In Arizona, a buyer can walk into Joe Realty and meet with Joe Loans and Joe Title and Escrow without walking out the door. In Oregon, we can’t do that by name but we can coordinate the process using affiliated businesses. Prudential Northwest Properties owns Columbia Mortgage and there are offices in each one of our branches. Prudential also owns a portion of Transnation Title along with a number of the other large real estate companies in the area. As Realtors, we receive no monetary benefit from our clients using either Columbia Mortgage or Transnation. The biggest benefit for us and for our clients is the relationship. We know what to expect and we don’t get caught off guard by surprises because somebody wasn’t doing their job.
When we write an offer for a buyer using Columbia Mortgage and Transnation we know that we are putting a good offer forward and this allows buyers to compete in any market. It’s tough when you’ve just met a buyer recently and you’ve found the dream house together and the buyer is preapproved through a broker you don’t know. When a listing agent inquires about the prequalification letter from an unknown source it doesn’t give us the opportunity to put our best foot forward, “I don’t know anything about FredzLending out of Texas…” If I was a seller, I’d be looking for something stronger regarding financing before I accepted an offer.
7 Comments on “Relationships in Real Estate”
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In years past (say 20 years or more ago) was this sort of coll… err… cooperation legal? You’ve outlined the potential advantages of this cooperation between Realty, Mortgage Co. and Title co. but I have to say that back when I was thinking of buying when an agent would refer me to their own mortgage broker it made me a bit nervous. I know most of you are above board, but you’ve got to figure that there’s some percentage of under-the-table dealing between these 3 branches (and appraisers?) going on out there as illustrated by this story today at CalculatedRisk entitled FBI:”Mortgage Fraud is pervasive and growing”:
http://calculatedrisk.blogspot.com/2007/03/fbi-mortgage-fraud-is-pervasive-and.html
Where are the checks and balances between RE agent, mortgage broker and title co.?
For us, the check and balance is the referral and repeat business. There isn’t an industry that can’t be undermined by breaking the law or questionable ethics. If the client enters what is probably one of the largest financial undertakings they will ever be a part of without researching who they are trusting it isn’t surprising when they stumble across someone willing to take advantage of them.
We can provide recommendations from past clients who have used all three services mentioned above in their transaction. I can’t do that with a lender from Texas.
To be fair, the article linked also mentions that the most common type of fraud is that done by borrowers (overstating income, etc.). There’s plenty of blame to go around in the subprime drama and that includes buyers who lied on applications.
Larry’s comment about pressure from the higher-ups at Prudential Northwest Properties to use Transnation or Columbia Mortgage is a perception that I don’t feel. Encouraged? Yes. Pressured or retaliation for not? No.
Bert Waugh Jr., Prudential Northwest Properties’ owner, is highly regarded by his agents and the real estate community and it is largely because he has created an environment that works. We’re heavily recruited by other brokerages but have no interest in going anywhere because we know we can offer our clients the best tools in the industry. We’ve interviewed so we know what is out there and it is always us that makes the decision to stay where we are. Bert’s belief in the product is so true that his encouragement could be misconstrued as pressure to some but I think it is in error to view it that way.
We don’t refer all of our clients to Columbia Mortgage. Some brokers are better at some things than others. Some personalities are better for other brokers too. The situation rules the decision. One of the reasons Jennifer and I work well together is that usually at least one of our personalities will match up with the client’s. Matching personalities to the transaction is just as important as the contract itself.
Ultimately the client has to make the decision. We’ve closed plenty of transactions that haven’t used Columbia or Transnation without a problem but historically, those have been the problem transactions. We put our word behind Shawn Headlee at Columbia Mortgage and Marisa Henman at Transnation because we can trust them to get the job done right and on time. We can’t do that with people we don’t know.
Interesting twist on this blog.
RESPA does not allow us (mortgage brokers or real estate professionals to receive a “thing of value” for a referral or for the attempt to gain a referral. This certailnly would include a kick back or referral fee.
So, while it might happen, it’s illeagal if it does. If you’re dealing with funds that transfer State lines, which most do, then it could be a Fed offense. Not good!!
Affiliated relationships are also going by the wayside as is evidenced by a Minnesota law suit. http://www.twincities.com/mld/twincities/news/16855258.htm
1st Am Title had Joint Venture relationships with realtors, mortgage brokers, builders… They recently had 35 JA’s shut down. The problem was that dividends were paid as a part of the business transaction.
Builder Banker Coldwell Burnett is having problems now for steering their clients towards their in-house Title company.
I’ll take Charles word for it that they are not directly compensated for referrals to Columbia or Transnation. My experience has been that several good friends of mine who work for various Prudential shops seem afraid to use anyone outside of Columbia or Transnation. There is a lot of pressure from the top down.
I know that other companies who have JA’s share in profits…not necessarily on a per deal basis, but over time. Some allow for quicker checks at closing to the relator, others offer retirement plans geared on JA profitability.
An excellant article written by a Realty Times contributing editor, Kenneth Harney, details this practise, and that if structured correctly, they can stand the test of litigation.
http://realtytimes.com/rtcpages/20070305_realtyfirm.htm
So, should you do business with the title company or mortgage broker that the realtor referrs you to? Yes, if after meeting with them you feel comfortable with them. Are you required to no. That’s illegal.
The partnerships that I as an independant mortgage broker have with my realtors and title companies are mutually beneficial. We do not receive kick backs, dividends, profit sharing or retirement plans. We help each other be successful by joint marketing, working together on deals and, over time, develop a track record of consistently getting deals done and covering each others backs.
Our clients enter into that partnership and they benefit from our experience together. Do they have to work with all of us as a team? No. Should they? Often times, yes.
In that I definately agree with Charles.
Well said.
So a key is to develop multiple relationships so that there truly are options.
I also make referrals to realtors and Title companies based on who I feel will do the best job based on location, personality and fit.
When I sit down with a client who does not currrently have a realtor I review several that I feel would be appropriate and help them to decide which might be the best fit for them.
But I do agree that this is easiest done when there is a history, either personally or via solid recommendations.
Oh, Charles, I have heard wonderful things about Bert and his passion. He has truly created a 1st class company.
Interesting discussion…
I have a good friend that works for Prudential in another office and he has mentioned the “pressure” from above to use both Columbia and Transnation. Some agents deny it, some flat out admit that it’s there. I’m sure it’s different for every office though.
He also had a very bad experience buying his own house using Columbia Mortgage so he refuses to refer clients to them. It’s a shame that one bad transaction can ruin something that could be a great thing. But, he has also mentioned the fact that the loan officers of Columbia are spoiled and do nothing to reciprocate business back to the agents. That alone would make me want to deal with someone else that wasn’t being spoon-fed all day long.
At the end of the day, you can’t deny the fact that these companies all have their hands in each others pockets and there’s plenty of back scratching going on between the upper management. I don’t consider this to be in the best interest of the client.