Building a power team - Thoughts on Mortgage Brokers?

Question

Hello BP community!

I am in the process of building a power team in NYC area (and around NY).

I have heard from some people to stay away from Mortgage Brokers. But I can see the value on having one in the rolodex (yes! I said rolodex!) Maybe not so much for us, but for a potential buyers.

What are your thoughts about it? Should I try to connect with one? should I not bother?

Thank you!

Chris Mason · Answer

The term "Mortgage Broker" is a bit loaded, a bit misleading, and frankly no one uses it correctly.

I am licensed to broker mortgages, and I do in fact broker mortgages from time to time.

But about 95% of my deals are either done via direct or correspondent lending, not brokering. Congress says I need to be licensed to broker mortgages to work for a firm like the firm I work for, but I don't do a lot of brokering.

My peers and I originate loans, for the most part, that can go from origination to funding without anyone NOT an employee of the same firm as us touching it. We don't want to lose that control over the process and screw up your deal, even if the discount points or lender credit is 0.104% better for the same rate.

But because these loan products are often not our own products (they will be sold to the investor 5 seconds after the loan funds), we have to be licensed to broker.

It's possible that you've been told to avoid someone that will broker your mortgage, which is different than being told to avoid someone licensed to broker. And yet, I am called a "mortgage broker" by consumers on a daily basis.

From a licensing perspective, someone like me is a mortgage broker.

From a "what's going to get your loan funded?" perspective, someone like me probably isn't going to broker it. "Direct lender" is the correct term, though not the ONLY correct term because I could technically broker your deal *IF* I wanted to.

In general, you will find someone in this odd grey area that I live in easily, because she or he will work for a company with "lending" or "mortgage" or "funding" right in the company name.

A "mortgage broker" in the sense of the term of "people to avoid!" that you're concerned about is someone that has the same license as I do, that literally brokers every mortgage - they send your loan file to a sweat shop in Detroit, to be underwritten by someone that they cannot talk to directly on the phone or via email, who btw is a community college dropout and can't really read all that well, and just kind of hope that it all works out OK, and if it doesn't and your deal is all F'kd up, they move onto the next one. THAT is what you want to avoid.

By contrast a company like mine will give me a nice bonus based on "rate lock pull-through %," meaning that if we lock your loan & rate YOUR LOAN WILL FUND or it screws with our compensation not just from your deal, but from OTHER deals too, because it throws that % off. Yup, I get paid less on the 10 deals before yours if I lock your rate and don't ALSO find a way to make your deal happen after I lock it! So by hook or by crook, guys like me will find a way.

Hope that helps.

Gino Barbaro · Answer

@Javier Perez-Karam

The answer to your question is Yes, you should include a mortgage broker on your team.  I do a ton of business with a community bank because they are easy to deal with and the terms are fair.  I didn't have that relationship in the beginning and used a mortgage broker to find the best deal out there.  They have the ability to access different banks and programs.

Real Estate is all about building a team and networking.

Gino

Arlan Potter · Answer

I have been an investor 13 years. Own a boatload of rentals, done many flips, built 20+ new homes.

I wonder when I should build a power team?

Javier Perez-Karam · Answer

@Kevin Wong thank you for the tip. I am not planning on doing any commercial yet, but hopefully next year.

In any case, I do like to have people on the contact list that I know I can rely on, so I think a mortgage broker, even if it's not for right now, it's a good idea to have at an arm's length.

Enjoy your weekend.

Kevin Wong · Answer

In the commercial lending side of things, a good mortgage broker will know how to underwrite deals to get you maximum leverage and have relationships with the lenders to get your loan funded. Knowing which deal fits within the box of each lender to shop out the best rate could help you save a lot of money over the life of the loan and possibly make or break your deal. I think it also depends on what sort of real estate deals you are doing and your personal preference to how you like to dedicate your time. I would compare it similarly to hiring a CPA to do your taxes, some people prefer to hire an expert to save them time and aggravation others like to spend the time to do it themselves.

Chris Mason · Answer

Buyers typically get skeptical and think there are kickbacks or shady business afoot when a seller tries to nudge them to one particular lender. Realtors have tried to use me in this capacity, it always FEELS scammy just because the buyers that I'm talking to don't like it. I don't want to do loans for folks that don't want me to do their loan!

What your lender can do, for you as a seller, without making anyone feel scammed:

Look at a set of preapproval letters & offers, and offer comments like "Oh that gal at XYZ Funding is solid, we tried to poach her" or "Haha, this clown at ABC Lending again? I've picked up two of his deals that he dropped the ball on within the last six months... one I made work, the other should never have been preapproved" or "1st/2nd/3rd mortgage combo with gov't assistance? It's not going to close in 30 days, I don't care what they wrote in the contract" or "Ya know, I don't know anything about this preapproval. Can't comment either way."

What you as the seller are typically focused on is the sales price. A lender will be more focused on ability to deliver, reliability, and timeliness, so it'll balance your perspective out a bit in multiple offer situations.

Sarah Ziehr · Answer

Depending on what you are trying to accomplish, yes you need a good lender in your corner.

Anyone buying and selling who is seeking funding needs a good lender to get them to the closing table on time.

If you are a seller, you want a good lender to vet out buyer offers and their pre approval letters which could be total garbage. If you are going to be buying, you want a good lender to take care of you, get creative, give you options.

Arlan Potter · Answer

@Javier Perez-KaramI consider myself to be the power team. I make the decisions about whether to buy or not. I decide what to fix, I decide who will fix it. I decide what to sell.(with the support of the wife unit)     When I started it was me who fixed it. We still manage our own properties.  I just never thought about building a team. We just started buying rentals. Learned the business on the fly. Anyone can do your taxes. Never really needed an attorney.  If you need a attorney, I am not sure what for, get one. I actually only use an attorney to look over abstracts, but a title company can also do that. I have used several realtors to show me and bring me deals, but I'm not married to a particular one. Likewise with contractors, be your own power team, if not some GC will take you to the cleaners. You have to know houses.

It is really not that difficult. If you buy a house then the realtor will walk you through the process.

My advice, go look for some property. If you like it, buy it. Repeat.

Robert Gould · Answer

i can answer that one sir, the Oklahoma market is doing pretty good.

Javier Perez-Karam · Answer

Chris Mason nice! thank you so much for the detailed explanation!

Building a power team - Thoughts on Mortgage Brokers?

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