And the county prosecutor is my defender! It makes about as much sense. Do I think a real estate agent can be a loan officer? Sure. Do I think a loan officer can be a real estate agent? Absolutely. Do I think either can be good at both?
That depends on the quality of understanding and commitment I think I deserve. If I think I deserve a real estate agent who does loans to represent me in either and I'm willing to compromise my desire for quality in either one then sure, let me have a real estate officer ... or is that loan agent.
Look, I know this is offensive to a handful of people. But the truth is real estate laws and regulations are quite voluminous and mortgage regulations and underwriting guidelines change daily. I know you can find mortgage brokers even on AR who are glad to let a real estate agent act as a loan officer to accept applications and pay 20% or more in commissions but how safe and how wise is that? Is that really transparent and good for the industry?
I'm glad my customers know how to separate the two and find and trust the best for both services.
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.
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Here, in California, we are even trying to make it a totally separate license. It just doesn't make sense to try to do both well. Also, keeping the entities separate helps with checks and balances. If there is an unscrupulous person involved, usually the honest one will see red flags and start asking some very pertinent questions. We usually cringe when we find out that the buyer of our listing is using the lender/agent person because it means we have to correct the errors made by the "inexperienced" agent.
I have been saying this for years. But then I don't care too much for In_house Loan Officers either. They tend to be lazy people working only the easy deals and the tough ones, come to outside sources like myself.
I recently had a client that was turned away from Coldwell Banker Mortgage because they did not score high enough. When I looked at their credit, the only thing that was negative and bringing down the scores were medical issues. Everything else was paid as agreed. I gladly did this loan for the clients and hope the Realtor will keep me in mind rather than to go back to that in house lender who did not want this business.
But Realtors and Loan Officers I have seen try to do both tend to fail miserably. They either let the client down on the Real Estate side of the transaction or they mess up the loan and ask me to fix it for them.
Good post. Hope more people learn they should be specialized in one or the other. Not both.
Ken.. I agree 110%... and what's sad is that until they crack down on this, we will always have it. And yes, there are some here on AR... what's truly sad about this, is that two of them have attacked me on two of my FHA vs Conventional blogs... and what both attacked me on, were things that are written in stone. But they both had different answers, they didn't back off, but kept harping me, telling me that I was wrong. So, it goes back to your statement and I truly believe that you can't know most things mortgages and most things in real estate. I find it very hard just to keep up with mortgages. Hey, they can fool themselves, but they can't fool me. good post.
I know exactly what you're talking about Ken, but don't worry... it works out great. My dog groomer also does my wife's hair.... that is when he's not working on my transmission while delivering the mail.
Cameron Novak Corona Hills Real Estate Broker The Homefinding Center Corona, California 951-212-7479
Ken, looks like you hit a nerve with this post, but I can tell you from experience, it is very difficult if not impossible to do two or more, as Cameron shows above, things at once and do either of them right.
Like Gary, I think this must stop and from what I can tell about what is happening throughout the Financial Services Industry today, I feel that it will stop pretty soon.
Although, I do have to say, that there are always a few who can juggle more than one thing at a time and make them all work, but they are few and far between, know what I mean?
Hi Ken, I think that we have crossed too many lines that shouldn't be crossed - and it's a problem. I don't think lenders should be Realtors and I don' t think that Realtors should be lenders. You don't have time to learn it all. I think that we should be hiring a professional in each different step of the real estate transaction. Great post!
Pat - you know I don't see any issue with a real estate agent being a real estate coach or a loan officer being an online marketing assistant because those are simply extensions of their current job, usually. But people like one AR member who advertises for agents to become loan officers is probably just looking for a way around the "I can't pay you directly for your referrals but if you actually work for me and take the application ..." Thanks for commenting!
Paula - California is one of the few states where it is not already a separate license. Here in Georgia, for example, they are two completely separate licensing entities and each have their own qualifications. Thanks for your comment!
Tony - I only know a couple of in-house loan officers and while they are good people they do not work deals as hard as we do. We love it when agents by-pass their "mandatory" in-house "lender" and we close the deals. Here in Georgia the in-house people often are paying thousands of dollars per month in "rent" to have that relationship. We were recently asked from $18k per month for a small office after I told the broker I never pay for leads. Oh, she reads my AR blog, too -don't you ma'am?
Jeff - you think "they" will ever really crack down on this? I think the poor clients who don't go out and find their own mortgage professional and demand to use their own they will continue to be taken advantage of by people who have nothing on the line.
Cameron - okay, I almost sprayed coffee through my nose. That is a great and hilarious mind picture. Thanks!
Lane - you know where I stand on it! Let's make it happen starting week one 2009. I'm working on that plugin today during football. Let's get a solid step by step plan that I can help you with and we can benefit from. I have about 5000 renter conversion cards and that $7500 FTHB tax credit is ending soon!
Gary - pefect! I love it. Thanks for throwing that in!
Ed - the real problem is from financial industry insiders who claim to be so transparent and upfront and put themselves out as industry experts who are really nothing more than pimps for hashed up services.They usually do crash and burn but they always take innocent people with them.
Sandy - thanks for commenting and yes -a specialist for every field. But do you know that many buyers don't know the difference between a real estate agent, loan officer, appraiser, inspector, processor, title agent ... you know what I mean?
This is huge. I just had a realtor who is full time as well as a loan officer apply at my office two weeks ago. I love the guy. He's awesome. But, at the end of the day, I said that I can't support that philosophy. Our company strictly solicits realtors. I would look horrible to the other realtors who are full time for us to take this part time loan officer who is a top realtor. His comment was "I don't understand, I've check with the State of Illinois, and it's OK and it works out great for my clients." I said I'm not worried about the legality or the ethics (He can't be an LO on an FHA deal and he knew that), but I'm concerned about appearance in the community. For me it's just too incestuous and I don't want to deal with an image problem with the clientele of whom I'm soliciting.
Larry - very good observation. In addition to what I perceive as an issue of ethics but your label of incestuous really hammers it in. Just the idea of a "full time" real estate agent being a "part time" loan officer. I had a hard enough time dealing with a bank loan officer when I refinanced my home a couple of years ago. She was basically clueless about the industry. She sort of knew a few things her own bank could do. She violated RESPA at least 3 times and was incredulous when I brought it up. I don't even like it when one spouse is the agent and the other is the loan officer. No thanks, not for handling my finances and loan.
I sold real estate! I originated mortgages! I do Title insurance!!! Never at the same time! Jack of all trades and MASTER of none...such a person is fine to have around the house, but not as a real estate professional...!!! Thanks, Fran
You know what they say, if you can do everything... you are good at nothing. I recall when Indymac was doing Sub-Prime, Alt A, Conforming, etc. at the same time. To quote Larry Bettag, I rest my case;)
Tom - that pretty much sums it up! Real loan specialists spend a tremendous amount of time following the ever changing regulations and guidelines and for any mortgage person to advertise for agents who want to become part time loan officers and claim to be upfront and transparant I smell many double standards.
Fran - likewise. I thought about you the other day and wondered how cold you must be! Thanks for stopping in.
Jason - great example. Say, how is IndyMac doing these days? :)
Ken, I was offered the opportunity to become a loan officer at the last place I worked. Guess what, I left...because I'm a Realtor and specialize in real estate...Puh Leez, that's like hiring a brain surgeon that does gardening on the side. Yea, get inside my head...I don't think so!
It is a trend that keeps popping up every few years. Real estate agents as loan officers is simply a bad idea. I don't use in-house lenders. However, I do see some benefits to having in-house loan officers and affiliated businesses that offer loans to customers of a brokerage. There is usually a convenience factor as well as greater control over the transaction. However, I have not seen any successful real estate brokerage that was able to effectively train real estate agents to be good loan officers. If someone can point to a successful example of a real estate brokerage that permits real estate agents to act as loan officers, I would love to see it.
Here are my concerns:
First, I don't believe that you can effectively master all of the nuances of the real estate profession and the lending industry. A qualfied loan officer must have in-depth knowledge of the loan products, loan programs, and program guidelines. It often takes even average loan officers several years to fully understand all of the available loan programs. If you don't have the product knowledge, then it is a disservice to the customer and will likely lead to closings that are delayed or terms of the loan that are misquoted. It also will lead to the consumer getting the easy deal, not the best deal.
Second, given the limited product knowledge, real estate agents acting as loan officers often offer a single set of loan products. As a result, they may offer loans from ABC Company and push these loan products even though the interest rates, fees, etc. are not competitive.
Third, there is an inherent conflict of interest between acting as the real estate agent and the loan officer. Although I believe that it can be legally and ethically done with the proper disclosures, I don't think that it should be done. For some, there may be a temptation to push the envelope to get a deal done - whether or not the borrower is qualified, the loan product is suitable, etc. I can foresee a host of issues where an agent may be tempted to provide less than complete applications to get the deal done.
Fourth, even the best loan officers have deals that they can't for one reason or another get closed. When you are wearing both hats, you are the problem and not the problem solver. I believe that real estate agents should be trusted advisors and it is hard to see how the jack-of-all-trades approach can work.
Fifth, the incentive for acting as the loan officer is to use the captured business to maximize the profit on a single transaction. However, from a consumer standpoint, I would be concerned whether the agent is acting in my best interests or in his own best interests. The advice or guidance of the real estate agent is no longer truly disinterested or objective.
Sixth, these real estate agents as loan officer schemes are often simply shams to cover up referral fees. The real estate agent takes the application, pulls the credit, orders the appraisal and attends the closing. To me, it seems that this scenario artificially inflates the cost of the loans - either in terms of lender fees of interest rate - to cover the cost of paying the referral fee. As a result, the consumer pays more for the loan.
If you don't want to post it here, I would be interested in hearing about experiences with real estate agents as loan officers. You can post here or send me an e-mail at Ryan@PREASignatureRealty.com.
Hi Ken! Can I be a loan officer NOW and a REALTOR when the rates go back up?! I could handle those re-fis like a pro, then go back to selling houses like a pro!! JK! My brother-in-law used to tell me that I should do both but, I had a deal one time with an agent who was also the lender for the buyer--it turned out to be a disaster--he did NEITHER job well and almost blew the deal for everyone. To me, it was a huge conflict of interest--this guy is no longer in EITHER business! I wonder why!
Debe - It is usually the case. I have hired agents but insist on them being very adept at the mortgage side. One man I hired was a founding member of Re/Max (hi Ralph) and he was probably a very good agent ... I will say he was a highly entertaining individual and I did enjoy his humor. The end.
Ken, I find it so sad, the agents who are also loan brokers in my market are in the less affluent part of LA and they usually are a one person brokerage doing everything and nothing very well....
I sold a home to a Relocating Client, picked her up at the Ritz Carlton every day when we went to look at homes, in the meantime her Limo Driver took her son to Disney Land to keep him occupied...anyway The Limo Driver said I have a Real Estate License as well why are you using ....She was gracious and politely told him to focus on Driving and Let my Realtor focus on selling me a home.(she bought a $3m home) That is how it is with Mortgage Brokers, They have expertiese and so do we as Realtors...
BTW in California Attorneys can represent themselves and inspite of that they use Realtors in their buying ... why because they know bettet.:))
Endre is absolutely right. As an attorney, I could have bought and sold my own home - but I didn't. Just because you can do it, doesn't mean you should do it. I didn't and wouldn't recommend it. Until I was actively involved in real estate sales, I didn't blur the line. My rationale was simple: Leave it to the professionals who do it on a daily basis.
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You are so right. YOU are either one or the other. same thing with lawyers who want to act as real estate agents.