You can get a referral from a family member, friend, co-worker, real estate agent, etc. But how good are these referral sources?
Let’s look at family and friends first. Usually, a loan officer or broker loves to get a referral from a family member or a friend. This means you are not a shopper. You already trust them because your family, friend, etc. trusts them.
If you don’t shop then they can jack up your rate even higher than they would a normal client. And they do it with a syrupy smile and a fruit basket at closing.
You think it’s a better deal using someone your family approves of but really if you don’t have interest rate information and the right documents, you end up paying a higher rate than your family did!
A referral from a real estate agent is another slippery slope. One of 2 things could happen. First, they could take money to refer you. It is against the law for anyone to pay for a referral.
Unfortunately, that does not stop real estate agents from demanding money for you. It happens all the time. No one is paying attention so the agents and loan officers run wild.
Now let me ask you this. If the loan officer had to pay to get you, are they not going to make that up somehow? Maybe like jacking up your rate even higher to pay for the referral fee to the agent. Yes, that is exactly what happens.
Second, real estate agents and loan officers are an incestuous bunch. Since the professions are intertwined, many people like to make money from both selling property and originating loans.
However, you can’t do that without disclosing it. But borrowers might think they are getting screwed if the same person sells them the home and does their mortgage…and they are probably right.
So to get around this, owners used their husbands and wives. For example, if I owned a real estate company, then I would make my wife the owner of my mortgage company. Then I refer all my real estate clients to my mortgage company. Excuse me…my wife’s mortgage company.
Except, you don’t know it is my wife because she has a different last name than I do and by the way she has never even set foot in the place.
There was a real estate agent in Denver who was on the radio touting his services, of course, but also the services of this “super fantastic” mortgage professional.
Well the “super fantastic” mortgage professional turns out to be his wife. They have different last names and he never tells people on the air that’s his wife.
She also had an office right next to his in his real estate company.
It all goes back to picking the right person.