A prospective homebuyer typically finds a real estate agent and then a mortgage originator. But what if there could be a better way? The client could work with a single professional to find a home and navigate the financing process. It’s an idea that’s been around a long time and its time is coming.
In Japan, a philosophy called wabi-sabi focuses on the acceptance of transience and imperfection. The aesthetic is sometimes described as one of beauty that is imperfect, impermanent and incomplete.
Artists who focus their work on this philosophy accept the imperfection of their raw material and then create with it. These artists take broken or imperfect pottery, and instead of throwing it away, mend it by replacing the broken or missing parts with gold lacquer.
The results are stunning works of art that prove an object’s imperfection is the key to its beauty. What does any of this have to do with the mortgage industry? Potentially, a great deal.
No industry is without its flaws and the mortgage business is no different. The Consumer Financial Protection Bureau’s public-complaint database is clear evidence that not all consumers believe the mortgage business is perfect.
It’s not only about the origination side of the real estate business. A recent class-action lawsuit against the National Association of Realtors (NAR) and several major brokerages suggests that consumers are growing weary of paying high real estate commissions while doing the majority of the work to find their next home.
Some might suggest that if real estate agents are charging too much and offering too little value in the internet age, homebuyers should just do without them or home sellers should go the for-sale-by-owner route. They might also suggest that if mortgage originators aren’t satisfying consumers that they should find an alternative to them as well.
This probably wouldn’t work very well. As homebuying and financing transactions have become more complex, consumers are actually reaching out for more support from these professionals. In fact, 88% of buyers purchase their home through a real estate agent or broker — a percentage that has risen steadily from 69% in 2001, according to NAR.
In the mortgage industry, several borrower-centric loan portals have emerged, all promising to put the borrower in control of the transaction. But borrowers continue to rely on trusted financial advisers to walk them through the loan origination process.
While there are problems and imperfections in the business of real estate, there also is beauty. It can be seen every time a team brings a new loan to closing and a family gets to move into their new home. But is there a better way to get to this conclusion? Can this imperfect industry be made better?
As homebuying and financing transactions have become more complex, consumers are actually reaching out for more support from these professionals.
It’s always easier to take on a new challenge when you know it can be overcome. If anyone has accomplished something, then you know you can potentially accomplish it as well.
In 2007, the world got a glimpse of how imperfectly the housing industry was being managed. It was a mess that threatened to drag the global economy into a depression. Fortunately, great leadership and broad new financial-services legislation paved the way to recovery.
By 2012, however, the mortgage servicing industry was still suffering. The Great Recession had turned into the foreclosure crisis, with millions of consumers facing the prospect of losing their homes. In February of that year, 49 state attorneys general, the District of Columbia and the federal government announced a historic joint state-and-federal settlement with the nation’s largest mortgage servicers.
One of the most effective changes handed down through the settlement was the establishment of a single point of contact for mortgage borrowers to talk to about their problems. People liked having a single professional to help them navigate their situation. So, why are consumers still asked to work with one professional to find and buy a new home, and another to finance it? There is a better way.
Having many different people touching a loan file and interacting with the borrower is confusing to the consumer, and it makes the process look broken. When you factor in how much it costs the average lender to close a loan, it’s time to admit that the process truly is broken.
There is a way to fix it, to create beauty out of this imperfection. This can be done by taking the real estate sales piece and the home finance piece, then putting them together with a bit of gold lacquer. The result is a new kind of industry professional who can be called a real property adviser. This is the future of the industry.
A real property adviser will be a licensed real estate agent and mortgage originator who can guide the homebuyer through the process of finding and purchasing a new home. Instead of handing the client off to someone else to get the deal financed, however, the real property adviser will handle that task as well by serving as a licensed mortgage broker.
A real property adviser will do everything a real estate agent currently does and everything a mortgage broker currently does. Neither job on its own is so complex that it would prevent a motivated professional from also doing the other.
From the consumer’s point of view, a single professional will guide them through the purchase and financing of their new home … forging a relationship that will last a lifetime.
The idea of a single professional selling real estate and arranging for the financing has been around for a long time. Until quite recently, however, no one has had the resources to effectively put this concept into practice — to get it vertical, so to speak.
Over the past few years, a number of real estate companies have made this idea a reality. They have been doing a great amount of business by controlling both the real estate sale through their brokerage and the financing through their captive or independent mortgage companies.
Depending upon how the real property adviser sources leads, they may spend more time on one side or the other. In hot markets where real estate is selling well, this professional may spend more time working with homebuyers or sellers. There is always an opportunity for a real property adviser with a good website to prequalify prospective borrowers before they begin searching for a home. The real property adviser’s own business will dictate how they spend their time.
From the consumer’s point of view, a single professional will guide them through the purchase and financing of their new home. They will have one trusted person to assist them, forging a relationship that will last a lifetime.
A real property adviser will carry both types of licenses and be responsible for the continuing education required to maintain them. In return, this hybrid professional will make far more money. They also will never have to share the client relationship with someone who offers them no loyalty and works to replace them with their own internal financing operation.
It will be incumbent upon the real property adviser to get the education required to do a great job for their clients. Although some people will naturally ask why they have to pay more and work harder to get licensed on both sides of the transaction, others have already been amazed at the opportunity this represents and are asking when they can get started.
Should mortgage originators worry about harming relationships with current referral partners? If only real estate companies asked the same question. Instead, they’ve launched their own mortgage banks.
The truth is, the originator can expect no loyalty from today’s business-referral partners, which is how it has always been. At best, the mortgage originator is only as good as their last deal. Before you blame your friends on the real estate side, realize that you also take your leads where you feel they will benefit most. That’s business.
If a mortgage originator has so much business coming in from loyal referral partners that they can’t afford to lose them, the situation should be carefully considered. But for the tens of thousands of other originators, these are the real questions: Are you prepared to protect your business in this changing environment? And are you willing to get the education required to keep and satisfy your clients?
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The real property adviser is not a jack-of-all-trades. They do not handle title, appraisal, home inspection, loan underwriting or any of the many other steps that take place in the real estate transaction. But they are the master of two trades: home selling and home financing, which makes them powerful in the market and capable of earning a great income in the future. And this can make an imperfect business perfect. ●