Daisy Chains in Mortgage Brokering

In the video, Jack discusses “daisy chains” in mortgage brokering. It involves multiple brokers passing on potential borrowers, but very few of these deals actually close, leading to wasted time and reputational risk. Jack advises prioritizing direct communication with borrowers or establishing fee agreements. He suggests focusing on building relationships with reliable referral sources to increase success in closing deals and building a successful business:

Hello, this is Jack Miller. Hopefully, you’re having a good day. Here to talk to you about something within mortgage brokering that’s called a daisy chain. It’s probably in a bunch of professions in real estate sales, but I want to focus on mortgage brokering. So, what is a daisy chain? A daisy chain is when you hear from somebody, another mortgage broker, that they know of someone who may know of someone who may know of someone – sometimes it’s one or two or three ‘d’– that’s looking to borrow money. So, maybe a relationship that somebody has, who you know, is looking to borrow money. They don’t have a source for it. That’s called a daisy chain, where you’re not speaking directly to the borrower, and you may have a lender who you may, who may want to do this. You know, some brokers work on these, and there’s good and bad with them.

The good is that you can see deals. You know there are advantages to them, that you get to see a lot of deals. You know, I would argue – and a lot of brokers work on them – because brokers sometimes are people sometimes a mistake for a flurry of activity with profitability, and they’re two different things. So, I would question yourself when you’re working on a daisy chain deal or really anything. Is it profitable or are you just busy and it feels good? You know, you should focus on profitability. All brokers should focus on profitability and not just busy activity. Rather do nothing than just waste energy and resources. You know, the downside of daisy chains is, you know, very few of them close, and that’s just the reality. I don’t mean to poo-poo them in some clothes. I’m sure someone will leave a comment, “Oh, but I closed one.” You’re correct, but unless you really know the deal, and if you’ve watched my videos, you know I say, “Really understand the deal.” Because unless you know the deal, very few of them close. Is it really? Ask yourself, is it the best use of your time? I would argue that it’s probably not, and you suffer a reputational risk because a lot of times you’ll send a deal to a lender. Lender will ask you a question you don’t know the answer because you don’t know any, you know, only what the other broker told you, and you know, it’s like pass it down the line. I forget what the word is, but you know if I tell someone a story, it gets diluted and it gets changed and changed and changed, and you don’t know what the heck the reality is.

I would argue that do not work on daisy chains; only deal when you’re direct to the borrower, either have a fee agreement or a non-exclusive fee agreement or a fee agreement with them. And I would say that the downs, that it’s better off to take your time and not work on those deals because the likelihood of them closing is very slim. And use your time and laser focus to work on relationships that can refer you deals because if you get a referral from an attorney, or an investment bank, or a bank, or a CPA, or any number of people, the chances of that deal closing are much more likely than you working on daisy chain deals. So, I would caution against these daisy chain deals from a broker. Again, there’s nothing wrong with working on them, but if you’re going to work on them, know that you’re protected and know that everyone has a good understanding of what your job is and what your fee is. Because another thing that happens through daisy chains is, let’s say there’s three brokers involved, everyone becomes a pig and a hog in these things, and a lot of times even if the deal is close to closing, everyone says, “Oh, I want 1%, I want 2%, I want 3%,” and they priced the deals out of the market. So again, there’s a lot of reasons not to work on daisy chains. Again, there’s nothing wrong with it, but if you do it, I think you have to have a good understanding of what your fee is, what everyone’s fee is. Make sure you have a good understanding of the deal before you bring it to market because every time you bring something to market, it’s effectively your reputation and your time at risk.

I would again much prefer and much advice rather than spending the time on these daisy chain deals, focus on getting to know an accountant, or getting to know a realtor, or getting to know an attorney that can be a steady source of deals for you. If you have a good five or six people who refer you business, that’s enough to keep you occupied, you know, that’s enough to keep you occupied that you don’t need a lot more. If you have the right people, you know, if you have 10 people, that’s plenty to keep you occupied. And you can make a living on 10– just 10 people who refer you deals if you get the right 10 people who are seeing deals.
So, I would focus on mastering your skill and being in front of the right people rather than daisy chains. So anyway, that’s what I got. You could say I’m not too big of a fan of daisy chains. Usually, people waste their time on it, but just my thoughts on it.

Anyway, have a great day. Don’t forget to like the video, subscribe to the YouTube channel, leave your comments. I’ll respond to them and check us out at geltfinancial.com. Remember, when your bank says no, we say yes. Have a great day.