The relationship between real estate agents and mortgage brokers has often run on ice in the past, but one top agent says the future for both industries lies in their coming together under one roof.
At a real estate conference last week, Cunninghams Property head, John Cunningham, suggested real estate agents needed to embrace mortgage brokers as a way to add value to their business.
Cunningham tells Australian Broker that, after 15 years of working in collaboration with brokers, he’s found a system that works equally well for both parties.
“We’re currently working more on the referral basis, because of the logistics of actually setting the broker up in house…it was just too technical.”
He says that, initially, his company had tried setting up a separate mortgage broking business to service their clients, but that the tension between the two meant they struggled to work collaboratively. They tried various other models before landing on the one that worked.
“The current situation we have is that we have a relationship with brokerage firms and we have an arrangement where they come into our office. We also refer a bit of work – it’s in house and out of house.”
Cunningham says that, when it comes to broker/agent relationships, they generally fall into two categories: Those based on a simple referral service and those involving fees.
“We have a fee arrangement, which is fully disclosed to all our clients and we probably do more business with people who don’t buy from us than with people who do buy from us, because we’re creating opportunities for people who require finance – and whether they buy from us or not is irrelevant.”
However, he says there are some agents in his office who are currently making ‘a few grand a month’ in fees – ample incentive to refer clients to a broker.
“We have an upfront fee, which is a percentage of the brokerage upfront fee and we pay a majority of that fee to the agent who originates the loan. Then we get a trail on that fee. That’s where the business makes its cut.”
Cunningham says it’s not uncommon for brokers and agents to swap places – but that it’s impossible, for obvious ethical reasons, to do both at once, meaning this is a co-working situation rather than an argument for diversification.
“We have dealt with brokers who have been agents in the past and we know brokers who have become agents. We employ a guy at the moment who used to be a broker and is now a real estate agent, but you can’t do the two together.”
By encouraging brokers and agents to work closely together, Cunningham believes home buyers benefit – though there are still misunderstandings.
“Because we’ve got the broker coming in to meet our team, we generate a lot of direct referrals. We’re meeting a couple hundred people each week through our open inspections and what we’re doing there is we’re asking a question – at the properties and also on our follow-up calls – whether they have their finance in place, or whether they want to reassess their finances and talk to a broker. So we’re fairly proactive in creating those leads. But because of the Privacy Act, we can’t supply that information to the broker. That’s a very important thing to know, that you just can’t go out handing out lists of people to brokers to call, because of the privacy issues.”