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CALIFORNIA LOAN CONNECTION: Should Realtors also be Loan Officers (or vice versa)?

By Brian Brady

Commercial Real Estate Agent with Matthews Capital Markets NMLS 2415712

September 04, 2006 07:43 PM

This topic tends to be a hot one. Many folks will say that performing both functions is a conflict of interest. I have never pursued selling homes because I don't want an appearance of impropriety to my good Realtor clients (they feed my family and send my little girl to private school). Personally, I don't see the conflict of interest. If anything, I believe that a Realtor may be the better choice to find financing for the buyer.

Some people have said that HUS disallows it. That is just not correct. HUD issed a ruling in 1999 that said that no employee of a HUD- approved lender could have a real estate license. Well, in California, there was an uproar because many loan brokers fall under licensing by the Department of Real Estate. HUD backed off of that requirement in 2001.

Here are the basic rules for compensation to Realtors for loan brokerage:

1- It must be disclosed to the buyer that the Realtor may be receiving compensation for loan origination. It must be disclosed on the purchase agreement and loan disclosures.

2- The Realtor must perform 3 of the 13 origination functions as defined by HUD.

3- The Realtor must have an employee/employer relationship with the mortgage brokerage lender; inasmuch, they're paid W2 wages for their commission.

4- Fees charged for loan origination must be consistent with fees charged by the other originators at their employer.

I hope we hear from agents on both sides of this issue.

An article from your California Loan Connection.

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Bob Pavey

RE/MAX Hometown - Aventura, FL

CRS

I have been in the business a very long time. I have not meet anyone who can do both and get the deal closed close to on time. If the agent is also the mortgage broker I tell my sellers its not good and weeither tell them to use another mortgage broker or no DEAL

Sep 05, 2006 01:54 AM

Roberta Murphy

San Diego Previews Real Estate - Carlsbad, CA

Carlsbad Real Estate and Homes

We do NOT do loans for a number of reasons, including maintaining our objectvity where financing is concerned. When we were with Coldwell Banker, I did not like the pressure put on agents to use Coldwell Banker Mortgage--and other controlled services. I think clients appreciate our independence and respect our recommendations.

It's a controversial issue, Brian, but a good one to discuss in this forum. Thanks for bringing it up!

Sep 05, 2006 01:54 AM

Sara Lipnitz

Max Broock Realtors - Birmingham, MI

Brian... yet another thought provoking topic. Personally I have absolutely no desire to be that involved with my customer's finances. For my business model, it would be somewhat uncomfortable. The majority of my clients are friends and friends of friends. I always make a point of letting my clients know that I DON'T need to know about their financials. All I need to know is what they have for an EMD. After that, it is up to them & the lender of their choice to select a loan program that works for them. Most of my customers have spoken to either a loan officer or their financial advisors prior to our first outing, it saves me a ton of headaches!

Sep 05, 2006 02:03 AM

Professor X

NONE - Ludington, MI

Excellent Topic. I don't mind it, but I feel it can cause extra problems should something go wrong in any part of the transaction...."Who would the real estate agent blame it on if it goes wrong." LOL

Seriously though I think there is nothing wrong with it, provided everything is disclosed up front and you let the buyer know they have an option to find financing elswhere.

Where I see a problem with it, and it is just from my personal experience. I kind of follow the old saying....you can be a jack of all trades and a master of none. I want to be the best mortgage originator I can be. I want to know everything there is to know about my profession. I want to be known from coast to coast as the most knowledgeable and most professional. I dont want the business contacts I have made who referr me business to worry that I am stealing from them. If I was to sell real estate and mortgages and pre-paid legal and mary Kay on top top of it, It sort of makes me look less professional and takes time away from me getting to be the best that I possibly can.

Just my opinion

Sep 05, 2006 03:14 AM

Jason Sardi

Auto & Home & Life Insurance throughout North Carolina - Charlotte, NC

Your Agent for Life

Total conflict of interest and I agree on specialized possitions. The old cliche that you can't be everything to everyone comes to mind. Not only does it appear less professional in my view, it is also not in the client's best interest as they could perhaps get better financing elsewhere or find an agent to find them the kind of home they are looking for faster on that end. It seems to me a way of monopolizing the transaction which is never a good think...especially for the consumer.

Sep 05, 2006 04:40 AM

Karen Villa Schweinfurth

RE/MAX Northwest Realtors, Inc. 425-308-3669 - Everett, WA

ABR, CRS, SRES, CyberStar

I have an established relationship with a lender. All my clients work with my preferred lender whether they've been pre-approved or not. I don't believe in in-house mortgage companies with real estate offices. I see that as a conflict of interest. I don't get involved with my client's finances. That's the role of the professional lender. I'm involved in the real estate side of things, I'm the professional there.

Most of the lenders/agents (they are not Realtors®) in our areas are not usually successful in the real estate business (why, it seems to me that they do it part-time as their full time job is lending, they have no clue about our market).

This is a hot issue with me as most real estate companies here have an interest in mortgage companies, title companies and escrow companies. NO WAY!

Sep 05, 2006 04:56 AM

Eddy Martinez

Nationwide Funding Group - Highland Park, CA

I know a few brokers here california that do both real estate and loans. They have 4 or 5 assistants and appear to get their deals closed. But theses "assitants" typically last one month. I am not too close to this broker so he may be having a tough time but just isnt telling anybody. I have done a few subprime loans for him.

Sep 05, 2006 05:58 AM

Mike Murphy

Windermere Exclusive Properties - Encinitas, CA

Real Estate agents and Loan Officers have different missions and rarely do they come together. We do not have anything to do with loans, rather we refer to those we trust. I do believe that even though the same license is required (in most cases) loan officers should not do real estae sales and vice versa.

Sep 05, 2006 06:32 AM

William J. Archambault, Jr.

The Real Estate Investment Institute - Houston, TX

Bill

William J Archambault Jr

The Real Estate Investment Institute

www.reii.org

Sep 05, 2006 07:36 AM

Adam Dalton

Century 21 M&M and Associates - Turlock Real Estate - Turlock, CA

Realtor - Turlock Homes

We've got quite a few in the SJ valley in CA. In fact, I met a broker while he was showing my listing and he tried to "wow" me to his company with all the money I'd be making. It just seems like a conflict of interest and I for sure wouldn't want a lender trying to do my job. Everyone has their place in the transaction.

Good luck!

Sep 05, 2006 08:35 AM

Carolyn Nelson

Realty One Carolina, LLC - Burlington, NC

Your Triangle to Triad Real Estate Expert!

I have assisted MBs in the past that were also REs. Never closed on time and there were always that hint of mistrust by the buyers.

Sep 05, 2006 03:29 PM

Carlos "Chaz" Mena

RE/MAX Premier Associates - Weston, FL

The owner of my company is also a Lender and Title company. They have a program where I can work directly for the lender and do not need a mortgage brokers license. I usually tell my clients that I will run them through my system to see how good of a deal they are getting. Sometimes they want to use me because I got them a btter rate sometimes it just validates for them that they are getting a fair loan. I do not push it on to the client I just use it as an extra tool.

Sep 06, 2006 12:36 AM

Mario Rea

Talmer Bank - Macomb, MI

VA Loans.FHA Loans. New Construction.Conventiona

I personally do not think there is a conflict of interest. Where I have the problem is whether or not you can perform the job well. I think to be knowledgeable and successful in your profession, you need specialized continuing education. For most people that is not possible if you have "2" careers. If you are a lender, it is a must to understand the real estate side of the transaction and vice versa, but to dive into both ends is doing a diservice to your client.

That being said, I was thinking about becoming an insurance agent, and a home inspector, and a handyman and...

Sep 06, 2006 01:52 AM

Susan Milner

Florida Future Realty, Inc. - Cape Coral, FL

Cape Coral Real Estate Broker, FloridaFutureAgents

I don't think it's necessarily a 'conflict of interest' but I don't think it is to the best interest of your client in most cases. I think a person should pick one or the other & stick to it. I have great mortgage brokers I refer my clients to. I am a great real estate agent & don't have time to shop for loans. My job is to sell houses & assist clients buying & selling houses. Maybe if you are a part time agent & a part time mortgage broker this will work, but either full time is just that 'full time' - meaning no time left for the other.

Good blog!

Sep 06, 2006 05:15 AM

Ann Guy

NA - Allentown, PA

I do not agree with acting as a agent for both sides. I do not feel as though I could give my files the attention that is needed if I also acting as a realtor. I strive for repeat business and referrals. That comes easily when you give each and every client the attention they deserve while being on top of the industry.

Sep 07, 2006 04:49 AM

Tony Croft

Tony Croft Team at Northstar Funding - Helping 1st Time Buyers, Move Up Buyers & Investors - Hoboken, NJ

Mortgage Advisor 201-943-6800

I believe it's not a good idea not just for the client but for the agent or banker. It takes your focus off of your core business which is either helping people buy/sell homes or financing homes. Yes it is possble to do both but usually not well.

Sep 11, 2006 12:04 AM

Gena Riede

Riede Real Estate, Lic. 01310792 - Sacramento, CA

Real Estate Broker - Sacramento CA Real Estate (916) 417-2699

This has been a pet peeve of mine for quite some time...I feel it is a conflict of interest and hope that NAR will see it that way, as well. If a realtor is actually doing a "good job" for their client, they don't have time to do both sides. Which means that both sides SUFFER and the client gets the raw end of the stick. I would like to see this practice stopped on both sides. If you are Lending do Lending if you are a Realtor be a REALTOR...concentrate on doing your very best in the area of your expertise and stop getting involved with other aspects that you know little or nothing about.

Sep 16, 2006 05:09 AM

Robert D. Ashby

Cruise Planners of South Florida - Plantation, FL

Providing Personalized Travel

I believe in the seperation of the services. If a company is to have both within its list of services, then there needs to be "experts" assigned to one or the other division. You must also not permit any "pressure" selling cross-division as this may create issues. It is best to ensure no potential conflicts of interest result in the buyer/borrower's eyes.

Sep 25, 2006 02:58 PM

Joseph Crespillo

Sellstate Realty First - Rocklin, CA

Wow! There is a whole lot of negativity and I think Brian has struck a nerve. Well I disagree with 99% of you. We are a shop that does both and I have quite a few agents that do a great job on both sides. Our industry is consolidating. Soon Banks will also be selling Real Estate. It is just a matter of time. The person that does both sides is in a position to help their client more than the peron that only does one side. If you are making 3% on the real estate side could you use your origination fee to buy down the rate? Of course. Does this happen? Somethimes. If you truley are working on clients for life then you will not do something that will jeperdize that.

I agree with Robert. At our company I work the loan side with 30 years experiance and Marguerite works the real estate side with 13 years experience. We only hire people to do both that has a minimum of 3 yrs experioance in both. If they don't, then they train with us until we believe they have the necessary skills to do both.

Oct 11, 2006 07:05 AM

Anonymous

Danny Flucke

Our clients appreciate having one person to answer all of their property/mortgage questions. We made the "switch" after doing a regression analysis of why we were funding over 90% of refi apps - Yet less than 60% of purchase apps. The issue was realtors dropping the ball.

Since taking over the complete transaction - Our fall-out ratio's have dramatically improved - And production skyrocketed. Even in this tough market we are gaining 10-12% per quarter.

Any competent realtor can easily learn the loan process - And any competent mortgage originator can easily learn the real estate process.

Lighten up - Selling a home and/or approving a loan is not rocket science or brain surgery.

For those with the proper skill sets - It is not difficult to deliver a high level "one-stop" experience for your clients.

In some cases we are able to negotiate a better deal for our clients - Waving or reducing commissions as required. In a few - We needed to waive the real estate commission to make the deal work. In others we waived profit on the mortgage.

The bottom line - If the clients weren't happy - And if we weren't happy - It wouldn't work...

Good luck.... Thanx, DF

Feb 16, 2009 12:08 PM

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