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Loan Officers vs. Real Estate Agents - The Battle

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

Because I have so much respect for so many of you here I had a difficult time writing this - but it's a huge background noise among lenders and brokers. I mean it, seriously, I respect you guys very much and admire the majority of you more than you know. I guess you know I'm prefacing something not so pleasant. Let me say this is a time for us all to work together and I truly want whoever reads this to have an incredible weekend!

Let me also preface with this: These words were very difficult for me to write and publish. Everything I do in this industry revolves around the client. If the client is not satisfied then I have failed in my job. Even when the client is uneducated and limited in home buying experience it is my duty to see that my employees treat them with respect and concern. Ask anyone who has every worked for me even if I terminated them they will tell you it is always Customer First.

I do not think, nor do my employees think, that all agents are like this series of events I am about to recount. Likewise all Loan Officers are not uneducated, greedy thugs who play putt-putt at work while they wait on those huge commissions to roll in. There may be a short one in Texas but he's rare. Please understand the point of my blog is to bring this to attention and make it a point of discussion. It is for leaders in the industry to take note and agree to do something about this attitude which, to your chagrin and mine, is all too common. I know how common it is because after closing several thousand loans I have dealt with it first hand and as an industry leader.

Not wanting to end my week on this note I will now vent and offer a challenge and state my campaign focus for 2009. I know a lot of you are not going to have favorable comments and there will be some feathers ruffled but this is something that, for as long as I can remember, has needed to be addressed on a global scale. Here goes:

I was just briefed on one of the nastiest encounters my office has ever had with anyone (buyer, seller, agents, broker, attorney, appraiser) since the day we opened. It seems the listing agent on a closing yesterday was very upset that the buyer did not use "her lender" to close one of my loan officer's old school friend's loan and did everything she could to make my loan officer and my company look bad in front of the other agent, the buyers and the attorney which we have never used. As far as the loan itself we compared GFE's and beat the "agent's lender" significantly on pricing and it was a very VERY difficult (and relatively small) FHA loan. The agent continually bashed us to the borrowers and got them all freaked out during the process. She harassed my loan officer from day one. I won't go into all of the details but I just listened back to the phone conversations (yes, when we say this call may be recorded we're not kidding) and this woman was extremely hateful and nasty from the very beginning.

It got worse...

At the closing table she made a completely rude and horrible scene in front of the buyers, the sellers, the attorney and the loan officer. She complained about every little thing including how long it took to close (16 days from the day we received the application - 11 days from the day we received the contract) and how horrific our fees were. She lied about her performance in the industry to try and make herself look better and verbally attacked my loan officer about our fees AT THE CLOSING TABLE. She repeatedly brought up how much better her lender would have done with the loan - you can only guess how I feel about that.

God bless the little 88 year old wife of the seller who said (and I paraphrase hearsay), "Honey, you've said about enough and if you don't want me to start on you about your commission and the way you have conducted business here you need to just sit back and relax."

I love real estate agents. My baby sister is one, my niece is one, my nephew is one and many of my best friend's are agents. I even used to own a real estate company and had wonderful experiences with all of the associates and agents. Today, all of the agents with whom I and my loan officers have a relationship are fantastic to work with and are invited to my home and our social events regularly. I won't let one moody little serpent ruin the punch bowl but I do think this needs to be addressed. In fact I have never required my LO's to go to the closing because this is so often how it turns out with the seller's agent.

Maybe there is a class that gives CE's for snotty attitudes from listing agents? Or was this lady just ticked because she wasn't getting her normal kickback from the Loan Officer?

Because of this very experience occurring a many times over the years I have my Loan Officers communicate only with the BUYER'S AGENT and only with written permission from the buyer on OUR form. We ask that the LISTING AGENT either contact us only once per day (not 7 times, not 4 times) or get their updates from the BUYER'S AGENT.

This isn't being written because it is a rare instance - in fact it is relatively frequent. Buyer's agents are almost always very co-operative and understanding and seller's agents are frequently not. I really want to know and understand why and fix it. Nobody on my staff is a rookie, we're not a "tiny" hole-in the wall company - we're a top performer in the state and our pricing beats every major lender or bank we know of. Our turn times are average and we have all sorts of communications tools and every conceivable mortgage solution available.

While reviewing, today, every encounter I have ever had with a broker about doing a marketing partnership I have become more determined to demand industry changes. Adding to that the things I have just learned from one of my ex-employees who went to a MAJOR national lender but returned to us I am even more determined to campaign for RESPA enforcement. Evidently there is something called an MRA or MSA which is an agreement this lender creates with real estate agents and brokers. If the loan is closed with that lender the MRA/MSA gets $500 to $2000 as a marketing agreement (here-say). In addition to that, as a Director of my company, I have been asked to pay as little as $5000 per month for a 350 square foot office and one of my reps was just asked to pay $18,000 per month to have an office in a big local brokerage!

(Interjection: I let a friend read this earlier today and asked him if he thought I should post this or not. He said POST IT! He's an agent. he is a prominent member of AR. He also asked to know more about these MSA's or whatever they are called. I don't fully understand them but from how it has been explained to me by an employee of the major national lender who inherited and uses them is that the agent and the loan officer enter into a marketing agreement and the company pays the marketing fee to the agent as a result of clients being referred to that lender and closing with that lender. Find an old HomeBanc employee to explain them to you.)

I guess I am weary from the battle. We're still open and still closing loans but having to deal with this insipid grief every day is really breaking my back. If nothing else it's the shear lack of respect many agents give to Loan Officers. It's why I have such a difficult time getting LO's to try and contact agents to tell them about the exclusive programs we have - they don't like being "snotted on" for a lack of a better phrase. Are there LO's that don't deserve respect? You bet. Are there agents who don't deserve respect? Obviously. But this is SUPPOSED to be about the CLIENTS. When things like this happen the poor client gets caught in a web of venom and disdain and leaves with a bad taste of the whole home-buying experience. And for these unfortunate folks it was their first time buying.

Is this an attack on everyone who is an agent? Heaven's no! Is it an attempt to say LO's are always right and agents are always a pain? No way not at all. It is a PLEA for BROKERS and MANAGERS to address this situation with the agents who use that company's and brokerage's name. Not even for the sake of the LO who busts their butt these days to get even strong loans funded but for the sake of the CLIENTS who get caught in the crossfire.

HERE IS MY CHALLENGE: Loan officers, all of you, and lenders, stop breaking the law by paying exorbitant fees in violation of RESPA. Big national lenders you know who is doing this and I am going to start pressuring for investigation. In fact with all of the activity in the southeast (allegedly) from HomeBanc and some very large RE companies I can't believe there aren't people who have lost their license forever and maybe even served a little jail time. Loan Officers STOP breaking RESPA by rewarding agents for sending leads to you - you are not a PART of the problem you are THE problem. BROKERS (RE BROKERS) stop violating RESPA by demanding your agents refer only to the associated broker who is paying your office rent or who have figured out another way to loophole a kickback to you. You, too, are THE problem and it's our wonderful clients who are suffering.

Brother and sister, I know this isn't going to win me any popularity points because it is going to hit some right between the eyes. Frankly, I don't care. I have dealt with this snotty attitude long enough, I have missed the opportunity to provide top notch services for some of the best buyers and agents in the nation and I'm fed up.

As soon as I finish my campaign to save buyer's and owner's ability to get a loan my campaign will be full force to demand investigations into lender/broker relationships and to demand a cessation to kickbacks, payouts and payola. It's a cancer in our industry and drives a wedge between the sales side and the finance side. You are either my friend or my enemy on this so please let me know with your comments.

And either way - do please have a wonderful, relaxing weekend. I'm going to go take my beautiful wife home and make her a nice candlelight dinner for her birthday.

See you at the polls in November. I dare you to vote for inexperience in a time like this.

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THE OPINIONS IN THIS COMMENTARY ARE STRICTLY KEN COOK's PERSONAL OPINION AND NOT REFLECTIVE ON ACTIVE RAIN, NOVATION MORTGAGE, or ANY SPONSOR OF THIS WEBSITE.

EDUCATION BEATS LEGISLATION EVERY TIME. Get your clients, friends and family members to a LENDER RUN home mortgage seminar as soon as possible.

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Copyright©2008 Ken Cook. Georgia and Florida real estate investment loans, FHASecure and FHA Home Loans, nationwide commercial hard money and small business loans, non-recourse loans for real estate investors

Novation Mortgage, 2501 E Piedmont Road, Suite 201, Marietta, GA 30062 Georgia Residential Mortgage Licensee 20014. Florida Mortgage Broker Business MBB 0703760 FHA Lender - Equal Housing Lender

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Comments(95)

Wayne B. Pruner
Oregon First - Tigard, OR
Tigard Oregon Homes for Sale, Realtor, GRI

That was an agent who acted unprofessionally. She is probably unhappy with everything in her life. We are not all like that. Every profession has "bad apples".

Sep 27, 2008 01:29 PM
Bill Gillhespy
16 Sunview Blvd - Fort Myers Beach, FL
Fort Myers Beach Realtor, Fort Myers Beach Agent - Homes & Condos

Evening Ken,  If you do not pursue this incredible event you will regret it forever.  This kind of behavior should not be tolerated.

Sep 27, 2008 01:43 PM
Debbie Summers
Charles Rutenberg Realty - New Smyrna Beach, FL

Ken - The listing agent has a lot of nerve trying to dictate who the buyer used for their mortgage.  As a REALTOR I offer resources to buyers for financing and yes I recommend loan officers that I have had success with in the past.... but, if there is a lender that they have a relationship with... we roll with it.  REALTORS and LOAN OFFICERS need to realize that it's not about YOU... it's about the customer, pure and simple. 

It took a lot of courage to write this post... Good for you!

Sep 27, 2008 01:46 PM
Ken Cook
Content, coding, marketing, host. - Marietta, GA
Content Marketer/Creator

Margaret - thank you so much for participating. I know this was a long post ... but ... that's not what it was about. It was about RESPA violations and kickbacks and a continuuing attitude that is encountered on a regular basis from agents who have inhouse brokers and are either pursuaded or required to pressure clients into abandoning even existing relationships. Worse than that it is when kickbacks are involved. I don't think put a sock in it, quit whining and move on is the proper response. But, after 30 years in business it's not the first time I have heard it ;) Thank you for participating your comments are very much welcomed and helpful.

Brian - why not just do away with the mortgage business altogether and the real estate brokers can just come up with the money and finance the homes, do the appraisals, write the loans, do the title work, sell the title insurance, handle the escrow, and do the closing? Heck, I'll retire. Good of you to pop in.

Debbie - "REALTORS and LOAN OFFICERS need to realize that it's not about YOU... it's about the customer, pure and simple" exactly the point. Realtor or not ethics are ethics. The problem does start at the middle and that's where most of us live. Thank you for your encouragement.

Sep 27, 2008 02:04 PM
Tina Allen
Exit Realty Tri-County - Mount Dora, FL

Ken,

     I am so in agreement with your statements.  I am fairly new to this industry and I just commented the other day on kickbacks for Home Warranties. 

I believe most agents do have the best interest of their clients, however, just like any other business (my husband is a Deputy Sheriff and to hear from some- they are all power hungry and think they are above the law) there are the few that make us all look bad.  I know my broker does encourage us to use a few different lenders that he deals with a majority of the time- because he feels it is safer and he can call to find out what is going on at times, but I would definately not feel comfortable if I felt he was shoving them down my throat.  I will use whom I choose and who I think will work best for my client and that's the way it should be.

Sep 27, 2008 02:37 PM
Stavrula "Sam" Crafa, RNC,GRI, CDPE, PSA
Future Home Realty - Seminole, FL
Providing the integrity and service you deserve.

Great post. I understand completely. My previous office had an in house lender. He is a good lender and takes good care of his clients. But he doesn't have the lowest fees and his programs are limited. One of the reasons I left that office was because the powers that be kept shoving him down my throat. I have had several conversations with my previous broker as to why I rarely refer him. Yet he was still there when I left. As it turned out, shortly after I left, he left to go with a company that wasn't being federally investigated!

I recommend lenders to my buyers but never insist on using them. If they choose someone else or already have a lender when they come to me, I do my best to work in a professional manner with that lender. As a sellers agent, I rarely contact the buyers lender. There usually is no need to. i only intervene when I see the deal going south.

11 days from contract to closing and she had a problem with that? The agent was rude, out of line and totally unprofessional. She needs to be reported to the real estate broker, the state licensing board and the local Realtor association.

If you feel someone is in violation of RESPA laws, they need to be reported. Realtors have a hard enough time not being compared to used car salesman ( no offense to used care sales people) . We don't need people like that representing out industry.

Sep 27, 2008 02:40 PM
Lane Bailey
Century 21 Results Realty - Suwanee, GA
Realtor & Car Guy

Ken, thanks for calling me prominent... or did you send it to someone else, too? 

And congrats on the feature.  It was well worth it.  Good job. 

I NEVER pressure my buyers into using someone.  I tell them who I trust and have who I have used.  I do not tell them who I don't trust, unless asked about experiences with a particular mortgage broker... and since there are about 20,000 of them in Atlanta, I don't run into the situation often. 

You're on the "good list".

Sep 27, 2008 02:49 PM
Ken Cook
Content, coding, marketing, host. - Marietta, GA
Content Marketer/Creator

Tina - I think you're going to be just fine. Welcome to an industry we all love in a time that will likely never be experienced again in your career. Thank you for joining us and participating.

Sam - thanks for commenting. Hopefully people will read and learn from comments like yours.

Lane - you are prominent my friend. And for the record I have never offered or given Lane anything of value except words and likewise he has never asked for anything of value or even hinted at a question like "what's in it for me" that I have heard so often through the years from forgotten names and faces. Lane is one of the good guys for sure. We did try one together and that turned into an adventure. It was one of those where if Lane did not know me he may have used that one event to relegate my company to the useless and worthless pile. Fortunately he listened to our feedback and in the end we both lost the deal because of the buyer ... not either of us. Thank you for your input as always.

Sep 27, 2008 03:49 PM
Brian Brady
Matthews Capital Markets - Tampa, FL
858-699-4590

why not just do away with the mortgage business altogether and the real estate brokers can just come up with the money and finance the homes, do the appraisals, write the loans, do the title work, sell the title insurance, handle the escrow, and do the closing?

I'll bite.  Why not?  Put them on the hook for loan performance and Wall Stree and the banks will come running to them.  It's not as far-fetched as you might imagine.  Of course, it's completely anti-consumer but isn't the NAR anti-consumer?

Sep 27, 2008 04:31 PM
Frank & Jodi Orlando
Frank & Jodi Orlando Get Us A Home Realty Atlanta Homes Sale - Cumming, GA

     There was a brokerage firm near us that had a lender next door, the lender paid the rent for the brokerage firm in exchange for referrals. They are both gone now, a result of their relationship? Probably not, but, who knows. I would HATE to be tied to anyone... Nice post.

Sep 28, 2008 01:01 AM
Tiffany Burke
Group one real estate - Corpus Christi, TX

Ken...not a problem. I'm sure your a great guy!   I don't even refer a loan officer unless my clients specifically ask. (I work mostly with buyer's)   Most of the time I have them secure a loan before I even meet with them and then I contact their officer and try to develope some repore with them, after all we are all after the same end here; a closing.  I have nothing against loan officers there are some good, some bad, the same  as real estate agents.  My intended point was that, the good loan officers from past transactions, I refer to clients who ask for help in finding a loan officer to work with.

Great post BTW..

Sep 28, 2008 06:57 AM
Margaret Mitchell
Coldwell Banker Yorke Realty - York, ME
Seacoast Maine & NH Real Estate

Wow.  I am appalled at that agent's behavior.  An ethics violation if I ever heard one and I would not let it slide.  Where was the Buyer Agent in all this?  If I were the Buyer Agent, I would have made it crystal clear that whom my clients choose to use as lender is none of her business.  I would not have let her go off in front of my clients but excused us both to have it out with her at the first sign of this. 

Btw, my own policy is to always recommend at least 3 of ANY services needed: lenders, inspectors, attorneys/title, etc.  Our office policy is to NEVER accept compensation for this type of referral and state law would require disclosure if we did.

Sep 28, 2008 11:10 AM
Lane Bailey
Century 21 Results Realty - Suwanee, GA
Realtor & Car Guy

Ken... I have asked you for advice...  But that is about it.  And the buyer changed her mind on the one deal we tried (not my buyer... and we will be trying some more in the future). 

But Ken is right.  The story coming off of the buyer did not jibe with the story coming from Ken and his people.  But, in the end it was obvious which story was right... Ken's.  Had we not had a relationship where I could call and say "What's up with this...  it looks screwy" and get a real answer, I might have been tempted to drop Novation from my short list.  At least until I figured out that there was something screwy... and it wasn't coming from Ken.

Sep 28, 2008 04:13 PM
Steve Homer
The HBH Group (Keller Williams affiliate) - Round Rock, TX

Ken:  Re: your response to my post above.  The policy of providing the names of three known professionals in the lending industry to a buyer is only performed when the buyer requests mortgage contacts from me and my team.  This is an over arching office policy by my Keller Williams office and not my personal policy and is used in all referral cases to lessen liability for KW and my team.  So if a buyer does not ask, there are no referrals of other lenders; however, we all live in a competitve world.  We as agents/brokers do as well as you in the lending industry.  To ask that no competition be entered into your relationship with a client on your part is unrealistic and will never happen from any perspective in a free market society.  That is what buyer representation agreements are all about in the real estate business.  I would think you would have some sort of binding agreement with a buyer when you begin to work deeply with them to protect your hours of investment with them.  Many lenders I have worked with recently are requiring a retainer check of $400-500 that is never cashed unless the buyer goes elsewhere.

My point is that I believe it is unrealistic in today's world to think that competition will not enter into your transaction with a buyer while it is in process.  That will happen, you simply need methods to keep it from costing you the transaction at the time it is introduced.  Thanks for letting me clarify my previous post.

Sep 29, 2008 12:00 AM
Ken Cook
Content, coding, marketing, host. - Marietta, GA
Content Marketer/Creator

Brian - "isn't the NAR anti-consumer?" The evidence I have seen would lead one to believe so.

Frank/Jodi - that's exactly the type of dealing that should most intered HUD. Thank you for joining.

Tiffany - thanks again!

Margaret - I love your policy. Ever thought about geting licensed in Georgia? You'd do well by name. Thank you for your addition to the discussion.

Lane - ditto. By the way, I finally found gas.

Steve -We cannot, by law, have a binding agreement with an applicant. Oh, if we could you can bet we would. Charging a non-refundable application fee is a joke. I think your lenders who hold that retainer check are headed for trouble with the law. I KNOW they are if they operate that way in Georgia because it is expressly against the Georgia Regulations. Even if it is to cover credit and appraisal they cannot do that here.

You said the operative phrase, "So if a buyer does not ask, there are no referrals of other lenders". That is not usually the case, however. Especially with builder/lender relationships. My run-in with an exec from a major national builder was over this: USE OUR INHOUSE LENDER AND SAVE $3000 at closing. Well, it wasn't a lender fee discount, it was a pricing credit on the home. NOT acceptable and that's how we got on the preferred list at that builder by throwing HUD at them. I like your policy and method - unfortunately it isn't across the board.

Trust me, I understand competition - I operate in Atlanta where there is plenty to go around. My point was when I have worked with a "shaky" buyer to get them to qualify so that now ANYONE can qualify them I am going to be more than a little displeased when an agent entices them to look around or requires them to get a pre-approval from "their lender". I know the agent has no way of knowing how much we have invested  so I really put it on the client when that happens. It is very rare when a client actually leaves us but, as in this case, the agent so pressured them and so confounded them by probably slandering our name that they became confused and began to wonder if maybe she was right. I still think her goal was to get whatever kickback that loan officer may have been offering. Thank you for returning with more information - I really do appreciate it. You're a good guy and we're on the same team.

Sep 29, 2008 02:48 AM
Fran Gaspari
Patriot Land Transfer, Inc. - Limerick, PA
"The Title Man" - Title Insurance - PA & NJ

Ken,

If we in the real estate industry choose to call ourselves 'professionals', we need to act like professionals...no kick backs, no back room deals, no good old boys scheming...straight up honest to goodness transparency!!! Thanks,   Fran

Sep 29, 2008 04:08 AM
Ken Cook
Content, coding, marketing, host. - Marietta, GA
Content Marketer/Creator

Fran - you sum it up nicely with these words, "straight up honest to goodness transparency". That's all I asked for. Someone said something earlier about fear of competition - I am absolutely NEVER afraid of competition. It's these lawbreaker who give and receive kickbacks, participate in good old boy schemes and back room deals who make the competition not competitive which hurts the buyer more than the "loser" in the competition. In a way it is a compliment to you and me because those "competitors" feel so inadequate the only way they think they can compete with us is to break the law. So where IS HUD anyway? Are they not going after these because they don't see the damage it causes?

Sep 29, 2008 05:04 AM
Renée Donohue~Home Photography
Savvy Home Pix - Allegan, MI
Western Michigan Real Estate Photographer

I do not care for "affiliated business agreements."  I like people who can just plain GET THE JOB DONE.

I do  have a favorite lender but the only reason why I use him is because I know he is capable of closing.  I never steer anyone to him other the unqualified.  If I stumble upon a buyer who has their own lender already, I respect that, whether my role is a list agent or a buyer's agent.

We really (collectively) need to open our eyes as a profession and work together just to get the job done.  Instead of working against the grain, we need to realize:  "wow, that person delivered, maybe we can use them sometime."

Open your mind to new possibilities :)

Sep 30, 2008 12:38 AM
Ken Cook
Content, coding, marketing, host. - Marietta, GA
Content Marketer/Creator

Renee - thank you. Everything you wrote is important yet this line stood out the most, "We really (collectively) need to open our eyes as a profession and work together just to get the job done." And still this one makes me ponder changing a couple of things in our Operations Guidelines to better accomodate the reasonable seller's agent, "Open your mind to new possibilities". And of course you ended with your better than Hollywood :) - Thanks for stopping in!

Sep 30, 2008 02:13 AM
Lane Bailey
Century 21 Results Realty - Suwanee, GA
Realtor & Car Guy

Gas is as close as the nearest Taco Bell...  oh, I get it.  You were talking about for the car... 

Did I write that out loud?

Sep 30, 2008 04:00 PM