Banks are hungry for mortgage referrals from real estate agents. They’re so hungry that they’re willing to pay up to $500 per $100,000 of mortgage, just for a Realtor to send you the bank’s way.
But most lenders don’t pay that much. And many of the best lenders pay nothing. So, what do you think the odds are that you’ll be sent to the best lender if your Realtor is getting paid to make that recommendation?
In truth, one could ask the same thing about mortgage brokers (i.e., how do you know your broker is sending you to the right lender). The difference is, brokers typically have:
- Considerably more mortgage experience, product knowledge and mortgage training than a typical Realtor,
- Far more lender options (specifically lenders who pay brokers), and
- A regulatory or implied obligation to recommend suitable mortgages for their clients (sample suitability factors).
Recommending suitable mortgages for payment is something most Realtors can’t do without a licence.
Suffice it to say, potential conflicts exist whenever adviser compensation and customer interests intersect. And disclosing this compensation (which most Realtors must do) doesn’t necessarily alleviate the issue. This week’s Globe column touches on this and more as it digs into the lender/Realtor referral relationship.