68% of brokers would consider implementing cancellation fees

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Brokers are of two minds when it comes to cancellation fees, with the industry appearing divided on whether or not they think such requirements are the best way to recuperate time lost on flighty rate shoppers.

“I think these fees are just a money grab from greedy brokers; brokers who just deal on line and create no relationship as they never meet the client and listen to them,” Mike Maguire of Mortgage Wise Financial said in the comments section of MortgageBrokerNews.ca. “Then they are shocked when another broker walks away with the deal.”

We asked brokers who use rate site to vote on whether they would consider charging cancellation fees and 68 per cent voted yes.

"When (brokers) send an application through Filogix the lender is charged 10bps and then there is the resources allocated to the deal to make it happen (Analyst, compliance, IT, legal department etc..) that's about at least $500,” Walid Hammami said. “So yes charging a fee is a good thing to do and will probably filter some clients for the agent.”

Still, some aren’t sure which side of the fence they fall on.

“It is partly a question of human nature and buyer's remorse; every time you buy a consumer good, be it a car or smartphone, you know that it is only a matter of time before something better comes along,” said commenter Patrick Smith. “With a mortgage, there is that lengthy gap between commitment and funding but, once funded, there is no return period for store credit. Therein lies the risk. Who should bear it?

“There really is no satisfying answer here.”
 
  • Dave on 2014-03-28 5:10:15 PM

    MBN should have interviewed Ron Butler to find out if he's charging cancellation fees to the Ratesupermarket miser crowd....

  • Blair Anderson on 2014-03-29 5:39:31 PM

    Don’t kid yourself into thinking rate shoppers are a problem exclusive to rate sites. I have been brokering for many years, I meet with clients face to face a lot of the time, and I can still loose a client. In fact, I just lost one this week. It’s never pleasant, and I always take it hard, mostly because I don’t treat people that way myself. Nonetheless, it’s a reality and if you haven’t experienced it yet trust me, you will!

    So how do I feel about cancellation fees? I’ve never used one, but I wouldn’t object to anyone who did. It’s not all that uncommon in the business world. Your time is as valuable. Just be professional and overtly disclose the cost up front on your Broker Consent form. I liken the procedure to “switch mortgages”. If you want to close a switch mortgage, you better have a candid discussion, up front, with your client. No client will admit they would leave you at the 11th hour if their bank did a 180 and attempted to keep them, and doing so makes it more difficult. Cancellation fees can provide you the same insurance policy.

  • Ronnie Kartman on 2014-03-30 3:11:01 PM

    Yes, there certainly is a simple answer to this issue: It's all about qualifying your client beyond jsutthe mortgage numbers, but whether they are also serious buyers and are not simply calling or emailing from their mobile devices while driving, grocery shoping, etc. Qualifying is an integral part of all sales.
    And just having your broker or broker-agent's license does not guarantee sales (something many broker/agents and realtors thought when and if they got in at the height of the market)

    As a facilitation organization for contractors, architects and participating mortgage specialists, we are constantly encouraging our participating brokers/agents to further qualify even the clients we refer to them..Even at th cost of losing the client (sooner than later) You can always start off by telling your client that, if and when you reach a certain point in the approval process, that a cancellation fee will kick in.

    It is a perfectly reasonable ground-rule for you top set, if only with those clients that initially look like time-wasters.

    Any sales to the general public means learinging what to stay away from and push aside, not just what to go towards. Once you do that, the good stuff appears once the smoke has cleared.

    This takes courage to charge a cancellation fee.. especially in this current environment. But when you place yourself in the position of running and chasing poor quality clients (tire kickers) then you will be mistreated by the same.

    From my standpoint, Qualifying is Everything, whether you a working in a retail store, selling architectural services or home improvements, or..yes..even selling mortgages.

    Ronnie Kartman
    The Renovation Co-op
    www.Werenovate.com
    The Canadian Renovation Funding Program
    www.PurchasePlus.ca

  • bruce davison on 2014-03-31 12:14:38 PM

    Over the years I have used cancellation fee structures with limited ( financial) success. Since the premise of most brokerages is to get more ( and continuing) referrals, rather than just close this one deal, it is difficult to get more referral business after sending an account to collections or small claims. I have cancelled any previous programs in favour of the "guilt" clause penalty. The emphasis here (as mentioned in other comments) is close relations with your client, but sometimes even your best client can jump. When they do so, they have previously agreed to send me at least two referrals within 12 months. They may or may not do so, but I now have a client I can continue to deal with and the "breakup" is not focused on what I lost, but more of what I gave to them, that has yet to be paid for

  • Angela Wong-Liao - Invis Inc on 2014-03-31 7:06:16 PM

    I do not think that we can charge a cancellation fee on a residential mortgage legally. Yes, it happened to me from times to times that I met with clients, took the application, submitted to lender and met with clients again to review and execute mortgage documents and 2 weeks before closing, clients decided to go with his/her home bank because their home bank offered slightly better pricing and other benefits that I cannot compete, ie: reduction in their SDB fee, etc. In my opinion, yes, it seems that I wasted my times with my clients but if we handled ourselves with dignity, respect and understanding. I find that I resulted having the same client referring me to his/her friends and relatives. I do not consider time wasted but costs invested in doing business.

  • Ron Butler on 2014-04-01 11:56:39 AM

    @ Angela, you would be wrong in your belief that mortgage brokers in Ontario cannot enter into service agreements with consumers regarding fees to be paid if transactions are cancelled. The Service Agreement is totally different than deposits on brokerage fees which are restricted by FSCO.

    These Agreements are lawful if correctly worded and do not violate FSCO guidelines.

Broker news forum is the place for positive industry interaction and welcomes your professional and informed opinion.

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