Banks soliciting more than just Realtors for referrals

Banks soliciting more than just Realtors for referrals

Banks soliciting more than just Realtors for referrals Brokers are increasingly frustrated by these big bank referral programs.

It’s not just real estate agents sending referrals to the big banks, according to one industry player who is noticing a growing trend among other financial services professionals.

“Banks are now not only paying commissions to Realtors for bringing mortgage deals to them, but to financial planners and insurance agents as well,” Walid Hammami, a Quebec-based broker with Dominion Lending Centres, told MortgageBrokerNews.ca.

It is unclear how exactly these referrals are structured. While it may be happening, it is not nearly as prevalent – or perhaps as formalized -- as Realtor referral programs, which have been in place for years. These programs have long frustrated brokers who believe they are self-serving and ignore a client’s best interest.

“They are doing their clients a disservice,” George Macris of CHDLA Mortgage told MortgageBrokerNews.ca, noting the agents send clients to lenders who offer fewer products than brokers. “It also often results in more credit checks for the client -- since the agents refer them to more than one bank -- which means more hits to their (rating).”

And while Realtor referrals are nothing new, it appears those agent players may be feeling a growing sense of entitlement when it comes to fees.

“When Realtors call me the first thing they ask is how much commission I will give them,” Macris said. “The agents expect and think they deserve the .5% commission from the banks; it’s not all agents, though.”

Most recently, many brokers felt snubbed when one of its own big bank partners sent an email blast to British Columbia real estate agents soliciting referrals.

However, others note these agreements are perfectly legal and the prerogative of the big banks. 
7 Comments
  • Rick (Mortgage Mentor) Robertson 2015-08-25 10:23:41 AM
    Walid.....This has been an on-again, off-again game for the 21 years that I have been a broker. There's likely a lengthy article on the advantages and disadvantages to the borrower in those types of referrals.

    Lenders offering to pay realtors is actually the root of how our industry got started. Some bright realtors back in the late 80's realized the best use of their time was to focus on just handling the financing referrals for all the realtors in their office..... I know that the deep roots of what VERICO is today came out of one of the principals positions in HomeLife Realty. Same with Dominion's Chris Kayat at Realty World.

    Here in BC, a realtor receiving compensation for such a referral must disclose the dollars & cents of all commissions they earn as part of a real estate transaction. This means that not only does the borrower (buyer) see how much the realtor is getting from that referral, but also the seller of the home sees the compensation the realtor is getting. Any undisclosed earnings are considered Secret Commissions and illegal.

    I'm not going to write them all out again here, but for more on why a borrower shouldn't follow such a referral, see all the previous comments from prior weeks and months that my friend Ron Butler has written on the advantages of using a Mortgage Broker.
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  • steve 2015-08-25 12:33:18 PM
    Love to see some disclosure laws where the realtor has to explain the personal benefit of choosing that particular referral.
    the system is logical, but may not be ethical. This is where government, brokers and real estate boards can step in to ensure proper disclosure
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  • RANJIT DHILLON CENTUM 2015-08-25 3:22:49 PM
    I think as professionals everyone should respect others, When a client approaches us and informs that they are also working with another mortgage professional, we would not entertain them till they are not happy with the other broker.
    And with the banks they would solicit the clients even when they are going to get a draft made to the lawyer for down payment 2 days before closing, not at all professional, lot of my clients would tell me that banks tried to lure them.
    A sensible realtor would always look at professional with more choices, compared to some greedy ones who would just attracted to the banks when they through the bait of referral fee.

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