in certain highly charged situations, any method of achieving your objective is justifiable.
Last Friday a mortgage broker posted in a private Facebook Group I am a member of that they were losing more & more clients to brokers who were buying down interest rates to gain their business. I’d like to embed the whole thread but because it’s a private group I can’t.
Basically the gist of it was – The mortgage broker has been coming across more and more situations where competing brokers were stealing his clients away by offering them lower interest rates. (Sometimes even better rates at SAME lender that the client was originally offered.)
There were then a couple of comments from other brokers saying the following:
“It’s a dog eat dog business”, “It’s unfortunate that client doesn’t see the value in your work” & “Is there not a code that says we don’t do this to other brokers?”.
After reading through the preceding comments on the thread and not having anything further to add to the suggestions of the prior mortgage brokers I simply said, “All’s fair in love and war.” I was then promptly replied to by another mortgage broker saying, “F*%k you. Learn some ethics.”
The broker who lashed out with that comment was asked to apologize for what they said to me by the group moderator but refused to and was removed from the group. I wanted to reply right away but was actually kind of in shock that another mortgage broker who claims to be ethical would say such a thing to someone they don’t even know personally or professionally. So instead of firing back I decided to take the time to write this blog post.
All’s Fair in Love & War (And Mortgages)
It’s no secret how mortgage brokers get paid. When I initially sit down with a client it’s laid out in plain english how I’m compensated AND I also offer them suggestions on how they can get lower rates. This includes going over restricted mortgage products & explaining how a quicker closing on their mortgage can help them get a lower rate in many situations.
Mortgage brokers also need to realize that our business is changing. Not only is it getting more competitive it’s also getting more commoditized. In the past, our main competitors were the big banks. Now, it is more and more becoming other mortgage brokers and more importantly, mortgage brokers that advertise on the internet.
Clients are becoming far more educated about mortgages from doing their own research online. Many times clients calling me are even requesting a specific product, term & rate because they have done the research ahead of time online on my blog.
Consumers know when a Mortgage broker buys down interest rates it involves sacrificing some of the commission paid by the lender to get them the lowest rate.
When we’re rate shopped some may try to make the argument on how the product is inferior or how the level of service from the brokers that offer buy-down rates is somehow worse.
Like it or not we no longer hold the golden key to all the information about mortgages and if clients are increasingly coming to us knowing EXACTLY what they want, why should we expect to get the same pay as we are used to? Gone are the days of expecting 100 BPS+ on AAA files.
I don’t buy the argument that getting a lower rate from a mortgage broker will result in subpar service. I can’t speak for other brokers but I know EXACTLY how much I need to make on each file to be able to offer consistent, reliably and timely service all while remaining profitable.
What about the Ethics?
A few brokers commented on how there was a “code” between brokers and that we shouldn’t take business away from another mortgage broker.
In the post my ethics of a mortgage broker were brought into question because it was assumed that I would do anything possible to try and steal a deal from another broker just to get the business.
How is it unethical to offer a lower rate on the same mortgage product than a competitor?
As a mortgage broker that is commissioned, if I don’t close files I don’t get paid. Will I compete with another mortgage broker or bank to try and take a file? Yes. Will I buy-down the rate if it means I get the deal? If I can still make a profit, Yes.
Will I buy-down every file? No. I know exactly what I need to bring in on a file and if someone is coming to me who has already been working with another broker looking for a better rate on the same product & it doesn’t make sense for me to buy-down, I’ll send them right back to their existing mortgage broker.
I’ll also send a client back to their existing broker if I notice on their credit bureau that they have been working with an associate at my office.
When to Say Goodbye
The Facebook post ended – Brokers out there – how have you handled such situations?
In our business we’ll lose deals. It’s the nature of the beast. We just need to learn from each one we lose, why we lost it, learn from it, and try not make the same mistake twice.
The customer is always right. If they make a decision to go to another broker asking for a second opinion and they are offered a lower rate I can’t remain profitable on, or go back to their bank because they are more comfortable there, I respect their decision.
Mortgage brokers need to know exactly when to let a deal die. There is a reason the client is shopping and many times we’ll never learn the exact reason. It doesn’t make sense to dwell on it and I prefer to spend the time marketing and sourcing new clients rather than dwelling on the deal I’ve just lost and trying to do anything to keep it.
I’ve also learned that it always pays off to take the high road when you lose a deal. A simple handwritten card thanking a client for the opportunity to work together has gone a long way in earning the odd deal back or a referral.
The mortgage business is a marathon, don’t dwell on the negatives of each deal, look at our industries big picture, learn and adapt.
I’ll close the post with a video shared on the group thread by Rob Campbell, a mortgage broker in Guelph, Ontario. To quote Rob, “Watch this. Then find the next deal. Then close it. Rinse and repeat.”