CEO predicts more realtors will seek loan officer licenses
A significant uptick in the number of realtors seeking loan officer licenses is just one of the likely consequences of sweeping real estate industry rule changes in the wake of the recent National Association of Realtors (NAR) settlement, according to a leading mortgage industry executive.
Thuan Nguyen (pictured top), chief executive officer of Loan Factory, told Mortgage Professional America that the highly publicized changes, which transform the way realtor compensation is negotiated and paid, would make it much more difficult for a real estate professional to operate solely as a realtor.
That’s because while home sellers were previously responsible for paying realtor commission – a fee that was usually included in a home’s listing price – buyers may now have to stump up that payment if the seller refuses. “We know the buyer is already under a lot of pressure. Home prices and rates are high, and now they [may] have to pay for the agent commission,” Nguyen said.
“So buyers will either negotiate or shop around, or go with discount services or go straight with the listing agent. So we’re going to know for sure that commission will be reduced.”
Many realtors will not be able to survive in that environment because of significantly reduced commissions, he added – meaning “they’ll get a loan license and they’ll become a dual agent [to] make more money.
“A lot of loan officers who are already getting referrals from agents will not get that kind of referral anymore. So it’s going to affect almost everyone in our industry.”
Loan officers face rapidly evolving landscape
In that changing environment, the onus is on loan officers and brokers to up their game, Nguyen said, competing more effectively and realizing how high the stakes may be. “If they’re not good, no buyer will want to work with them and pay them money,” he pointed out.
“In the past, nobody really cared too much because your seller would pay the buyer’s agent. There was no accountability, no standard – and now the buyer, when they pay, expects that the agent has to work hard for their money and if the buyer’s agent is not good enough, they’re going to be out.”
Darrell Weekes of Purple Thread Marketing advises mortgage brokers to focus on two free tools for lead generation: Google Business profiles and LinkedIn.
— Mortgage Professional America Magazine (@MPAMagazineUS) August 26, 2024
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That shift has seen a growing number of companies pivot to a new business model, focusing on either a discount for buyers, a flat fee model, or even provision of a real estate agent to the buyer at no extra cost in order to ultimately make more money on referral or cross-selling.
Nguyen sees an opportunity for Loan Factory to expand amid a potential influx of new loan officers from the realtor side, allowing those professionals to earn more on both sides of the same transaction.
That migration to the loan officer side will be attractive to realtors, he added, because a loan officer license is generally viewed as easier to obtain than a real estate agent license. “For the loan agent license, we only need to study 20 hours and pass the exam,” he said.
“The real estate agent license takes a lot more – normally three, four classes. So it’s easier to become a loan officer than a real estate agent and this is more stable for now. With the nature of the work, it’s easier to be a loan officer if they join the right company.”
How did the changes come about?
The changes arrived as part of a landmark $418 million settlement finalized by the NAR in March following a slew of class-action lawsuits which effectively accused the organization’s compensation policies of reducing competition and artificially bulking up the price of commission.
They came into effect nationally on August 17 and mean offers of compensation can no longer be detailed on Multiple Listing Services (MLSs) while agents working with a buyer are also required to enter into a written buyer agreement before the buyer can view a home.
Preliminary approval of the NAR settlement was granted by a judge in April, although a final approval hearing is still to take place, and has been scheduled for November 26.
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