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 MortgageBrokerNews.ca