Today you could be faced with the same situation faced by Brokers after the GFC, where lenders can and possibly will change their commission payment structures thereby reducing your income without you having any control of the business you have worked hard to build.
When you first started out on your journey to build a Mortgage Broking business, it is likely that most if not all of your business income, will come from your primary business activity, which is writing loans for your clients. How much you earn per hour depends upon your skills – or so you think. In actual fact you may be the best Mortgage Broker but in an instant your income may be eroded or even completely disappear.
For those brokers who have been in business for longer than 10 years, the fact of income cuts is a reality. During the GFC in the space of a few months brokers lost up to 40% of their upfront and trail commissions. This did not happen because of loss of business, but it was the decision of Lenders to cut their commission payments to Mortgage Brokers. It was a time to get out of the industry or DIVERSIFY.
The exodus happened between 2008 to 2009, which was not a bad thing for the industry, as it forced many of the cowboys out of business, thereby consolidating good operators into groups, where like minded Mortgage Professionals came together to build businesses with shared overheads and lean operations, geared to excellent customer service. The result was a tremendous growth in the market share for Mortgage Brokers.
But there was also another group of Mortgage Brokers who diversified their business by introducing a New Home Property Advocacy arm to their operation. The result was some mega successful business and some really bad money grabbing operators who thankfully have been shut down by the regulators or have just gone out of business. If Property Advocacy is introduced for the benefit and convenience of the clients as the primary business objective, then I believe it can be very successful. Unfortunately, many Brokers only saw the opportunity to make some extra money by introducing their clients to questionable builders who are even bigger cowboys in the building game, this has resulted in some very bad outcomes for clients and Mortgage Brokers.
There are a few thousand homes built every year in Victoria by a small handful of Wholesale Builders and these are the ones Brokers should deal with. These builders have an excellent pedigree and are very proud of the product they deliver to the clients. The end product to the client is very important as these are your referrals and a negative outcome can adversely affect you.
The most successful in-house New Home Property Advocacy business is a partnership with companies who have the experience, the quality and good customer service, additionally it requires the Mortgage Broker to develop a set of skills to help them introduce and speak convincingly about New Homes for the purpose of investment or a First Home to live in. Partnering with innovative property providers who may have more than just a list of properties to view is important. Check their quality and inclusions to ensure your referral is going to get a home that will hold its value and be desirable to a tenant.
Make sure the provider you deal with gives you and your clients the support in terms of cash flow simulations, tax modelling, suburb profiles and end to end customer service. If you put in the effort to learn about the products they offer and invest some time to view their homes and offers, then you can build a serious business that will diversify your income and add value to your clients and your business.
Glenn Rodricks Managing Director Invst Australia email@example.com 0414 402 289