Here’s good news from a market considered the birthplace of bank-paid referrals for Realtors: Those real estate professionals are starting to turn them down.
“It’s is a trend that we’re noticing in this market as it slows and Realtors are focused on making sure that all their deals get funded,” Sean Chouman, president of Landmark Financial Group, told MortgageBrokerNews.ca, echoing the comments of another Montreal broker. “I think what’s been happening and what they’ve told me is that sending a deal directly to a bank at this time increases the uncertainty of the mortgage being funded, so they’re referring clients to brokers instead because they know that the deals stand a better chance of getting done.”
Another leading mortgage professional in Quebec’s largest city is backing up the observation, pointing to both conversations with leading Realtors but also to his own increasing database of Realtor-referred clients.
That trend runs counter to what many Montreal brokers have grappled with for years, as banks sought to cut originations costs and circumvent the channel by enticing real estate professionals to send their client directly to the branch.
That Realtor-banker relationship has been built on cash compensation, a phenomenon that has now spread outside Quebec, with real impact for brokers in Ontario and B.C.
Still, if what Chouman and others are now saying proves true for the rest of Canada, banks might find it harder to woo Realtors even despite referral fees as high as 50 bps.
But lenders such as National Bank, which has come under fire from some brokers for offering those same 50 basis points to Realtors, argue Realtors remain a viable and very attractive means of bringing business through the door, at the same time increasing the likelihood of client retention.
But in a slowing market, Realtor may be increasingly willing to stand in the way of those plans, said Chouman.
“As the deals get fewer, Realtors just aren’t willing to take the chance,” said the industry vet, “especially if many brokers are willing to offer a small referral or to sometimes split the commission.”