by Brian Brady
Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL
In Southern California, many loan originators are licensed by the Department of Real Estate. Such licensing is unique to California. California was one of the first states to require licensing of loan originators and chose to require that they have a real estate salesperson’s license.
Some bright Realtors realized that they could earn an income from both functions: real estate brokerage and loan origination. In fact, business models were built that center on that unique ability. Utopia Mortgage and Real Estate offers an 80% commission split to agents for such dual agents. It’s not a bad deal for an agent. Represent 3-4 buyers a year, secure them financing, add 4-5 more refinances in the year and you’re a six figure agent!
The problem in the past was that HUD explicitly forbids real estate licensees to engage in loan origination if the lender/broker offers FHA loans. That hasn’t been an issue in California for 5-6 years.
Tracy Nicole posted an excellent article in the Members’ Only section of Active Rain entitled: Jack of All Trades, Master of None. Fact or Fiction? You need to be a registered member at Active Rain to see this article and comments. Get a free membership by clicking this link. The premise is that she opts for the dual function because it (a) gives her control of the transaction over the “so called professional” loan originators (b) it allows her to “drastically cut the mortgage fees” for her customers 90% of the time (paraphrased quote)
I asked the question “Why Can’t Banks Engage in Real Estate Brokerage ?” in a like members-only post at Active Rain. My rationale is that if the consumer benefits, as was presented by the commenters, than it is just too substantial to pass up. True, federal banks are exempt from state licensing laws and that’s unfair. However, pretend that we could force them to license in each state
Will the merging of real estate and mortgage functions benefit the consumer? Can the big banks be more efficient at creating a national MLS than local real estate boards?
Lake Martin Voice says:
Brian – As a capitalist, I agree with your take that banks should be allowed to have agents and vice versa. Absoultely. No brainer. But, just because it (should be) legal, as a shareholder in a bank, I don’t think I want my bank to have the potential of such a conflict of interest. Again, let there be no laws to discourage competition from any sector, but – the buyer and stockholder should beware.
April 23, 2007 — 9:55 am