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.