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Selling Homes – Isn’t That Enough?

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Yesterday I attended an awards luncheon. On of the things that got my attention was the venders who were at the event. There were a couple of lenders present, who were owned by other real estate companies. First of all I would never use or recommend their services, period.

I am real glad my company does not own a mortgage company, an escrow company or any other service company. The conflict of interest is too tremendous. If I ever leave the company I am with I would not consider an office that also owns and promotes their own lender or escrow company. I can not imagine any added benefit for the real estate agents, just a lot of additional liability.

I know many will disagree with me on this subject. That is OK there are companies just right for them. For me selling homes is enough.

Posted by Randy L. Prothero - Hawaii REALTOR® on 02/22/2008 05:36 PM

Comments (57)

mortgage, real estate sales

Originally posted at: Hawaii Randy's Real Estate Opinions: Selling Homes – Isn’t That Enough?

This post has been included in Hawaii Information
Post is included in group: Realtors®

57 Comments on Selling Homes – Isn’t That Enough?

FEB

2008

Amen Randy, Amen......been there done that, and hated every minute we had to use an in-house Escrow.

Randy
Remember the days when we had to look for outside companies?
Tom BRaatz

I too agree with that...it becomes a conflict of interest...though I met many vendors who were nice ...etc....I do not agree that at some point there is not going to be problems. I really think the company with both escrow and lender...in the same office is a joke.

I'm one of those folks who offers multiple services. I feel upfront disclosure, choice for my buyer and overall top notch service is the way to go. Here in my market, buyers are wanting more one stop shops to "get their monies worth". Since I don't put any pressure on my buyers to borrow with my company, I know that it's their choice. I do know of other firms that just about shove their in house lender down a buyers throat though! I disagree with that!

Kathy - I am glad I don't have to deal with that.

Tom - I my practice I only deal with outside companies. It seems the industry is heading towards more and more in-house.

Sally - it is very dangerous.

More and more brokers are adding these services as "profit centers". Most real estate brokerages find it difficult to make a profit when commission splits are 80/20. That makes other "profit centers" very attractive. As a previous owner/broker, I did not approve nor use such "profit centers" but the brokerage never made a profit either.

Erica- From the first day I have made a business decision to never offer multiple services. Even if it is disclosed there is a big conflict of interest. I feel I can make just as much money selling homes and being the best I can be at that.

Me too, Randy. I don't even use my own companies. No, I have learned far too much from Ed and Fran.

Randy

I am of the philosophy that it is better to do one thing great rather than wear so many hats. I hold both my Mortgage Broker and Real Estate agent licneses but my primary focus is on lending and running my brokerage shop and I have never signed a purchase contract. I have a borrower I spoke to today that we pre-approved and called me today that they found new construction and the builder will only give the $8500.00 seller credit if they use the builders lender. ILLEGAL ILLEGAL...total RESPA and FTC violation. These things happen when you have a all in one shop as well.

Randy, several of the Century 21, Prudential, Coldwell Banker, and William Raveis offices around here, have an in house Loan Officer. They are not very competitive rate wise, and neither is the service that they give to their Borrowers or Realtors.

I tell my agents to do one thing and do one thing well.

We have in-house lender and title, but we aren't required to use them. Our mortgage guy is actually very competitive on rates and programs.

And I have a stack of Jason Sardi's cards, too....

Randy, Have to agree with you completely and there are some companies that ding their agents on their splits if they don't use the in house affiliate.

Hi Randy,

Like mamy of the others, I'm with you on this one. I prefer to wear only one hat.

Missy - It is always safer.

Steven - I have seen lenders requiring buyers use their real estate agent to get the rates here also.

George - I find that to be true here also. There is a Century 21 mortgage that is available from the mainland. They are not affiliated with our office and I refuse to even mention they exist.

Joey - Great advice.

Jayne - In-house lender and escrow? I am glad I do not even have to address that with my clients. Those companies have to add disclosures to every deal whether they use their in-house services or not.

Cameron - I have also heard that from other agents.

Lynda - I think your clients will respect you and trust you better.

Hi Randy-many in our office use Century21 Mortgage...we have a rep...I tried to do mortgages and real estate at the same time...I think that is how I got my gray hair! :)

FEB

2008

Midori - I do not use C21 Mortgage. They are out of state and I see not benefit to my clients.

Funny you posted this, I was showing property to a couple yesterday and they asked me about in house lenders. I told them I felt it was a conflict for any agent to only recommend one and in fact they should be giving them at least 3.

Your Friend in Charlottesville!

In my area all of the large companies have thier own tilte company, mortage company and many of those that do not have recently signed with a lender that allows the realtor to put automated loans through and they are paid 300.00 to do so. It is more common than not here. The same brokers are fighting the banks ability to have homes sales people aboard.

Randy,

The last company I worked with always seem to push for us to use in house but from the experience I had seen...they weren't that great...so I stayed away from them. I still think it could be a conflict...I would rather have the client chose if possible...I actually will recommend a few title companies that I have worked with but that outside and about it. We have disclosures that are signed just letting clients know we have an affiliation but are in no way obligated to use them

I hear you randy! I think you spread yourself too thin when you put your hand in everything

Charles - That is exactly how I feel.

Cindy - You hit on another good reason why real estate companies should not be doing loans. Now the lenders want to sell homes. The public will get short changed either way.

Neal - I have had a couple of seller's reject offers because of the real estate company's disclosure. Besides all the in-house services they have to disclose, some here try to rewrite the purchase contract language.

I personally hate being on the other side of a transaction where the other side where in-house services are being used from the other side. I had two very messy escrows from an in-house escrow. (not neutral). I have also received a couple of bogus loan approval letters from an in-house lender with a large real estate company. That is another side of the conflict of interest.

D. - In a declining market where they lost value, they will be going through their papers with a microscope and remembering how much money you made while they wound up losing money. On the other hand, I hope all of my clients remember how hard I looked out for their interest and went the extra mile.

Absolutely, just with the fact that our Buyers are suspicious enough about what we do. I always give 3 lenders info for my clients to contact on their own so it doesn't look like I'm favoring anyone. I mainly care more about them getting great service, since it reflects on me, and having a lender care about what they can do for the Buyers. Looking out for my Buyers are my #1 concern.

Tammy - As long as you put the client's need first you have it covered.

Been there, done that - not anymore. What about C-21 Mortgage?

Gary - It is a mainland operation that I have nothing to do with.

Randy.... sure, I have a problem with such real estate companies that have both mortgage and title in-house. But my biggest problem is that they push or force the realtor to use these services. And for that fact alone, it's illegal, but you can't really prove it or that nobody does anything about it. They have RESPA laws in place, but they ignore these types of relationships. That's the part that gets me the most.

Overall, just waiting for more and more lawsuits in regards to the so-called one stop shopping.

I left a firm previously that try to force their prefered lender down your throat. I hated the companies products and rates. Im much happier being able to allow my clients to work with whomever they choose.

Jeff - More law suits and more expensive E&O insurance.

DeAndrea - Most clients look to us for assistance in finding a good lender. We better be real sure the lender we point them to will take great care of them. I like not having any tie to the lenders and escrow companies other than the desire to get the best for my clients.

I agree with you Randy. Do one thing and do it right is what I think. There are several companies in my area (mostly small ones) that are real estate & mortgage with one agent doing both. Seems like a big conflict of interest to me. My broker does push C21 mortgage but I have never used them. In the 4 years I have been with C21 we have had 5 or 6 reps here for C21 mortgage. I think that says a lot.

FEB

2008

Jim - I wonder why the broker pushes C21 Mortgage? Do they get some type of payment from them?

A year or two back there was a deal that if you put the Century 21 Mortgage ad on the back of your business cards they would pay half of the price of the cards. I offered to give free business cards to all agents who would put my ad on the back of their cards. No takers. LOL'

Randy - Great post and certainly worthy of being, "Featured." I work for an organization that has its own title, mortgage, insurance, etc. I agree with you, but do think we will see more and more of this, as the Real Estate brokerage, although profitable for the Agents, is becoming less and less profitable for the company. Their options are either merge, close their doors, or diversity and offer other services.

Randy

I had once put my RE license with a local KW Company but was told I could not solicit any mortgage business due to the in house mortgage facility. To say the least that relationship did not last long.

Derek - The other option is to provide the highest level of service to their clients and charge appropriately.

Steven - That would have kept me from ever joining them.

Randy - Of course the best service should always be provided ... that goes without saying, I think.

Derek - I think it needs to be said. I run into many companies and agents who work on price and not service.

Randy

I agree with you, Brokerages put a lot of strain on their agents by making it mandatory for you to introduce your clients to their Mortgage reps. I once worked for a company that if the mortgage rep didn't sign off on your file that they interviewed your client, you didn't get paid!

I think many Brokers forget ... IT VIOLATES RESPA TO MAKE AN AGENT USE A CERTAIN VENDOR. Gary, and SO many others that commented here today - you may want to remind your Broker they are/were breaking the law. Even though we are encouraged to use our in-house vendors, we are not stiff-armed to do so, and we are certainly not forced to do so.

FEB

2008

Gary - That would be an easy decision for me. See ya!

Derek - I like not having them in the first place.

I work at Coldwell Banker SSK Realtors in Warner Robins GA and we have an in-house lender, but it is not mandatory that we use them or even introduce them - which would be called steering. I like having an in-house lender that is available if want to use them. I have used our in-house lender a few times and they were great! It is nice to have someone available that can work up a net sheet to help the customer compare rates and payment information to help the customer find the best deal for them. As long as the lender is local, reliable, and fast it doesn't matter to me which lender they use. Having an in-house lender can be a positive thing to have in your office....

John - The loan officers I work with the most are fast and real good at what they do. I have found it a plus not having the in-house lender. I have made a business decision that I would not work with an in-house lender or hang my license where they have have and push one. Those who use them need to weigh the liabilities as I have and make their own business decision.

We have in-house escrow, title & a lender. It's encouraged to use them but you aren't given grief if you don't. The lender we have now I found when he was with an outside company and I thought he would be an asset so I referred him and he chose to make a move. I also have other "outside" lenders that I can recommend but my buyers have always chosen him after an interview. We also have a very ethical and hardworking escrow team and title company that were told they need to earn our business. And they have but I think this team is a rare find. Most deals where I've had to use other companies in house people have been some of the most difficult deals and worst title, escrow and lending experiences which is why I love my team. We aren't given any type of incentive, other than great service, but again, I think they are an exception to the rule.

Randy, I agree with you 100%. We have a major franchise here that pushes ALL their deals with their inhouse title and mortgage lender. Once they get a buyer they rarely go outside the office for another lender. This is a conflict of interest, I think! They don't give multiple names for people to shop around. They just push all the buyers to their own lender and title company. The consumers don't realize they're being steered to a single company till they're well into the process. All the buyer wants is THE HOUSE. Just get me the house. They don't think about the mortgage or title till they're in the middle of it, and by then the company has snagged their business.

FEB

2008

Sandra - I the past I never recommended a counter offer for an escrow company. After the worst one ever from an in-house escrow company for a large real estate firm, I have had to rethink that. An escrow is supposed to be a neutral third party. They can't be neutral if they are owned by the real estate company.

Erica- I have two potential and one current client who all got less than desirable mortgages when they bought new construction and was financed by the developers lender. No one looked out for their interests when they purchased directly with the developer and their in-house services. The ARMS are kicking in and the hard prepays are trapping them. I can say that not one of my buyers is in the same situation.

I think that we as Realtors should always give at least 3 options for any loan officer,inspector,appraiser,insurance company ,etc. so that the client picks who they are comfortable to work with You know that the mortgae companys and title ecompanies don't tend to stick their necks out to refer to just ONE particular realtor either. It's called CYA.

List to Last! Isn't that the saying? You got a good method. Go with it

I agree with you. I have never recommended a lender from a mtg company that was owned or associated with my real estate office. I believe the buyer needs more choices in lending.

FEB

2008

I understand where you're coming from, but our company does own a lender that is a division of Wells Fargo. They have a penetration rate of about 30-35% and are in the top 5 in the country for customer service. It is great to have a lender right there when you have a client in the office that sees the light. Also, they do some interesting things to entice us. If we use them, our contact information is actually printed on the customers statement every month. they see you and your information 12 times a year with you having to do anything. We also disclose our relationship in a full page form because there are several other companies that we own. We don't own an appraiser. I see that as a huge problems as far as liability.

FEB

2008

I could not agree with you more and from what I have read so does everyone else.

Vickie - I think the number of people you give the client is not as important as the quality. If you give three names and the one they use does a bad job you have more liability than if you gave them the name of one great loan officer, etc., who took good care of them.

Joe - Thank you

Ton - That is a business decision we all have to make. I think my decision on that subject is real clear.

Robert - Not everyone agrees with us, but definitely the majority. It is a dangerous road that some choose to travel.

I believe the conflict exists with these companies. How could it not? To some buyers it makes the process SEEM easier but in reality that is an illusion.

Paul - I don't see how it makes the process any easier. I agree at best it may be an illusion.

Hi Randy,

I dont' know if you remember me, but I met you at the NAR convention last year at the Active Rain party!

I hope your business is doing well! I just finally started doing blogs, so please let me know what you think about my blogs when you have time!

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