Does it matter who you list with, who you close with or who your loan officer is?


Being in the escrow business is really fascinating. You see lots of things. You hear lots of things. You get to observe what is efficient and what slows down transactions.

Escrow can be confusing too. We really serve two masters: those that are our clients (the principals such as the seller or buyer or borrower) and those that are our customers: agents and loan officers who suggest and refer work to us or any other service provider. It’s also something to experience such a large transaction “quality control” chasm between different agents working for different brokerages even within a major brokerage franchise network.

But this post really is about how agents and consumers decide what you decide.

1) For example, an interesting thing occured. In the mail, I received a post card from Greg Perry of John L Scott marketing a home not far from my place. It’s not strange that I receive things in the mail from Realtors, but that the owner of the home is a broker from another company—why did they hire another agent to list the house? I know this owner because our kids play together and we’ve closed transactions for him. It is a fascinating move.

2) We have had several transactions with repeat clients who have used a different service provider (agent or loan officer) the second or third time around. Why are they doing this?

3) In escrow we work in high collaboration with just about every title company. Obviously, we do not have primary contact with the sales staff (title reps) but rather the attorneys, title officers and back office staff that are largely the engine under the title insurance hood.

One of the things that I have always wondered and one question that my wife actually raised while we discussed business matters is the following: how do agents choose one title company over another since the perception of agents in the market is that title insurance companies (heck, even escrow firms) all do the same thing and the end result of issuing a title policy or a closed transaction is the same result? In other words, agents have a tendency to say they receive good service, but what is that service they receive? Agents have very little if no contact with the title company other than the with the title rep. How are the title companies differentiating themselves especially when many are using just another name plate but are in fact a subsidiary of a large national title company.

Consumers have no idea how to differentiate Pacific Northwest Title (First American) from First American Title. Or, comparing Land America Title from Commonwealth or Rainier Title (Land America companies). It is kind of like comparing the Nissan Quest with the Mercury Villager. Both are virtually the same vehicle. Consumers rely upon their agent to differentiate for them. How do the agents differentiate between service providers for their customer?

4) Along those same lines, competition is cut-throat between service providers such as escrow and title, especially in a market where sales volumes are significantly lower than over the past four years. Agents are very fierce in fighting for their respetive loan officer or title or escrow company if involved in a sale. Tradition has it’s place, but what is the compelling proposition of one service provider or closing agent over another?

5) What is more important to an agent when suggesting a loan officer: closing the transaction, lowest rates and fees for their customer or client, or a combination? For example, one of the loan officers we work with does average volume but gives phenominal service to the client, loan docs are usually ready days in advance and nothing has ever not closed due to a problem created by this LO. On the other hand, we work with LO’s that due boat loads of loans and there are the occasional problems with service to their clients or other issues.

Let Brokers charge what they want. Do away with YSP.

Couldn’t the whole yield spread premium (YSP) debate with all the trimmings end with a simple solution such as allowing the broker to charge whatever they want? Let the free market sort it out. Certainly lenders would have to be on board and do away with incentives or change them somehow, but it seems to me that everyone is making it so complicated.

Yes, compliance issues, licensing and fair dealing issues are important and should be implemented in some manner.


  • Just disclose up front what the compensation is based on the interest rate or program the borrower qualifies for. Therefore…….
    • No more the need to attend sales seminars on learning how to overcome objections, which will allow more time to attend seminars on how to provide sterling service.
    • No more awkward moments for the loan officer attending an escrow singing when the borrower questions that “YSP thingy.”
    • No more loan officers asking escrow “how will you explain YSP” to the borrower, as if escrow’s response somehow dictates whether or not they will receive future business.
    • No more agents having to watch helplessly at their clients becoming frustrated or stressed out due to lending problems associated with YSP’s and the completely preventable situation where a transaction spirals out of control at the last moment.
  • How about lenders just have a simplified schedule of programs and rates that the borrower can choose from and if they pay a higher interest rate they receive a rebate that can be used on their behalf. How about just turning the PC monitor around and showing the consumer the several programs available and then have a good old fashioned counseling session. It would save every single moving part in a transaction a lot of grief. And it would save transactions from failing at the last moment because a “nuclear bomb disclosure” by a lender about the yield spread premium a loan officer is earning that freaks out the borrower.

I can just about darn near guarantee that if a consumer knows where all the chips are on the table, they would have no problem moving forward with a transaction. Give a consumer the very best rate they can qualify for, at the very lowest fee structure you can, with all the chips clearly on the table and Bam! you have a happy client, fostering long-term value.

When will someone just give the consumer what they want? Somebody is working on it and they are going to will be very successful. Is it really more complicated? If so, sound off.

Blog Wars: It's everywhere.

The last month has been educational for me in a lot of ways about our industry and confirmed a lot of my thoughts, both good and bad. There is a lot of passion out there in the blogosphere and out in the work place. The one nugget I always come away with is that the real estate industry is full of very independent people who are fierce in the way they do business and in the manner in which they convey their positions on issues. Both in the work place and blogging, some are professional, others make fools of themselves, intended or not.

One common denominator I see is that people genuinely want to improve our industry, its function and image. The problem is, how can that happen with such fragmented independent practitioners that all play a part in this industry? There are so many moving parts with industry specific (lending, title, escrow, Realtors, consumers) internal self-serving issues. Perhaps this fragmentation of independent real estate practitioners is a core reason why the industry and associated moving parts has suffered from image and credibility problems for so long. Just take a recent look at all the folks that were operating under the radar over the past two or three years with criminal records.

Recently, I don’t know how many times on local or national blogs and forums, I’ve seen the quote from agents and loan officers, “sure be glad to see (insert any practitioner here) get out of the business,” or “I’ll be happy if there are less (insert practitioner) here as this market shifts,” and so on. Again, the problem is, everyone is saying it. It’s like each team praying to God…..”and help us beat the other team.”

Passion and Blog Wars extend far outside our real estate industry. That’s what is so interesting to me as a small business owner involved in the real estate industry and blogging. I know this is foreign for many of my friends and colleagues in the real estate business, but here goes anyway: The world does not revolve around real estate. The Blog Wars extend into every crack and corner of our society: soccer mom’s, politics, economics, Church, professional sports and the “Holy Land of Blogging” known as the technology and software industry.

The Pre-Payment Penalty: Gold mine or equity Quicksand?

Ninety-one year old Seattle woman’s mortgage mess as detailed by the NY Times.

“……That was the case for Gertrude Robertson, a 91-year-old widow and nurse’s aide living in Seattle who took out an adjustable-rate mortgage of $450,000 in January. Even at her age, Mrs. Robertson was earning $3,500 a month, largely by caring for another elderly woman. Then the woman died. Mrs. Robertson’s income was reduced to her monthly Social Security payment of $1,500. Meanwhile, her loan ballooned to $475,000. Unable to make the payments, Mrs. Robertson is listing her home for $510,000.”

Mrs. Robertson’s pre-payment penalty was $14,400.00. We have seen pre-payment penalties slightly higher than this paid out through our escrow office. I think there are many cases where consumers really don’t understand what they are signing. My wife Lynlee and I argued about this pretty robustly this morning. Lynlee contends that people should know what they are signing and if they are uncomfortable for any reason, they should not sign or at least consult an attorney or other party to help them understand the documents. She argues that if people get in trouble with loans they should not blame the loan officers or anyone else but themselves.

I don’t think Lynlee and I will agree on this issue. I think she is very naiive about why pre-payment penalties were so widely used. I think there are a lot more pressures to consumers and it leads them to make decisions that are not necessarily wise. How many Gertrude’s are out there? Thousands.

Update :  the New York Times Article was available through the link earlier this morning, but as of 9:50am it has been archived and you have to  log-in to access it.  Sorry about that.