content, coding, marketing, host. - Marietta, GA
Content Marketer/Creator

Renee - I believe your experiences are common. It's the same reason socialism and government contracts drag down the nation. Ever deal with a closing agency before they get the HUD contract and then again after?

Sarah - we really don't need any more legislation. In fact I am going to push for an examination of these relationships based on existing legislation and regulation. If you come across anything that will help us please let me know! Thank you for your comment. 

Dec 31, 2007 05:55 AM
Fran Gaspari
Patriot Land Transfer, Inc. - Limerick, PA
"The Title Man" - Title Insurance - PA & NJ

Ken,

The virus (one stop shop concept) has spread through Pennsylvania as well!!! Thanks for a great post,   Fran

Dec 31, 2007 09:00 AM
Ken Cook
Content, coding, marketing, host. - Marietta, GA
Content Marketer/Creator
Fran - thank you for ringing in. Good of you to call it a virus--let's see if it becomes pandemic before we rise up and put a stop to it. What we don't need is more regulations to stop what most of us agree is probably a violation of RESPA, anti-trust and almost certainly a few state laws. UNLESS they can demonstrate that there is absolutely no confabulation between the groups--which would be very difficult to prove if all or most of those parties are named on the closing documents.
Dec 31, 2007 09:08 AM
David Miller
Saint Petersburg, FL
Florida Appraiser & Licensed Real Estate Broker

Ken, Some very good points. I own a Real Estate Brokerage and an Appraisal Company. I will not allow any of my appraisers to do an appraisal on a property that I am representing the buyer or seller on. Even though the appraisal would be an unbiased opinion of value of the property there is still the fact that others may think that there was something not right. It has the appearance of a conflict of interest.

Unfortunately there are some one stop shops out there that put making a buck above the best interests of the buying public.

 

 

 

Jan 03, 2008 12:10 PM
Ken Cook
Content, coding, marketing, host. - Marietta, GA
Content Marketer/Creator
David - keeping individual deals separated is definitely smart. As a lender and head of the quality and compliance department I can tell you any lender doing their job would discover the connection and ask questions or require a review appraisal "just to be sure" -- as you already know. It's more of a problem when the real estate agent is the loan officer or the lender has an office inside the real estate office. DISSCO from Interthinx helps us discover some of these things. The rest are found by good old quick but usually accurate detective work. Appraisers are often real estate agents, too, so that's not highly uncommon. Thanks for your comment!
Jan 03, 2008 01:40 PM
Rebecca Schrader
Competitive Insurance of Dundee - Dundee, FL

A jack of all trades, and master of none.  Is this who you want handling the largest financial decisions?

While there are certainly cost savings having everything in one place, I find it hard to beleive that you have the best people working for you in each important catagory. 

Jan 14, 2008 01:39 AM