Every seasoned mortgage broker has lost deals to other brokers. It’s just part of doing business.
But a few in our profession feel it’s over the line to court another broker’s clients with better rates. They deem it okay to undercut banks, credit unions and other lenders, but somehow it’s a tacit sin to undercut another broker.
When a prominent agent recently suggested otherwise, this was a fellow agent’s response to him: “F*%k you. Learn some ethics.”
Fortunately, the e-bully behind that vulgarity is unrepresentative of the vast majority of civilized client-centric mortgage professionals. Yet still we see some brokers falling into this trap, the trap of condemning competitors instead of improving their own game—as if that will actually effect the change they seek.
To be clear, most brokers—this author included—would rather win business from outside of the broker channel than from one of our own. But, in the words of my colleague Bob McDonald, brokers are competitors first and friends later. Not only is it acceptable for one broker to outprice another, it’s healthy (to a degree). It’s the market functioning as the market should.
“Buying down a rate has nothing to do with ethics,” notes McDonald. “What is unethical is advertising a bought down rate and using it as a bait and switch, not disclosing that this bought down rate is a 30-day quick close high-ratio special that has to fund in June but is only available if it’s snowing and your first and last name are both Laverne. That’s unethical.”
If, however, a broker operates in full disclosure and wins a deal by undercutting another broker, they didn’t “steal” that client. That client was never the first broker’s to begin with.
For someone to be your “client” (and not just a “lead”), three requirements must be met. The customer must understand your value, like you and trust you. If a competitor’s rate alone has won that client over, you’ve failed to meet one or more of these three requirements.
Fear of losing business drives us to serve clients better. In my early days—well before I had any online presence—I lost more deals to other brokers than I care to admit. The pain of that loss forced a re-examination of how I speak to clients and portray my value proposition. I owe those brokers for eating my lunch.
If you’re in our business, beware of counterparts who preach that broker-on-broker competition is somehow “unethical.” It’s anything but. In a normal transaction, we as brokers don’t have a fiduciary duty to each other. That duty is only to our clients and lenders.
Until competing brokers start paying your expenses, you owe it to their clients to work harder for the business, provide better informed advice and price more aggressively if appropriate. (And by no means is that an across-the-board endorsement of buydowns.) It’s what consumers expect and it’s what we’d expect standing in their shoes. McDonald said it best: “If you put your client second, you will come in second…and eventually last.”