Top broker: ALL brokers will need to buy down

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Most seasoned brokers object to buying down rate, but they, like everyone else, will soon have to get over it, says one of the industry’s most successful professionals. He has.

“The fact is that our products and services have been commoditized – that’s a reality,” said Jim Tourloukis, owner of Advent Mortgage Services in Unionville, Ont., and Ontario’s No. 1 broker on last year’s CMP Top 50. “We talk about value propositions and customer service, but at the end of the day everyone expects good customer service, so if you want to keep your deals, you’re going to have to also offer the lowest rates and that means buying down.”

He’s speaking from experience. While he did a whopping $212,927,433 in funded volume for 2010 with “almost zero” buy-downs, last year the high-volume broker opted to buy down as much as 15 per cent of his deals in order to hold onto increasingly price sensitive “retail” clients.

His total funded volume for 2011 actually grew by the same 15 per cent, although there wasn’t a dollar-to-dollar correlation, said Tourloukis. It's also worth noting that year-over-year income went up only modestly. "It requires more work to make the same amount," he said.

The analysis comes as banks drop variable rates – 2011’s weapon of choice – and pick up increasingly competitive fixed ones in order to fight this year’s battle of the rate wars.

Brokers simply don’t have access to BMO’s industry leading 2.99 per cent five-year fixed, but can, with a buy down better that rate on a four-year.

It’s what Tourloukis and a growing number of brokers are now doing, specifically for rate shoppers, willing he said, to jump ship to save even 1bp.

Brokers unwilling to adjust their commission expectations may ultimately be left “twiddling their thumbs,” said Tourloukis, if, in fact, there remain any brokers unwilling to buy down on at least some of their deals.

“Not too long ago we had just one of those (online rate sites) and now we have four,” said the six-year veteran. “That has changed the way we have to do business. We have to compete on rate.”

Tourloukis does have his limits, only sacrificing five to 10 bps on buy-down deals, where necessary.

“I don’t ever do it to attract deals, but to keep them,” he told


  • Christopher on 2012-01-20 5:33:14 AM

    If you don't have your clients believing you are a valued counsellor, then you need to do more to convert them.

  • Jeremy on 2012-01-20 6:10:25 AM

    I completely disagree. Not every broker will need to buy down, just those who lack compelling value. Some of us are more than just a transaction and do a great job educating the consumer on our value proposition. If you wish to compete on rate and cater to the uneducated consumer, all the power to you! When it comes to BMO's 2.99%, what are you really comparing? The product is crap!

    I wish more would stop preying on the consumers own ignorance and help to protect them from themselves. What about a solid 10 year strategy?

    If everyone was truly concerned with price, we'd all be driving Ford Fiestas! I don't know about you, but I'm not driving a Ford Fiesta.

    On with the mortgage revolution!

  • Terrilyn Moore on 2012-01-20 7:10:17 AM

    I agree with you on this. I will buy down a rate to keep a deal that I've worked long and hard on however, I will not buy down to bring in business. I cannot believe the lenders that want our business have not followed suit with this BMO 2.99% 5 yr product.

  • Den on 2012-01-20 7:21:32 AM

    You can agree or disagree, but when top gun who's doing $200mil+ speaks - YOU SHOULD LISTEN! That's a new reality and we have to adjust - 80Bps+VB earned on a deal is now a luxury. Not only because of buy downs, but also because of smaller compensation on shorter terms, HELOCs etc.
    Most high volume brokers will agree that last year we've got less compensation for more volume...

  • Mortgage Advisor on 2012-01-20 7:26:53 AM

    Any Broker than loses a deal over .01%, should hand in his\her license, as that is just weak. There will always be a rogue broker willing to uy down a rate in order to get business. I dont like it, but it's their business & choice... It's an entirely different matter for lenders to use the finders fees of their clients (the broker) to buy down the rate. We as a broker community, collectively, need to be more discerning about the lenders we support. The status quo that was, is no more...

  • Chris on 2012-01-20 7:35:57 AM

    Buying down the rate creates no loyalty. Let me tell you a story about a multi billion dollar company I worked for and how we handled a similar situation.

    For 8 years we battled 1 other major competitor. Every month we offered ridiculous promotions to lure customers back, or to save them from disconnecting services. At one point we actually offered all equipment free, and 6 months free service just to stay with our company. That obviously made no sense. 8 years went by, with the promotions becoming more and more lucrative. The company we were battling with would do the same thing. Every month clients would flock back and forth, and that churn cost us an enormous amount of money.

    Then one day we came up with an idea. Lets not offer any promotions, other than a very small incentive like first month of new service at half price. The first few months were brutal, but as the other company caught on, they also started cancelling their promotions.

    Over time, the client churn slowed, and slowed. Both companies were now charging full price again, and simply selling their services for what they were.

    A couple more years went by, and the departments for “Saves” and “winbacks” were actually dismantled. They were no longer needed, and the companies saved piles of cash and clients were more loyal, no longer switching back and forth every few months.

    Offering promotions, or buying down rates creates no loyalty. Offer your client something better than the other guy, a better explanation of the mortgage, the benefits and features of the mortgage, more convenient hours. This will create repeat clients. Silly article.

  • Outsider on 2012-01-20 8:04:33 AM

    What exactly is that "value" and education that the broker provides? And is it truly worth 80bps on a 500,000 mortgage? I don't ask this to offend people; I only ask that you re-evaluate your 'value' proposition.

  • George on 2012-01-20 8:04:37 AM

    Wake up folks. The guy correct - I lost 5 deals this week to rate. Those of you that believe that rate doesn't matter are fools. Would you pay more for the same product? No. Why would you. You expect good service and the best price. Why do you think mortgage clients should accept less. Wake up or you'll be out of business fast.

  • George on 2012-01-20 8:11:57 AM

    Listen, on that $500,000 mortgage we make 120bps which is $6,000. Do we need to be paid $6,000 for an hour of work? Hey - I would still work for $3,000 an hour. Heck - most people in this industry couldn't command $12/hour if they had to get a job. Brokers should be very lucky that that are grossly overpaid. Very Lucky!

  • Mike on 2012-01-20 8:17:07 AM

    I can see about 5% of deals maybe needing to compete on rate, but the 2.99% is a very restrictive program.

    Only when a deal that has had substantial time and energy vested in would I consider salvaging on rate, otherwise I haven't done my job well enough to sell a 10-20 bps rate difference.

  • Chris on 2012-01-20 8:20:10 AM

    Sorry to hear about losing deals because of rate. I'm not sure what the difference is in what we offer, but I cannot think of the last time my team lost a deal because of rate. When my clients need a mortgage, they always come back to us, and send us their friends and family. Maybe being in sales for the past 14 years has helped me. I wish you the best of luck though!

  • Outsider on 2012-01-20 8:30:08 AM

    I'm not willing to go as far as George, but when there are 4 or 5 brokerages who all provide great service, have strong marketing campaigns (relative to the industry) and offer experienced & knowledgeable're left to compete on two other factors: how well you can sell & rate. Let's be real, the 2.99% isn't really that great and it isn't really much lower than what you can get for a well qualified client today, but your sales skills will have to be enough to overcome the 'wow' factor of a 5yr @ 2.99

  • Chris on 2012-01-20 8:34:14 AM

    Just trying to help, so don't take this the wrong way anyone. Maybe brokers should consider taking some sales courses on their own? I've certainly taken my fair share in the past 14 years. My advertising budget is also next to nil....

  • George on 2012-01-20 8:45:56 AM

    The true test will be when we see how low the brokerage channel has fallen in market share against the banks.

  • Mark on 2012-01-20 8:58:14 AM

    I think we could agree that all our business models can be unique. I agree that to buy a rate down for a first timer is a lost leader, the time and effort possibly better spent elsewhere. Most cold calls we get via our web site at this point in time are rate shopping and based on that, and the 2.99% no frills offer, we will probably not win them over, pure optics. We all know our loyal clients, and if it means keeping a $500K mortgage and maintaining a long term relationship then buy down; it’s your vested interest. Jim makes a lot of good points with history on his side, I would have thought that the same acumen of zero buy downs he used on $212 million funded would have worked with this latest speed bump.

  • Zoltan M. Padar on 2012-01-20 9:15:09 AM

    Buying down rates? Incompetent brokers do it, as no other way can provide valuable service to their clients. Next step; barter. Trade stupidity for education and business sense.

  • banker1 on 2012-01-20 2:21:08 PM

    I am in the process of switching from the dark side (bank)to become an indpendent mortgage agent. I come to this site to get motivated but after going trough all the comments I am really supprised and disapointed about all the negativity on this site. I do think that the Mortgage Broker/Agent concept is really beneficial to the consumer and that the only way for this channel to surrvive is to stick together, be positive and to get the word out. There will always be challenges and that will never change. We need to overcome them...stay positive and keep motivating each other. There is enough negativity everywhere you go. It is contagious and your clients can smell it. When you work for the bank there will always be another bank with a better rate (sooner or later) you better make peace with it. You will loose some clients to the rate but there is enough clients out there for all of us so just move on. As long as your rate is competitive and you get to the client first will do fine. Please excuse my rant I just couldn't take it anymore and needed to went. This is a wonderfull website so let's get some positivity and focus on the good things too :)

  • Liz on 2012-01-20 2:52:56 PM

    I couldn't disagree more. This makes our industry look pathetic and desperate. What about the TRUE VALUE brokers are offering? If a client simply goes to a bank that is "buying" their business, which is not sustainable, they will pay for it somehow. The public needs us to ensure they truly understand what they are getting in to. Once you are with a bank, you are just a number, make no mistake about that. Do you think you can call a banker 24/7 for advice, coaching etc? Not to mention the "true" costs. Opening up and maintaining a bank account, cross-selled to death! Who do you think pays for ALL those branches out there? This topic has been discussed ad nauseum. I swear if we as a community/industry spent HALF the time on public awareness as we do on buying down rates, it would be a different world for us. Stop selling yourselves short!

  • Lior on 2012-01-20 3:13:04 PM

    With all due respect to Jim, is this supposed to be news? I think most brokers would be more than willing to buy down rates to save deals. It's just that once you get into this cycle of matching rates, the odds of you ultimately providing the lowest rate as stacked against you because at the end of the day, someone is always going to have a better rate than you do. And if you lost a deal over just 1bp, then you're not delivering a strong enough value proposition.

  • Lior on 2012-01-20 3:18:09 PM

    "Listen, on that $500,000 mortgage we make 120bps which is $6,000. Do we need to be paid $6,000 for an hour of work?"

    With all due respect, if that's the amount of time you spent closing a deal, then it's no wonder you keep losing them like that. Instead of an adviser you become an order taker and in the process commoditizing your service.

  • Lior on 2012-01-20 3:26:02 PM

    One point I'd just like to touch on in response to what Jim said about buy downs. As many brokers know, there's a limit as to how much you can buy. With some banks willing to offer their best qualified clients a discount of as much as 50bp on the best rates that are available through independent brokers, you can't buy your rate down to that level to begin with. If that's how you think, you've lost the war before the battle even started. Even more of a reason to think outside the box these days. Rate buy downs will accomplish nothing for most these days. And believe it or not, bank employees are facing the same challenge.

  • Lior on 2012-01-20 3:29:52 PM

    I agree with Chris. If an agent or broker losses a deal over 1bp or even 5bp, they're not presenting a strong value proposition for their clients. You know how little difference these reductions made? May as well just send your clients to a nice dinner because that's just about what they'll save with a 1bp reduction.

  • Jake on 2012-01-21 1:21:47 AM

    I'm reading this article and shaking my head and laughing at the same time. I've watched Advent mortgages for the past few years offer rates well below lender's best rates on or even cash back incentives.... go to their website and they have rates that are clearly bought down also..... using a buydown to win a deal is one thing but when you are promoting rates that are below lenders best rates you are cannibalizing the industry....

  • Jim T.. Advent Mortgage on 2012-01-21 2:26:38 AM

    Jake, with all due respect, you do not know our business model so let me enlighten you. True, our website does show low bought down rates. However, this represents a mere 15% of our business as it is meant for what we call the 'retail client'. You know, the rate shoppers that only care for rates and nothing else. The bulk of our business (85%) comes from our corporate business contracts where we do no buydowns at all. I did $240,000,000 in business in 2011 with just myself and 2 assistants, $200,000,000 of which came from my corporate contracts with no buydown. So, am I really cannibalizing myself? No. The low rates that you see are for a different channel within our business strategy. Do we like this rate shopping "retail client' business? Not really but it adds incremental revenue to our core business. However, if you lost any of your clients to these low rates then I do apologize. That was not the intention. We put this out there to compete with the bank branches. Maybe you should have a look at your value proposition. I can tell you that I have rarely lost a deal to another mortgage broker so our value proposition is in check. All the best in 2012! Jim

  • Ron Butler on 2012-01-21 5:13:48 AM

    I think there is room in this industry for many business models and Jim's is certainly a valid model that has had great results for his brokerage. Jim also has a very good reputation in our market for honesty, knowledge and professionalism.

    Most importantly: we are very lucky to exist in a free enterprise system and Jim is a prime example of trying something new and working hard to make it succeed.

    I wish Jim had never apoligised for taking deals away from another broker; competition in a marketplace is what makes our country great.

    Chris, please note the story you related above is simply an illustration of huge monopolistic companies engaged in defacto collusion. The example is the opposite of what we all want in a free enterprise system.

    The key issue is always the same: its not what we want it is what our customers want. I know of very few clients who given full disclosure would not say: "give me good service, correct advice AND get me the lowest rate"

  • Danielle on 2012-01-27 5:26:01 AM

    I sure hope this doesn't become the only way to compete with the banks. I honestly feel the broker channel offers a lot of business to lenders, and some are broker only. Things are going to get more least I hope. Broker only lenders will be lowering rates as well not to lose out. I also feel these rates are so ridiculously low, how long can this go on for? Lets not hope too long.
    I think 5-10BPS to save a deal, sure. But 50 or so, forget it! We need to make a living here.

  • Paul Therien on 2012-02-02 4:42:01 AM

    If all any broker does is compete on rate without providing demonstrated value to the consumer, then the reality is that the broker becomes a "transaction" to the consumer. Loyalty is not created by price alone, as is clearly demonstrated in many other industries. The auto industry is a prime example - there is a brand of auto out there that is near the bottom of the barrel for quality ratings, yet costs 30K more than the company with the top rated car for quality... yet every wants to buy the fancy brand. It makes no economic sense, it costs more than twice as much to own and maintain, and it does not hold its value as well.

    Consumers make purchases according to what they BELIEVE they get the greatest value - in our industry we have told them for years that rate is king, and it once was - the playing field has changed and it is time to adapt.

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