I am a new Mortgage Broker. I work out of my own house. A friend of mine says that he gives realtors a referral fee of $350 when they give him a client and they end up getting a loan. I was thinking that $350 is not really that much when we typically make $3000 on a deal. I asked him what if my referral fee was 50% of what I made. He said that I was crazy for giving out that much. But really I dont need the money bad because I have another job, plus the overhead cost of this business is only my internet fees and business cards. I figure realtors would want to work with me and they would be more likely to spread the good word about me if I was being generous and I would get more business. So what do you think? Should I stay with the $350 referral fee or try out my 50% idea? Thanks, Mark

Mark -

You could be in violation of RESPA with the referral fee. There are certain requirements that a Realtor must fullfil in order to be paid. The fed's are watching this closely.

Also, most mortgage brokers get caught because other mortgage brokers don't like losing business.

Check the reg's more closely - would hate to see anyone lose their license.

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Glenng

Specializing in residential Naples Florida Real Estate, Bonita Springs, and Estero

In Georgia, all that sort of stuff has to be fully disclosed to all parties of the transaction.

As a Realtor, I don't decide to recommend someone in hopes of getting some sort of kick back. I recommend someone because he will provide great service and products to my clients. When I find a lender who can get the loans done for my clients and give them a great experience, I really hesitate to send them any place else. You don't have to buy your business. Focus on your service and you'll get all the business you can handle.

A fee paid as you described is a RESPA violation and could result in a fine and the loss of your license as well as that of your broker's. If you are having to bribe agents, you are working with the wrong ones.

As a Realtor, when I refer a client to a mortgage person, my main concern is that the client be served to the best of the lender's ability. I prefer to use lenders that operate as "counselors" for the client. Lenders who see only "how much they make on a deal" are looking out for their own best interest, not the clients.

Sometimes we must give advice that does not make us more money, but it is the right thing to do. In the long run, the client knows you are looking out for them and you end up doing business with them over and over again.

The lifetime value of a client is worth more than the short time value gained by taking a kick back.

So as a lender it's best to work on your skills to gain superior knowledge...that's where you can add value to the transaction. When you have done this, you have earned the right to keep all the fee.

Getting paid for a job well done is very satisfying.

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Kristal Kraft, ABR, CIPS, CRS, Webmistress
Denver real estate and relocation

Buy / Sell Denver Homes
Denver Lofts

Thanks for the info. So what is the best legal way to get a realtor to want to work with a mortgage broker when that broker is first starting out? Thanks, Mark

Hi Mark,
When I started doing mortgages, I relied upon my background to assist prospective clients. My background was accounting with a specialization in the management of accounts receiveable. Therefore, I had in-depth knowledge of The Fair Credit Reporting Act and Fair Debt Collections Practices Act. With that knowledge, I was able to identify with the prospect errors on credit reports and write the appropriate letters or negotiate with the creditors. In one case - the client's credit score was very low and after 120 days, the credit score was over 720 - an increase of over 140 points. ALL PROPER AND LEGITIMATE!!!!

That person has sent me more business and good clean business, both in real estate and loans.

This is only my experience - but if you look at what the other Realtors have said - I would listen to them too.

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Glenng

Specializing in residential Naples Florida Real Estate, Bonita Springs, and Estero

Hi Mark,

My experience as a mortgage and real estate broker has convinced me that a new agent’s time is best spent developing and maintaining relationships [build a network].

If you have a specific realtor who’s business you would like to earn, try to develop a relationship with that person. People like to do business with the people they know, like and trust.

Good Luck!

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Cold Calling (This is too easy!) ~ Sales Training ~ Mobile Homes For Sale

I agree with the others. It takes time ... years ... to build a business! Whether it be a loan business, or a real estate business. Trust, personal relationships, honesty ... and just plain old "time in the business" for people to know you are serious about the business and going to be in it for the long haul. This business can be a "revolving door"-type business, and it' more comforting to know the people you work with will still be there at the end of the day.
Perhaps having others sing your praises in terms of testimonials from satisfied clients/realtors would be a good thing to put in your portfolio or advertisements - including on your website. It might be a way to start to build that trust.
Hope that helps! Best of luck to you!

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Los Angeles Real Estate - La Canada Real Estate

Southern California Real Estate

Southern California Real Estate Blog

To build your business you need to find something that you are really good at and communitcate that as your specialty. Get involved in Realtor activities and build a great website.

You don't need to have a hundred agents to work with, just pick out 10 really good ones or ones with really good potential and focus on them. Ask your target agents who is currently handling their financial needs and if they are satisfied with them. (It's generally easy to find an agent who just had a closing and is ready to make a change. ) Listen to what they say and use your knowledge to help them. Don't expect any loans if you haven't got a clue of how to present your material in a refreshing way. Take the time to understand the nuances of the business, why one should chose a CV loan over a VA loan, etc. Or have 5 reasons why a borrower should consider an interest only loan and a profile of what type of borrower should consider it.

Take your group of Realtors to lunch each month and talk about financing. You buy. It doesn't have to be expensive, if you feed a Realtor they will come, especially Rookies.

You need to be available when agents are available. Provide great, dependable service and always put the client first.

Your client is also the agent. Never, never forget that the agent put you in front of the customer. Build up the agent to the customer, make your agent look good in the eyes of the customer and you will never lose an agent.

FYI -I once had a closer who would say at the closing table, "Kristal called me to make sure you got the 50% discount rate, since you have only lived in the house for one year. She sure is looking out for you!" Did I actually call her? NO! Shirley the closer just said that. Did it make me look like a hero? You bet. Did Shirley get 100% of my business? You bet!

Follow up and keep in touch with all your past loans (people) and stay "in flow" with them. The lifetime value of a client is amazing. When you do a great job, people are very loyal and will spread the work about you. There's nothing better than a personal referral. It's the best kind of advertising.

Go for it!

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Kristal Kraft, ABR, CIPS, CRS, Webmistress
Denver real estate and relocation

Buy / Sell Denver Homes
Denver Lofts