A Mortgage Broker is not a Lender

At the beginning of every law, there’s a preamble and then a set of definitions. Many of you know this: A mortgage broker is not a lender.
A lender is defined by federal law, RESPA, as an entity that makes loans.  This means the entity has the money to fund the loans.

Brokers, by definition do not loan their own money. Instead, they’re middlemen who go out and find the mortgage money. The entity funding the loan is the “lender.

Mortgage Broker Commission Meeting Tomorrow

There’s a Washington State Mortgage Broker Commission meeting tomorrow, May 7th at the Renton Community Center to discuss the impact of State Senate Bill 6471. This legislation ammends the Consumer Loan Act and Mortgage Broker Practices Act requiring all lenders to become licensed under the Consumer Loan Act (except those licensed under RCW 63.14)

This change in the state law was put in place to close a loophole. Some mortgage brokers were issued an exemption certificate by their regulator, DFI, because they had received approval as a Fannie Mae/Freddie Mac direct lender. Though still subject to the MBPA, these lenders, an estimated 300, were operating with no state regulatory oversight. This loophole is now closed.

Mortgage brokers are complaining loudly that this change will cost their firm lots of money. I would like to see the raw numbers on their estimates.

I will be attending tomorrow’s meeting, and if I can catch a wifi signal, I will blog live.

This does not appear to be a “closed” meeting since DFI is indicating that the room capacity is 100. I received no notice about this meeting, which is odd, since DFI is always very good about notifying all of us via their listserve.

Time: 1:00 PM
Location: Renton Community Center
Address: 1715 Maple Valley Highway, Renton 98057
Driving Directions

What will a market slow down do to discount brokers?

One of the reasons I became a real estate broker and started a RE company was because I felt 3% across the board was not right. Using capitalism, over the past 100 years as a guide, real estate will move away from the % model to a more competitive flat fee for service model. Speaking of Seattle in general, a 750k house is not worth $7,500 more in commission than a 500k house. Of course there are special circumstances, but on average.

The mood is changing in real estate. Greg Swann talks about some changes in the industry as a whole in his post here. The real change will come as full service agents become more and more aggressive for business. The slow down in the housing market will surely result in a long over due change in the traditional real estate commission structure. Following the typical paradigm shift, prices decrease, while customer services increase. This means ‘No Touch’ discount brokers will have it rough down the road. As more agents offer their services at competitive prices, discount brokers will loose their appeal.

I do not want to pin point any specific discount brokerages, but in the past week I have noticed two well known discount brokers signs taken down and replaced by reputable full service firms. Discount brokers are stuck at a flat fee with zero customer support (AGAIN… on AVERAGE).

The big question is, “Would the average buyer/seller rather pay a bit extra for a live body than an 800 number to call? “ Time will only tell, but in a service industry, price is never the deciding factor!

UPDATE: I have received an unusual amount of personal emails about this post. I would like to reiterate my reason behind this post was to show the real estate paradigm is shifting. My purpose WAS NOT to challenge the value of an agent or was I trying to make agents defend their side of the story (I am a broker so I guess mine too). My purpose was sharing my view of the future and what will happen.

Investigating Preapproval Letters

(Editor’s Note: Today I get to introduce yet another contributor! Rhonda Porter is a successful mortgage broker from the Eastside who has been a frequent and much appreciated commenter on RCG as of late. I’m definitely excited that we get to learn more from her years of experience in the industry… She was formally a title representative before getting into mortgage. You can learn more about Rhonda on her personal blog or her website. She can be reached via email or by simply leaving a comment below!

Yesterday, I received a phone call from a Listing Agent regarding a preapproval letter I had prepared for one of the buyers I’m working with. She wanted to confirm that my clients are indeed approved and to find out a bit more information about me since, if she did accept their offer, we would all be working together. She informed me that she calls on all preapproval letters she receives and that often times, lenders may seem not to have all the facts straight on their borrower or respond as if it’s the only transaction they have in their pipeline. Regardless, she gets a better idea of who the lender is that might be involved with her Seller’s transaction. I am really surprised I don’t receive more phone calls from Listing Agents to check out preapproval letters.

[photopress:j0403639.jpg,thumb,alignright]When I sold my house last year, I actually called on one of the preapproval letters we received. The Selling Agent who was presenting the offer thought it was “highly irregular

Permeating Self-Promotion

Here’s a few stories from around the real estate blogsphere I found interesting…


Phil is obviously have some fun in Boise, although others may find his anatomy of a listing he won’t take more relevant to recent RCG conversations…


Jonathan sends out a blogger’s prayer and some really nice words about RCG.. Thanks!

Fortunately, I ran into Ardell DellaLogia, her blog, and the Rain City Guide. Between her advice and her blog, and the larger Seattle based blog to which she contributed, I got a sense of what a blog could be – articulate, meaningful, educational. And that’s what I decided I wanted and what I’ve strived for, with mixed success.


The xBroker is clearly and definitely over-the-top. Yet, despite the self-promotion that permeates all of his posts, I really like this guy. In emails and blog posts, he’s come across as someone who is definitely informed and wants to communicate his knowledge… There’s definitely a there, there…


Tech alert: Greg Linden turned me on to a very interesting post by Google’s Steve Yegge, where he looks at the management of Google through the lens of the Agile programming philosophy. The story would have been good enough, but then Microsoft’s Dare Obasanjo made it better by comparing the ideas to the (failed) management structure at Enron… All three posts are worth reading (but make sure you have some time!).

How did the industry get broken and how do we fix it?

[photopress:dentist_patient_chair.jpg,thumb,alignright]I’m actually writing this from the dentist chair. First time I’ve actually put my laptop on my lap. Kinda cool.

There is a very, very simple explanation as to how the real estate industry got broken. How we fix it is another story that will take more heads than mine to figure out.

While technology and the internet has helped consumers, it has actually been the downfall of the real estate industry with regard to agent competency. Agents never learned how to sell a house from the licensing classes. Agents never learned how to sell a house from the Broker. Agents never learned how to be competent Buyer Agents from either of these places.

Every good agent in this Country, learned how to do these things from their peers IN THE OFFICE. Not by asking questions, but by listening and watching them at every opportunity. Good God man, could I possibly name all the agents I learned everything I know from? Never. It takes a Village. Well guess what? The Village burned down…the people in the Village all went “home” to their “home offices”. New agents sit in offices like the blind leading the blind. The poor Broker just gives them pep talks and lead generating tips wondering how come it don’t seem to work the way it used to.

Brokers really never knew how we learned what we know. Their job was to keep the shelves lined with supplies and give us pep talks when we felt down and listen to our rants when we needed to vent. We did NOT learn how to sell a house from the Broker…we learned from the best of the best, the top agents. We “mirrored” them, we listened when they were on the phone, we peeked into their files to see a sample contract and how they dealt with oddball scenarios. And the very, very lucky ones like me were chosen by the top agents to help them and they tutored me in exchange. I did their Open House and they taught me how to do a successful Open House in exchange. I helped them with their flyers and CMAs and paperwork, and I learned real fast from the volume of transactions passing through my hands. Eileen Friedland, Peter and Gail Rubin, I’ll have to do a whole list sometime, but not now while I’m sitting here in the dentist chair, as I think the drill is about to come out and I’ll have to go…

The industry BROKE when the agents could work from HOME!! When mls services became internet based, no one had to go to the office to work! The busiest of agents, the available great mentors work from home in their robes (like me, LOL) in the early hours of the morning and the wee, small hours of the evening. We go from our homes to meet our clients. We are no longer available for new agents to watch and learn from…

Oh, oh…Here comes the dentist…

Brokers and Agents – a perplexing business model

For those who aren’t agents let me explain how many of the larger brokerages (eg., in this area – Windermere, John L. Scott, Coldwell Banker Bain, etc) operate. As an agent you are an independent sub-contractor usually paying a monthly desk fee to associate with a particular company, plus variations of splitting your commissions with the broker. For that you get office space, administrative support, access to training etc.

What you do NOT get is client leads from the company. (except for Relo clients if you last long enough). For that you do your own marketing and/or sink to using the sourcing companies like house values, home gain and others of those ilk whose business model Ardell summed up so well long ago.

So here’s the part that I just don’t get. As an agent, there is no way I can come up with the marketing dollars to compete against House Values online. But my brokerage (Coldwell Banker Bain) spends millions in advertising, development of their website and overall branding. Yet for all of that they have no pro-active lead capture system or method of distributing leads to field agents. Certainly any of the larger brokers could compete better for the internet business and yet they don’t. Plus, if there are agents willing to pay for lead sources why not capture that revenue back into their own company.

It seems to me that the logical thing to do would be develop a virtual brokerage office.

  • Create a staff of salaried agents for an inside sales team
  • Implement a product like LivePerson to monitor web traffice and engage potentinal clients online
  • Capture those leads and turn them to field agents in the local office for a percentage of the commission (you have to pay for that inside sales team somehow)
  • Quit making your agents rely on 3rd parties for additional lead source generation

I’m going to propose this idea to my company but thought I’d run this by everyone for some feedback.

Unintended Consequences

According to an article in Advertising Age, a NY-based Ad Agency is suing a blogger for copyright infringement, defamation and trade libel and injurious falsehood. Appears that the blogger, Lance Dutson, made negative remarks about the agency on his blog that revolved around the agency’s work for the Maine Office of Toursim. The agency apparently tried to get Mr. Dutson to remove the remarks and apologize. He said no. They sued. Repeat after me, “Never, never, underestimate the power of the blog for unintended consequences.”


Unforunately for the agency, the blogosphere flew to Mr. Dutson’s plight like bees to honey. According to Mr. Dutson’s latest post on his site, more than 200 blogs are now referencing him compared to just 2 before the suit. Seems that the negative PR to the agency from the cumulative effects of bloggers may have surpassed the harm they suffered from Mr. Dutson’s original comments. At the very least, there are a lot of eyes reading this story that would never have seen the original comments on Mr. Dutson’s blog.

This is another example of how blogging can alter the historical power dynamics of business. I don’t know anything about the financial strength of either Mr. Dutson nor the ad agency but if I was a wagering man (which I am), I would guess that the agency has the resources to use the legal system to make Mr. Dutson spend a lot of money on his defense. This is a common practice in the legal profession and explains why many small firms back away from challenging the entrenched larger firms even when the small fish have good cases. Bottom line is that it takes a LOT of money to litigate a dispute and power goes to those that can afford it. Justice is blind but it ain’t cheap.

While Mr. Dutson will certainly spend some money on attorney fees, it cost him NOTHING to have positive PR spread across the Web. In the old days (like a couple years ago), litigating a case in the press would require the press to actually want you to win. In the blogosphere, Mr. Dutson does not need to worry about the political will or economics of the traditional press to get “web time.” And there is NOTHING that the agency can do about this. The cannot enjoin the collective blogosphere from commenting on this case and opining on its merits or what they think about the agency themselves.

In the end, this is just one example of how blogging can play a part in leveling the business playing field.

How does this impact the real estate industry? Many of us who are (as we like to think) “in the know” debate about the future of real estate, about the new oohs and ahhs in real estate technology and the tidal wave of change that is looming. But the average joe or jane knows nothing about this stuff – yet. They buy and sell homes each and every day just like they did for the last 20 years. As blogs proliferate, so too will communication about the new and the old, and the good and the bad, in real estate. Average joes and janes will spread their opinions about new companies and new offerings and just like the ad agency, there will be an impact on how business is done.

Visionary brokers will figure this out and harness the immense power of social networking. Others, like the ad agency, will operate at its mercy.

Lots More than Just the Sexiest Real Estate Agents

It’s been a while since I had a real “ramble” post, but considering the occasion, hopefully people will forgive me for trying to cover a lot of ground in one post.

Happy Birthday to Rain City Guide!!!
It’s been one year since I wrote my first post (Hello World, of course) on Rain City Guide. I probably would have taken down the first post since it was just a test except we got a comment right off the bat and I’ve never been very good at deleting comments…

I have no (clear) idea where RCG will go over the next year, but considering the real estate industry is clearly in a pivotal position and I’m extremely excited to have front row seats.

New Broker For Anna
LTD Real EstateWe’re excited to announce that, as of today, Anna has officially switched her broker to LTD Real Estate. This major change for Anna began when I struck up a conversation with a broker at LTD, Jon Ribary, after noticing that we were both developing tools to map Seattle listings this past summer (who wasn’t???). Just like my gHomes tool, his search tool hasn’t kept up with some of the amazing tools that have been released recently (including ours!). However, our similar interests led to many conversations and ultimately a much stronger bond between Rain City Guide and LTD. Anna and I look forward to working closer with Jon and his staff in the days, weeks, months and years to come. If you’re wondering, don’t expect much to change here at Rain City Guide based on Anna’s move to LTD (besides the logo on our sidepanel!). Anna’s move is really related to the fact that she was searching out a broker who understands that the real power of marketing on the internet is when you use the tools to communicate with potential clients as oppose to talking at them. About the only thing you can expect to change is that Jon and I have some ideas for side-projects that will allow RCG to continue innovating so that we can achieve our mission of being the best resource for real estate information in Seattle.

Ride Home from the MIT Forum
The MIT forum is tonight and it is sold out in a major way. I definitely plan to attend, but I have a minor issue in that we’re a one-car family and Anna has something else that she must attend. Getting between my work in Downtown Seattle and Downtown Bellevue tomorrow afternoon without a car will be easy. The part of the trip that I’m not sure I can handle is the trip to my home in Crown Hill this evening. Is there someone attending who wouldn’t mind giving me a lift home after the forum is over? Found a ride home! Feel free to email me directly.

Sexiest Real Estate Agents
I was checking my log files earlier today when I noticed that someone came to Rain City Guide based on the Google Search: [sexiest+real+estate+agents]. I was deeply saddened to find out that we are ranked a dismal #2 on this all-important search. So, if you are a blogger interested in helping us celebrate our birthday in a zany way, consider linking to this post with the phrase “sexiest real estate agents”. I’ll bet it won’t even take a full week for us to be rated #1! Okay, it is obviously getting late, so I’m going to go to bed and try to sleep off the celebratory Champaign that Anna and I cracked open tonight!

Agent? Broker? Realtor? What’s the Difference?

[photopress:409_0991_IMG_1.jpg,thumb,alignright]The Motley Fool has a nice article explaining the different between a real estate agent, real estate broker and a realtor:

Ever wonder whether a real estate broker and a Realtor are the same thing? Well, they’re not. Not exactly, at least. Someone with a real estate license is a licensed real estate professional, or an agent. This person may also be a Realtor but isn’t necessarily one.

We often think of any real estate agent as a Realtor, but to be one, he or she must be a member of The National Association of Realtors, which has trademarked the word “Realtor.”

A real estate broker, meanwhile, has had additional training and holds a different license. Don’t think that you need a broker and not an agent, though. Either can serve you very well. Although many people casually refer to those who show and sell homes as brokers, they’re often actually agents. Most people use the terms interchangeably.

If you’re curious, I’m a real estate agent (not a broker) and a Realtor.