Is it feasible for a Loan Officer to Be and Agent?
April 21, 2006 by Don Murray
I appreciate Bobbi Overlande's comments regarding the feasibility of the dual role of a Loan Officer providing Real Estate Brokerage services and or a Real Estate Agent providing Mortgage Services.
Bobbie Wrote -- Comment:As a principal broker I would not like to hear that our agents are representing themselves to our clients as "experts in financing", and I disagree that they should be.
From Don -- I agree Bobbie -- Your Agents would not be able to represent themselves as experts in financing unless they truly were experts in financing. It would take dedicated training and effort for an Agent to make that claim. The good news is that we are not advancing the frontiers of physics here. Fortunately financing is fairly straight forward. There are 5 specific elements that need to be analyzed to determine if a loan can be written and what the rates and terms will be.
With the proper technology and a centralized "back end" at the broker's office and with the appropriate "brains and talent" in that centralized back end backing the field Loan Officer/Agent up, that Agent can in fact be a financing expert and offer sound advice and loan programs to the client.
Bobbie Wrote -- Comment: We are not loan officers but, as professional real estate brokers we are under the supervision of the rules and regs of our State statutes and local associations.
From Don -- I agree that at this time your Agents are not Loan Officers, but the problem for today's brokers will be that soon you will not be able to compete economically with Agents that truly are Loan Officers as well as Real Estate Agents.
On most loans the Mortgage Company grosses 2.5% of the loan amount. Doing the math on a $500,000 purchase with a $400,000 loan, the Real Estate Broker that is legally licensed to provide both services and their Agents are true loan officers, before splits with the Agent, that Broker will usually gross 3% of $500,000 or $15,000 for the real estate commission and 2.5% of $400,000 or $10,000 for the loan. That is a total of $25,000.
The problem is that the Real Estate broker that grosses only $15,000 can not economically begin to provide the level of service to the client compared to the Real Estate Broker that grossed $25,000 on the same transaction.
The traditional real estate broker can not compete on several levels:
- Budgets for Advertising and promotion to acquire clients
- Compensation to Agents -- When you include the re-fi business, an Agent will make more money from the loan side of their business than they do from the real estate commissions they earn.
- Quality of Presentation Materials
- Level of Transaction Coordination and hand holding support for the client
- Technology and Systems that insure the Client gets the best rates on Financing
I am not saying that this change in business models is necessarily good. But I do believe it is necessary to survive and prosper in the near future.
Bobbie Wrote -- Comment: To claim to be "experts" is misrepresentation which is in violation of our ORS 696.301(1)(Misrepresentation) The client who wrote the letter did the right thing by submitting a complaint to the local association.
From Don -- Again, I agree that agents can not represent themselves as financing experts unless they truly are. I do not agree that the client did the right thing. The client bears some responsibility for their selection criteria they used when they chose the agent they did. I am not saying that an ignorant client and an ignorant Agent deserve each other, but I do believe that in a fairly short time through advertising and promotion you will see the public educated to the point where they will not consider and Agent that is not a financing expert.
Bobbie Wrote -- Comment: However, I would agree the pre-qualification letter is not worth much and should have been followed up with a loan approval letter from that loan officer.
The fact this was not followed through by the agent could be considered negligent but probably not grounds for revocation of their license. As real estate agents we look to loan officers such as yourself to be the experts.
From Don -- Bobbi I can not tell you enough how much I appreciate your comments and thoughts. I know making the transition to a "one stop shop" is a challenge most brokers will need to face as to not do so, will probably economically force them out of the industry. You will find that eventually you will need to add insurance and escrow services to your bundle and the related education and training of your Agents will be never ending. The Real Estate Agent of the near future will be well trained, well educated and a master of multiple facets of the transaction. Obviously the level of technology and support at the "back end" will need to be considerable as well. The good news is that with dedication and committment this can readily be achieved.
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