Fallout from the global financial crisis has sparked one of the biggest challenges currently facing any real estate business.
Not in the sense that people aren’t buying or selling houses. The reality is properties will always change hands regardless of the market. But the resultant tightening of lending criteria has created a big hurdle to actually settling deals.
Despite record cuts in interest rates in 2008 which have made mortgages significantly more affordable to the average Australian, credit is now harder to come by than it has been in many years. Increasing numbers of contracts signed subject to finance are falling over before settlement due to the lender declining the buyer.
It’s a common story which starts with the agent listing the property. After a solid marketing campaign, several open houses, energy spent educating the vendor as to market value and working hard with the buyers, eventually a deal is put together and exchange takes place. Everyone is happy. There’s a finance clause because the buyers only have conditional approval, but it’s a formality. Or so everyone thinks. When the bank reviews the deal they decide they don’t like it after all and finance is declined just before the finance clause expires. The deal is dead. Back to square one - only this time it’s with a rapidly stagnating property and disillusioned vendors.
Enter the mortgage broker to save the day. If we reply the story this way around it’s much more likely to have a happy ending; the broker has access to many different lenders and banking products and finds the avenue most likely to result in approval for the buyer. The broker dramatically increases the chances of a successful outcome first time around.
But if the solution is so obvious, why aren’t more agents working with brokers?
A mortgage broker working alongside a real estate agent is not a new concept. But since the idea’s first inception almost fifteen years ago, a premium broker today is almost unrecognisable from the original version.
Traditionally, mortgages were treated as one more “add-on” service where leads were passed through to the broker from the salesperson. A commission was payable and if the broker was good, the customer enjoyed a service which made the sales process flow more easily.
The downside was the quality of the service was generally heavily dependent on the quality of the individual broker. Processes varied widely and as with any new industry, sometimes there were teething issues. This made for an inconsistent level of service and sometimes rather than adding a benefit, the outcome could actually detract from the real estate sales process. The potential risk to the agent’s reputation by aligning with a poor broker was real and many agents were frightened off the idea.
This fear may account for some agent’s reluctance to work closely with mortgage brokers.
But times have changed - if a broker is aligned with a reputable mortgage broking group today, it’s likely they will now have solid and proven processes to follow and little will be left to chance or personal interpretation. And on top of that, good brokers now are so much more than loan writers; they can be an integral part of any successful real estate business.
Here are just a few key ways in which a good broker can add value;
Firstly, the broker helps the agent maintain control of the sales process by building stronger relationships with vendors and buyers. With two good relationships instead of one, all parties are bound more closely to the agent throughout the process.
The broker helps educate both the buyers and the vendors about issues like the state of the market as well as price versus affordability. This third party information adds credibility to the agent’s information and will also streamline the sales process.
The broker provides valuable market intelligence back to the salesperson. Some of the mystery surrounding the sales process is alleviated when a good broker is working on behalf of all parties. They’re the grease on the wheels making for a smoother conclusion and significantly increasing the chances of a successful one wherever possible.
Instead of just receiving leads, referrals are two way - the broker hands leads back to the salesperson at least as frequently as they receive them.
The days of the broker just being a source of revenue with upfront and trailer commissions on the leads fed through to them are well and truly over. Today, a good broker can actually increase the whole business’ total turnover by increasing leads and conversion rates at each stage of the sales process.
No longer just an add-on, mortgage broking and real estate sales can now be the perfect marriage.
