We’ve discussed this before, but it’s time to delve into it again.
Have we finally reached the point of no return?
First, a disclaimer: I apologize if I offend anybody who works in mortgages for one of the major banks.
I know that many of my readers, and some of my very close friends, work in mortgage departments for banks, and while this may come off as a very biased account of a recent experience, I think that public opinion is probably on my side here.
The people that work in mortgages for banks, aka “mortgage specialists,” are not bad people, and they’re not bad at their jobs.
It’s the “higher-ups,” or the “red tape” they are put through that makes it impossible for them to compete with mortgage brokers in 2013.
And that’s what today’s blog is about: MORTGAGE BROKERS VERSUS BANKS
At this time, I’ll make a second disclaimer: I have no vested interest in seeing my clients, or anybody, use ‘my’ mortgage broker. I don’t get referral fees, nor would I accept them if offered.
Having made that clear, let me tell you about what happened last week…
A client of mine, who we’ll call “Richard,” is a first-time buyer who was focused on condo-lofts in the King West area.
Richard is pretty savvy, and he certainly knows his stuff. He’s seen about thirty condos, and two minutes after walking into this King West condo last weekend he said, “It’s great. Let’s do it.”
I love when my buyers know what they want!
We reached an agreement with the seller, conditional on financing and a review of the condominium’s Status Certificate, and away we went.
Buyers usually have pre-approvals in place, but as luck would have it, Richard’s 6-month pre-approval expired the day before we made the offer!
No matter, right? We’ll just get financing from one of the many, many lending institutions who are lined up to give out money these days.
It should be a slam dunk. Right?
To all you “Mortgage Specialists” out there, I don’t know how you do it. I don’t know how you put up with all the red tape, and I don’t know how you keep from going crazy. You work way, way too hard to deal with the hurdles, and the hoops you need to jump through to approve financing that should be rubber-stamped.
Richard was looking to get financing through one of the major five banks, and it took three days for them to reply.
My mortgage broker can get an approval in two hours, if you ask him nicely…
A mortgage broker works with sixty lending institutions, and thus the service, speed, rate, and term will almost always trump what your good ‘ole neighbourhood bank can muster up.
After three days, Richard’s bank determined that they needed to do an appraisal, and they sent an email to Richard and I that said, “Please extend the condition on financing until Monday at 5pm.”
I’ll get right on that…
It felt a lot like dealing with the relocation company that I wrote about last month. They make these assumptions that everything is so easy! Sure – just go and get the seller to allow you another four days to tie up the property so that nobody else can make an offer! That should be easy, right?
They have very little knowledge of how real estate and negotiations work, or, they do, and they just don’t care.
I informed the mortgage specialist at the big bank that we had until Friday to get the condition satisfied, and that he’d better get the financing in place.
To his credit, he was able to move things quick(er), although they required an appraisal of the property. The appraiser wasn’t available until Saturday, of course, so they had to once again “escalate” the file so that we could get an appraisal that afternoon.
The appraiser was “rushed,” and it was clear that he wasn’t happy. He got in to the property on Thursday afternoon, and later that day, he submitted his “appraisal” that was significantly below the purchase price.
Sorry, but I think appraisers are a joke.
These guys and gals go inside a condo or a house for ten minutes, look around, and then throw down an arbitrary value are who the banks are trusting?
FYI – this condo was worth more than my client paid. We got into the unit on the first day of the listing, and he and I both agreed that it could have been listed $10-$15K higher, and we ended up getting it for $6K under asking.
But try telling that to the appraiser. Because I did!
I called him and asked how much he figured the Wolf range and the Sub Zero fridge were worth, in the $30K kitchen that had been featured in two different home/style magazines. But the appraiser, who sounded like he was at a bar, wouldn’t talk to me. He said he wasn’t permitted, which is most likely the case.
I called the mortgage specialist and told him that the appraisal was low and it was going to cost him a deal.
The mortgage specialist suggested two options:
1) That my client put down more money, and pay for the difference out of his pocket.
2) That we “escalate” the appraisal to senior management, who, so long as we get a seven day extension, can likely get the value appraised.
I apologized to the guy, because he was really nice, and was doing all he could do, and told him that I would take Richard to my mortgage broker on Friday morning. Both of his “options” were silly, self-serving, and would cost Richard money, the property, or both.
Richard and my mortgage broker talked at 9am on Friday, and from the time my mortgage broker clicked “send” on the email to his lender, to the time he received a return-email with an approval, a whopping fifteen minutes had passed.
No exaggeration, folks.
That is what a good mortgage broker can do.
If a broker has the experience, knowledge, and contacts, he or she can get approvals done in a day, in an hour, or in this case – in fifteen minutes.
It took the bank FOUR DAYS to muck around before they finally got some BS appraisal, and it took a mortgage broker fifteen minutes.
The lender, which could have been any one of several lenders that my mortgage broker uses, looked at the purchase price, the down payment, the borrower’s income, debt, credit score, and approved the mortgage instantly.
Isn’t that how it should be?
I know the cynics are going to say:
“Good for you. You got somebody ELSE to approve a value that the appraiser didn’t deem fit.”
Well, I think I know more about downtown Toronto lofts than some appraiser who was inside the unit for five minutes to give a subjective value when he was rushed and frustrated, so I don’t think the appraisal was the problem. I also think that ten other appraisers would have appraised the property at the value we paid.
Cynics might also say:
“Great, so you got financing from some Joe Schmoe Bank for your client who was trying to get financing from one of the big-five.”
And that’s where things get really interesting, since it was actually one of the big five banks that came through in the end!
The mortgage industry is strange.
Think of the relationship: the banks are working with the mortgage brokers, since the banks want to loan to applicants/clients of the mortgage brokers, but the banks are working against the mortgage brokers, since they are direct competitors.
Have you ever seen something so bizarre?
It’s like fighting a war where your allies – the people watching your back, are also your enemy.
And this, in my opinion, is why the banks have such awful customer service, such slow turn-around times, and such incredible red tape. Because even if they lose the business to a mortgage broker, they get it back in the end when the brokers get their clients loans from the banks.
After all, the mortgage brokers are shopping the big five banks, in addition to many other lending institutions. So if the bank “loses” the business to a mortgage broker who is quicker, more personable, and easier to deal with, that business might come right back to the bank, via the broker!
A friend of mine works as a mortgage specialist at one of the big five banks, and he told me off the record that he can’t understand why people still go to banks for approvals. He told me that in order to work on an application, he has to do about five times the work that he believes is truly necessary, and that the application has to pass through dozens of hands. He likens it to the movie Office Space where he has eight different bosses, all telling him the same thing, when he’s just trying to do his job.
I don’t fault these mortgage specialists at all, but rather I fault the setup at the banks and lending institutions.
If they don’t shape up, they might lose more business.
In 2013, you simply cannot take four days to work on a mortgage application for somebody who is exceptionally well-qualified financially.
I’m sure not every mortgage broker can get a deal done in an hour, but mine can. My mortgage broker routinely rescues deals off the operating table, and every time, I fault myself for not pushing my clients harder at the onset to use a broker and not a bank.
So, let the debate begin.
I’m not averse to hearing feedback and/or criticism from you mortgage specialists out there. I think you guys have it rough, and I respect what you do. But I just think a mortgage broker has no much more to offer.
In the fast-paced world of real estate in 2013, time is of the essence. And no consumer should accept a 4-5 day turn-around on a mortgage, no matter what their “specialist” tells them…