Broker: Realtors rejecting bank-referral offers

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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.”
 

  • Ed Novak, Real Estate Broker on 08/02/2013 5:30:16 AM

    Could someone tell me what banks offer cash compensation to realtors? Its news to me. Is this a common practice in Quebec? If anyone would offer me financial compensation for a referral, I would have to disclose it. Knowing how majority of people think, I would prefer to refer to those who can do a job right, instead of hoping for compensation from someone who might ruin the deal. But then its only my opinion....

  • Chad on 08/02/2013 5:30:27 AM

    Good article. We should all market Realtors with a message such as "Don't a chance at a branch.."

    My question has always been if they lenders complain they pay us to much how can they justify 50bps to a referral source (don't kid your self lenders pay other people too) and then still pay the branch staff or Road Rep etc at fully discounted rate + appraisal etc .

  • Ryan Kirwan, HQ Mortgages Inc. on 08/02/2013 5:31:12 AM

    I have a general question for all mortgage brokers out there... If you bring a referral to a Realtor, are they splitting their commissions with you? If so, how much are you getting? I've heard it go as high at 50% from some realtors, but, in most cases those realtors are the most desperate and don't offer our clients the best service. Any advice on this would be appreciated. Thanks!

  • Derek Rowley on 08/02/2013 6:14:30 AM

    As popeye use to say; "I'v had alls I can takes and I can't takes no more". Is it really coming down to this - paying realtors referral fees or split your commission with them. What ever happened to professional ethics. In the past when a reltior suggested to me that they wanted a portion of my commission, I would rebuttal with the same when I sent them a client. I never have and never will pay a realtor for doing a good job for them and their client. Why does it always have to be about money. Sell yourself if that is what it is going to take because you have now become the victim and not the victor.

  • Paolo Di Petta | dipettamortgage.com on 08/02/2013 9:16:22 AM

    @Chad - they justify it come renewal time, where they pay no one referral fees. (not to mention, 50bps is less than most commissions to brokers)

  • Paul Stapley (Realtor & Mortgage Broker) on 08/02/2013 11:06:48 AM

    I have been referring clients to realtors and getting referrals from realtors for years and have never paid a referral fee. In B.C the Real Estate Council and Financial Institutions Commission require full disclosure of all referrals paid out. The Real Estate Services Act under section 5.11 Disclosure of Remuneration and under Section 3.3 (1)F Fiduciary Obligations.

    As a professional I believe if you do a good job for someone that's the best reason to be referred or get a referral. As a consumer how would you feel if everyone you deal with is asking for referrals fees. Don't they get paid enough for there job. I know if I was the consumer and I knew about my agent or broker receiving a referral I would put a stop to it and not use them again.

  • Derek Rowley on 08/02/2013 11:39:33 AM

    For Ryan

    Hi Ryan

    Derek here. In 13 years I have never had a realtor offer me anything as far as some form of referral fee or compensation goes. When I had emergencvy open heart surgery, the realtors I was dealing with back then stabbed me. Not so much as a phone call or get well card. I hate to think how much money I have spent on realtor gifts and dinners, lunches and various forms of "thank you" but never cash in their hands. The bulk of them have a me,me,me first attitude attached to their God - $$$$$$

    But then again, I am not perfect.

    regards

    Derek

  • Roger - managing partner on 09/02/2013 3:33:26 AM

    Relationships with Realtors should be based on a mutual and ethical respect for each providing a valuable service for the client. We have never had to pay a Realtor a referal fee and vise versa. It is an understanding that we will provide the best possible service for their client and they provide quality opportunities for our brokerage. It has worked well for a number of years for us and our Realtor referal base continues to grow. Bank reps calling on Realtors come and go all the time. We simply reduce our volumes to those lenders who outright compete with us.

  • Kevin Duffy on 09/02/2013 9:07:37 AM

    I am a new mortgage agent and am also a financial advisor. I cannot really understand why a broker would place a mortagage with a bank anyway. I do not solicit realtors in the first place.

  • @mortgagepro10 on 10/02/2013 8:03:38 AM

    The true value that we as brokers can provide realtors is not in scratching a cheque for referrals, but having their brokerage scratch more commission cheques as a result of our expertise. There are several products, programs and niches available to the broker channel that dont exist with bank branches. These allow us to offer far greater opportunities to close important sales for our realtor referral sources. If you as a broker take the time to articulate your value in having knowledge to structure deals properly to allow for more approvals than a bank (or specialist) can provide, I guarantee that you will not have to compensate for referrals. I have never paid for a realtor referral and have never been asked to. My realtors know that they close far more business and clients are treated to a much higher service level than they would through a bank referral. When their clients are thrilled with service received it is a coup for the realtor as well. The clients are far more likely to refer the realtor's services also when the referral is a home run success. That's my focus.

    In regards to Kevin Duffy, you shouldn't shut yourself off to realtors altogether, especially being new to the industry. I can tell you that trying to land realtors can often feel like a worthless battle. Many will swear up and down that they will use you only to never hear from them again and it can be frustrating. You should at least have discussions however, find out who has a business model that is alignment to your own, who is interested in what you have to offer and focus on winning even a small portion of their business to start. If you can find even one or two realtors who you can build a foundation with, you will have a strong foundation to build your mortgage career upon. It took over 2 years for me to start getting referrals from a top realtor in our community but he is now a loyal supporter and advocate of my business, often going out of his way to ensure that clients call even when they have already talked with their bank or another associate.

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