The success of the real estate agent/mortgage broker partnership is now well established. What was once considered a precarious marriage now finds itself part of a growing trend. Jill Fraser spoke to the key protagonists to find out where this union may be heading
The success of the real estate agent/mortgage broker partnership is now well established. What was once considered a precarious marriage now finds itself part of a growing trend. Jill Fraser spoke to the key protagonists to find out where this union may be heading
One of the primary designers of Australia’s first model of this co-referring affiliation happily engages MPA in some crystal ball gazing.
Predicting that the union of real estate agents and mortgage brokers is the way ahead for both industry groups, Sam White, deputy chairman, the Ray White Group and chairman of the eMOCA Group (formerly Ray White Financial Services), maintains that in the current, tough real estate market “good mortgage brokers become more relevant to real estate agents to get deals together and bridge the gap between vendors and buyers”.
“The biggest challenge at the moment for real estate agents is that vendors have expectations of what a house is worth, and in a market that’s falling those expectations aren’t going to be met,” White says.
“In a declining market, the gap [between high expectation and reality] becomes bigger, valuations drop off and it’s harder to get finance.”
Getting finance today
Stitching up a deal in today’s economic climate, says White, “has moved away from being just a price issue and become a whole credit issue”, and working through the financial options requires a broker’s expertise.
McGrath Estate Agents’ founder and chief executive John McGrath agrees, saying that any resistance to the partnership – which he admits some agents still possess – disappears “when you’ve got a house that you’re having trouble selling and someone who wants to buy it is having a problem funding it through their traditional lending channels”.
“Then all of a sudden an Oxygen broker [Oxygen Home Loans is a wholly owned subsidiary of the McGrath Group] comes up with a better alternative,” McGrath declares, adding that as the markets tighten agents will be looking for every possible tool to market and sell their properties more effectively.
Referring to the broker/estate agent relationship as a win/win situation for all concerned, McGrath paints a typical scenario of a buyer who finds a property late on a Friday and frustratingly cannot get hold of his bank manager prior to the auction the following day.
But then one of McGrath’s Oxygen Home Loan brokers jumps in and saves the day by securing funding in principle, “which gives the customer [the] confidence to bid and buy”, says McGrath.
McGrath and White have a longstanding association that harks back to 2002 and the inception of the McGrath Group’s in-house mortgage broker business, at which point White was McGrath’s aggregator.
Ray White Financial Services began in 1994 during another tough market. White, the great-grandson of founder Ray White, confesses spending “the first few years making a lot of mistakes”. But persistence paid off, with last year the company’s slowest year to date with 27% growth.
The establishment of Ray White Financial Services was prompted by Suncorp Medway buying LJ Hooker, says White. “We felt that Hookers would be able to offer their clients more financial advice and rates. So we started our business to ensure that our agents had tools that would be relevant.”
For the first four years the business drew a loss. “We weren’t getting paid trailers and were only dealing with four banks,” says White. “But we weren’t concerned because we saw it as a fundamental value-add to our core business, which at that time was only agencies.”
ANZ was one of the first majors to come on board and the panel grew from there.
Recognising the growing value of the mortgage broking channel, Suncorp entered the market in 1999 through its partnership with LJ Hooker, starting with 30 mobile lenders working from LJ Hooker offices.
The franchise model
LJ Hooker’s financial services franchise model was set up in October 2004.
Peter Bromley, general manager, LJ Hooker Financial Services, says that the point of difference for the brand is that both real estate agencies and the broking business are franchised operations, “so it’s franchises working with franchises”.
Bromley’s aim is to create a holistic, one-stop shop to address all related needs of consumers. He concedes, however, that shifting from a singular mono-line product line to a multiple channel product line has been a steep learning curve.
“The challenge was getting agents to think outside of the initial transaction,” he says. He did so by teaching them that repeat business was the reward.
From McGrath’s perspective, many real estate/mortgage broking models have gone wrong because they have not “cracked the code” – how to convince agents of the potential success of the model and establish trust between the respective parties.
He found that the answer lies in incorporating the Oxygen brokers into the McGrath Real Estate team. “So not only are they sitting in the office, they’re attending sales meetings, coaching sessions from the principal around customer service and so forth.”
One often-unrecognised stumbling block, he says, is the fact that agents sometimes view the whole exercise as just “another potential rejection”.
“In the agency industry, you have to go through a lot of ‘no’s’ to get to a ‘yes’, and one of the greatest challenges in becoming a successful agent is your ability to deal with rejection.”
According to McGrath, having brokers on board means yet another question that agents need to ask, which potentially could result in yet another ‘no’.
Unlike McGrath/Oxygen’s style of housing broker and agents under the one roof, LJ Hooker Financial Services brokers (or as LJ Hooker describes them, ‘financial services consultants’) have their own shopfront offices.
Separate offices
“We’ve kept the two businesses separate because there are differences even though they work together as one,” Bromley maintains.
“From a relationship and business development point of view, they’re one,” he says. “By the same token, each has its own distinct responsibilities to ensure that their business is working.”
The ultimate key to establishing a good working relationship between brokers and agents is finding the right people to put into the mix, says White.
“One thing we’ve learned is that,
unless you’ve got the right brokers, agents won’t refer because they need to have confidence in the people to whom they’re referring,” he says.
And agents are not beyond doing their own form of ‘R&D’, to “put brokers through the hoops”, admits White. He speaks of “tests” that agents subject brokers to in order to see if they are willing to go the extra yards. “But once that trust is earned and the relationship is established, it’s a wonderful source of business that goes both ways,” White explains.
“The hard part is earning the respect and being seen as part of the sales team as opposed to being an outsider.
”All real estate groups hold training courses and encourage both sides of the equation – brokers and agents – to attend and to try to help bridge the cultural gap and assist in the bonding process. Internal promotion of the respective broking arms gives credibility and weight to brokers.
Getting satisfaction
But to Gary Lees, GM, Raine & Horne Financial Services, who began life as a broker with another real estate group, financial franchise, the issue of broker satisfaction runs much deeper than referrals and bonding.
Lees left the other network due to the pressure being applied to brokers to write a minimum amount for one lender. Consequently, credibility and transparency were major drivers when he subsequently co-created the Raine & Horne Financial Services model, in which he has ensured that there is no bias towards any lender.“
That way, the advice of a broker can’t be tainted,” he says. Raine & Horne Financial Services is not owned by the Raine family. Under a master agreement, the business is licensed to use the name Raine & Horne Financial Services for 20 years but, in order to guarantee transparency, the company is not part of Raine & Horne. “So our brokers can never be accused of fudging a loan application in order for the same company to achieve sales commission from the sale of that house,” says Lees.
Raine & Horne Financial Services has been operating since early 2006, and Lees acknowledges that there is still a degree
of natural scepticism and wariness within the Raine & Horne Real Estate group towards brokers. “Some offices still think that we’re selling a ‘white label product’, such as a Raine & Horne Home Loan, and one concern is that if someone defaults on a home loan it may affect the office. But we only deal through major lenders on the PLAN Australia panel. We don’t white label any of our products,” says Lees. “Therefore, the Raine & Horne name will never be associated with a foreclosure.”
The matter of credibility extends to the issue of confidentiality and the potential to abuse the broker/real estate agent relationship, states McGrath, noting that if this model is to retain its integrity, “Chinese walls and privacy are of paramount importance”.
“A broker finances a client on a Friday, knows he’s got $1m to spend, and in the wrong hands the word gets passed on to the agent that this bloke can go up to $1m,” McGrath says, stressing that the MFAA code of conduct prohibits any disclosure of information to the referring agent. McGrath maintains that a high degree of cynicism still exists in the market regarding the broker profession. Therefore, he says, “the ability to be totally transparent and honest, and build a rapport quickly” heads the list of Oxygen Home Loans’ character requirements.
Character traits
Asked what character traits constitute the most appropriate broker for this model, White sighs: “I wish there was a template that we could apply. It would save us a lot of time and money.”
“White suggests “persistence and patience”; Bromley offers “the ability to deliver on the service and the promise”; and Lees says “good people and communication skills”, adding “we find that the really good brokers have dealt in either sales or hospitality”. LJ Hooker Financial Services is looking to bring new people into the industry because, according to Bromley, the pool of talent is slim and not like it used to be.
Lees offers a cautionary note for new brokers contemplating joining a real estate network.
“The trap is the mindset that carrying a real estate network card means that automatically the floodgates are going to open to unlimited referrals and that you’ll never have to source your own business again.
“It may be six months to a year before a broker has earned the stripes and credibility of some of his offices.
“So brokers need to realise that while the card will get you in the door, it’s still up to them to earn the right to receive referrals,” Lees says.
eMOCA’s GM for broker services, Chris Dobbie, who had previously been with Ray White Financial Services from 1999, agrees with Lees.
“I was given the key to the door of what at that stage were five or six Ray White offices in Queensland, and then I had to build a relationship and educate the agents on how to refer,” Dobbie says.
Declaring that the hardest part of the process is educating a salesperson who is stuck in their ways, Dobbie says the point to get across is that, when the contract is being signed and finance conditions are being discussed, the patter should go something like this: “Hey, do yourself a favour and speak to our finance guy, Chris Dobbie. He’s really good, he’s helped a lot of my customers out and they’re really happy with his service.
“If the client says: ‘We’re pretty right with finance and have already got an established relationship with a bank’ [you] say: ‘Do yourself a favour, have a chat with Chris and double check that you’ve got the best and most appropriate home loan.’”
Bromley believes that the real estate agent/mortgage broker relationship is the way of the future for the mortgage industry “because companies are looking at how to help their customers from the beginning transaction to the end”.
“What it signals is that the independent mortgage broker who doesn’t have an [allegiance] to any particular brand is going to struggle big time,” Bromley says.
Expansion plans are widespread across the board.
McGrath’s vision is “that every single McGrath office in Australia and New Zealand will have an Oxygen consultant operating out of that environment”, his plan being to grow from 12 to 125 offices over the next three years.
Raine & Horne Financial Services has 30 franchises across NSW and Queensland, and Lees has just got the nod from Raine & Horne in South Australia, Northern Territory and Tasmania to roll out the service. He is also in the final throes of discussion with Western Australia.
eMOCA Inc’s CEO Jennifer Nielson’s strategy includes gearing up its brand Loan Market (two years ago all the eMOCA brokers were moved over to the Loan Market brand) for a big promotion starting in June.
“We’ll be driving out a line that all good real estate agents have a good mortgage broker attached to them,” says Nielsen.
“And we obviously believe that that good mortgage broker is Loan Market,” she laughs.
