The New Commission Equation

Real estate rule changes open up new LO opportunities

Insider

Contributing Writer

Every change brings challenges, but it also brings opportunities. Those who are willing to change and take advantage of the opportunities will be those who not only survive, but also prosper. It reminds me of the tremendous blow to the markets during the Great Recession of 2008. So many loan officers and real estate agents left the industry. But some agents decided to specialize in short-sales and foreclosures. And after a while, rates moved down enough that refinances started to take off. Of course, with refinances again in vogue, many loan officers tried to come back in the industry — we called them rebound loan officers. Similarly, those who were foreclosed upon also came back into the market years later to purchase again (rebound buyers).

So, what are the opportunities this new “commission regimen” could bring our way?

• Education. I don’t care how much on-line information is out there, the average consumer tends to be fairly clueless about the real estate and mortgage process. And many real estate agents are certainly in need of education as well. Now we have just made the process more complicated. Before it was easy — the seller paid the commission (though the buyer really pays it). Now we have added another option.

Loan officers who are successful give their prospects more options and then they educate them on these alternatives. That is what separates a salesman from a trusted advisor. More options demonstrate that the process is more complex than just shopping for a rate on a 30-year fixed mortgage. Thus, this is an opportunity to present more options and further educate the consumer and the agent on the paths they might take.

Those who are willing to change and take advantage of the opportunities will be those who not only survive, but also prosper.

• Timing. In the mortgage business, any top producer can tell you that the earlier you get in front of a prospect the better. If you talk to them before they even start house shopping, you can develop a relationship and add value to their lives. That value might include helping them with their credit, making sure they are looking within the right housing price range or even introducing them to a real estate agent or another vendor partner.

Well, the option we just added to the equation makes it even more imperative for the agent to refer the prospect to you before they look at houses. The agent needs to know whether the buyer definitely will need to request that the seller pay the full commission which is due. That is too big an issue to leave to the last second. Thus, your education needs to start with the agents because this change is new to them, and they need your help more than ever in this regard.

Loan officers who are successful give their prospects more options.

As I have said: every change begets opportunities. Some will look at this change and head for the hills. Others will assess the situation and find out how other successful industry players are reacting. This change will not mean an end to the industry by any means. People will still need the guidance of an agent to help them find the right home and negotiate the process. And with a shortage of homes in America, there will be plenty of demand.