Jack talks about the difference between an Exclusive versus Non-Exclusive Fee Agreement for Mortgage Brokers.
“Hello, this is Jack Miller at Gelt Financial. Hope you’re having a fantastic day. I want to spend a few minutes and talk to you about—talk to mortgage brokers. I should specify about the two types of arrangements you could have with a borrower. One would be a non-exclusive fee agreement, which would say that the borrower will pay you. I’m just going to use 1% if you close the loan. But the other is a what’s called an exclusive fee agreement, which means the borrower pays you again. I’ll use 1% if you close the loan. I’m just using 1% as an example to keep it simple. Self-understood, it’s whatever you work out. 90% of the brokers, probably 95% of them, work under a non-exclusive fee agreement, which means that a borrower signs a piece of paper and says if you close the loan, they’ll pay you the 1%. So that works, and we, as lenders at Gelt Financial, and I think most lenders today, put the name of the mortgage broker right on our term sheet, as well as your points. So you’re protected, you’re paid right on the HUD-1.
But the difference between a non-exclusive and exclusive is a world of difference. If you work on an exclusive deal, what you’re entering into in an arrangement with the borrower and saying that you are the exclusive mortgage broker or, depending on how you position yourself, investment banker to get this deal done, that you’re paid your fee no matter if you close with you or someone else. They’re really holding you to a higher standard by doing this, and they say they’re not going to shop around to someone else; you’ll do the shopping for them. My experience is that most people, as I said, work on the non-exclusive, which is fine. There’s nothing wrong with it. But if you want to set yourself apart and work a little differently, instead of working on a lot of deals, again, set yourself apart. You may want to consider going to an exclusive fee agreement, which again says you’re the exclusive broker that they can’t go with anyone else. Again, I’m not saying you can enforce it or whatever, but it really is a mindset that the borrower has, where they’re just working with you or they’re working with everybody, and if you can close the deal, you’ll get paid.
I would advise brokers to seriously consider to change their model and go with an exclusive, especially if you’re not a high volume shop. Again, you have to really set yourself apart for this. This isn’t for the average broker; this is for the highly skilled, highly experienced brokers to do this. So it’s just something to think about. Think about it. Do you want to be work under an exclusive arrangement or a non-exclusive arrangement? The agreements are different, but more important, it’s how you set yourself apart is different, how you sell yourself, and how you position yourself in the market. I’ve done many of these videos, and it talks about how you position yourself in the market for referrals, and there’s a big difference if you go out and just take on deals, or if your referral sources know that you’ll only work under an exclusive arrangement. So something to think about, self-understood. You know there’s nothing wrong with either one of them; both are successful. Just something that most brokers don’t think about. I wanted to bring to your attention.
Well, have a great day. If I missed anything, if you have any questions, leave your comments. Don’t forget to like the YouTube channel, like it, ring the bell, and subscribe to it, and take care. Don’t forget, Gelt Financial protects mortgage brokers. We got a lot of business from mortgage brokers, have a lot of deep relationships. We’re always looking to do deals. Check us out at geltfinancial.com. Remember, “When your bank says no, we say yes.””
Category: Mortgage Brokers
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