Response to The Washington Post Article entitled "Realtor Discourages Use of Outside Lenders"

By
Real Estate Broker/Owner with EXiT Metro Realty

I posted the following comment on The Washington Post's website in response to an article from November 5th's article, "Realtor Discourages Use of Outside Lenders".  You can read the full article here: http://www.washingtonpost.com/wp-dyn/content/article/2007/11/04/AR2007110401274.html

As a former Long & Foster top-producing and award-winning agent, I take issue with "affiliated business arrangements".  Agents are not merely "asked" to use these businesses.  There are Prosperity loan officers in many offices to strongly "encourage" agents to refer business to them.  There are quarterly awards given out to agents who refer the most business.  Office memos and e-mails constantly "remind" the agent about using affiliated businesses.  This is definitely "quiet intimidation".

However, it is not just a Long & Foster way of doing business, in fact, you'll find it in most major real estate companies like Weichert, Coldwell Banker, ReMax, etc....

OK, so what's the big deal you ask? Buying or selling a house is for most people a very stressful event.  It is usually the largest investment that someone will ever make.  Often buyers and sellers are not as savvy as their agent.  Should the referral of a mortgage company, insurance company, or title company be based on making the real estate company more money?  Ask yourself, how long will a buyer be affected by the rate and terms of the loan they take out on their new home?  Don't you think that a TRUE buyer's agent who is representing their client properly should be able to refer more than just one mortgage company so their client can get a true picture of the best loan for their purchase?  There are real money issues here.  The loan you get can cost you more in settlement fees, interest rates and adjustments, prepayment penalties, etc...  Why shouldn't you be allowed to comparison shop?  Shopping is a VERY strong negotiation tool when it comes to getting the best rate and terms.

C'mon, there's a reason HUD/RESPA has rules!  Those rules are there to protect the consumer.  So...how does skirting the law provide that protection?

Yeah yeah, I understand competition.  I was a mega producer, remember?  But being competitive doesn't mean you have to sell out your client.  The very best thing you can always do is to stay true to the letter of the law and offer your client a myriad of choices...tried and true choices, so your buyer or seller can pick the program that is best for THEM.  What a concept! (I am fairly certain that this is what HUD had in mind when they created their laws.)

Yes, I am a real estate broker and the owner of two offices.  I do not have affiliated arrangements with any businesses.  I encourage my agents to try different lenders and let us know how they work out.  We have a list of lenders, insurance companies, etc. that come highly recommended by our own agents.  One bad experience can get a company removed from that list.

Why should Long & Foster or any other company make money from referring business?  Remember, kickbacks are illegal in real estate.  Isn't an affiliated business arrangement set up to line a broker's pockets with just another form of a kickback?  What troubles me most is wondering why more people aren't raising a huge fuss about this!

Hello....is anybody out there?  How do you think we got into all this sub-prime mess with foreclosures and short sales?

Consumers should run from most affiliated business arrangements.  Get quotes from more than one place.  Make your loan officer explain these charges to you.  Double check them with your agent.  If your agent doesn't understand them, get another agent.  Ask as many questions as you need to until you fully understand what is happening and feel completely satisfied.  You deserve the best representation available.  Insist on it.  Don't just show up at settlement hoping you can trust what is going on.  Make sure you know.

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Rainmaker
223,010
John MacArthur
Century 21 Redwood - Washington, DC
Licensed Maryland/DC Realtor, Metro DC Homes

Shawn - You raise some sobering thoughts. I was with Weichert and now I am with Long and Foster. I have never won any awards for sending folks to Prosperity or anyone else. By most standards, I am just a "middle of the road" agent. I don't consider myself a top producer. I just do my job. I have to tell you that when I was with Weichert and while I have been at Long and Foster, I have altered the related business disclosure form on every transaction. It usually reads that by signing the disclosure, the client is also giving the brokerage permission to refer folks to them. I cross it out and clearly print "we do not wish to have our name referred to anyone and we do not authorize the selling of our name to anyone."

I have never offered just one name of lender or home inspector or termite company.

All that being said, I suppose Mr. Foster and Mr. Weichart can do what ever they please as long as they conform to the written law.

Nov 26, 2007 05:37 AM #1
Rainer
9,699
Trevor Ainsworth
Shoreline Homes Group at Randall Realtors of Watch Hill - Misquamicut, RI
i agree with you on a lot of points. however, i work in 3 states and in vermont i work for a c21. they have a great mtg system and never did a sub-prime mtg ever. they are still on top of the game and help my clients out. our local mtg rep sue ryan is great and she really makes sure the borrowers know everything. she is also good because she is local and knows the market plus she can often get the underwrites over hurdles we find in vt with out of state lenders. the avg home up here has 5-10 acres. lots of out of state lenders find 5-10 acres hard to deal with. i think it is all iin the lender you choose. thanks for linking to the article. trevor
Nov 26, 2007 05:37 AM #2
Rainer
109,059
Linda Tremblay
Long & Foster Real Estate, Inc, PA License #AB065488 - Doylestown, PA
Associate Broker - Bucks County, PA Real Estate Services
I am a Long and Foster agent and we certianly did not get into this sub prime mess by using Prosperity Mortgage, which sometimes I use and sometimes I don't.  We got in this mess by people buying homes that they can not afford and mortgage companies lending monies to thoses who can not afford the loan payments. Additionally there are a lot of people in sub prime that are paying their mortgages.  People can not keep generalizing.  The market is not bad in Bucks PA but the press has everyone scared to death.  I just talked to someone I know in Rochester NY.  The market is not bad there either, but buyers are scared due to the press. I do not think that it hurts my clients to use prosperity or our titile company.  However I do advise them to shop their rates, mortgage and I do give them more than one name.
Nov 26, 2007 05:47 AM #3
Rainmaker
89,713
Katie Wethman
Keller Williams - Falls Church, VA
CPA, MBA, Realtor - Northern Virginia & DC Real Estate
Shawn, you've written a very thought-provoking post.  As a L&F agent myself, though, I have to chime in that I have never felt pressured or intimidated in any way to use the affiliated businesses.  Sometimes I recommend them, but often I don't.  I almost always recommend they clients speak to more than one lender and often provide several names of lenders I've worked with in the past who I feel would do a good job for the client.  Maybe it's because I don't much pay attention to awards and such, and instead focus on my clients and my own goals, but use of ABA's has never been an issue to me and no one has ever approached me about it (or to reprimand me for not doing so).   Maybe I'm in the minority??
Nov 26, 2007 12:24 PM #4
Rainmaker
138,180
FRANK LL0SA Esq.- Northern Virginia Broker .:. FranklyRealty.com
Northern Virginia Homes - FRANKLY REAL ESTATE Inc - Arlington, VA

Great post Shawn! I'm gonna link to it.

I hope people don't focus on your sidenote about subprime and miss the message about your experience with ""quiet intimidation"

Nov 26, 2007 01:14 PM #5
Rainer
11,185
Shawn Harris
EXiT Metro Realty - Alexandria, VA

Affliated business arrangements were not necessarily responsible for subprime loans. However, steering buyers to lenders happened a lot when the market was a seller's market. Agents knew the mortgage brokers who would "paste" a deal together.

My main concern with affliated business arrangements is they basically are a back door way of getting kickbacks for the BROKER. I am a broker. I don't think they are a good idea for anyone. It's hard to say you are working for a client when another company is handing you money to steer business their way.

Personally, I feel RESPA needs to put an end to affiliated business arrangements. Period. When companies have affliated arrangements and place loan officers, etc in offices, there is "quiet intimidation".  It's not overt.....it's just.....there.

The good news is...you all are thinking. Good. That's the point of all of this, isn't it?

Nov 26, 2007 02:34 PM #6
Anonymous
Joseph T

The problem is, it isn't a kickback.   It's a partnership between Long & Foster and Wells Fargo.  The mortgages are from Wells Fargo, not Prosperity Mortgage - it's right there on the website: http://www.prosperitymortgage.com.  It's basically a 3rd party mortgage broker.   Think insurance salesperson, but without all the other companies to give you quotes.

Of course using Prosperity benefits Long & Foster - that's why it's a partnership!

I love the "loss leader" issues too.  For a while, the only parts of L&F that were making money was the affiliated businesses.  They were basically subsidizing the real estate side of the company.   I guess it's expensive to have 200+ offices and 15k agents sucking down the company resources when they aren't actually producing any income for the company! 

Yes, I was an employee of L&F for many years.  I saw the "typical" agents that go to the office to print children's school projects, play solitaire, socialize, etc.  I also saw the big teams that worked to make money for themselves and the company.

Those of you that are/were L&F agents - think about the cost of technology.  Think of the paper and ink you waste.  Think of the free marketing tools you are/were provided on a monthly basis, and then think about the number of agents in your office that never produced a single transaction!

 

 

May 12, 2010 09:15 AM #7
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Rainer
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Shawn Harris

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