Mortgage pro talks challenges and opportunities
Recent changes to the way realtors are paid commission following the much-discussed National Association of Realtors (NAR) settlement have shaken up the real estate industry – and the adjustment could prove a “huge advantage” in levelling the playing field for mortgage companies.
That’s according to Marty Medve (pictured top), a loan originator with Trident Home Loans, who told Mortgage Professional America that the rule changes had brought lenders’ ability to assist realtors into sharp focus in a way that wasn’t widely known before.
The fact that contractual fees are negotiated up front, rather than included in the listed home price – as was often the case before – means an opportunity has opened for lenders with lower margins to assist realtors in covering the gap for fees, according to Medve.
The settlement may have complicated the overall outlook for realtors – “but it does allow a borrower to decide up front, and then it does push a realtor to refer a lender that has better rates with credits,” he said. “So it’s a huge benefit for us.”
The rule changes have spurred speculation of a possible exodus from the realtor space as real estate professionals grapple with the shifting landscape.
Still, Medve described a “separation of professionalism” currently at play. “The professional realtors don’t seem to have a problem with it, and they actually are doing better,” he said, “because more people are looking for someone of value… When you sign a contract, you want to know that they’re more of a professional. What do they bring to the table?”
Navigating the new landscape
Top of mind at Trident, according to Medve, has been educating realtors on the Buyer-Broker Agreement (BBA) and how lenders can offer incentives to buyers and realtors to offset the agreed compensation fee when the seller isn’t willing to pay it.
Plenty of sellers are now limiting the buyer fee regardless of the contract, he said – “and we’re finding that we can make up the difference. And as we slowly put that out to groups of realtors, we’re seeing that they’re very interested.”
August brought a much-needed break for prospective homebuyers, with mortgage rates dipping and home prices cooling, according to the latest ICE Mortgage Monitor Report.
— Mortgage Professional America Magazine (@MPAMagazineUS) September 4, 2024
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While prior to the rule changes, realtors may have been more concerned about getting leads, their focus has now shifted to how to obtain their fees, Medve said – “which we highly support, because we want realtors writing million-dollar contracts. We don’t want buyers going in unrepresented.
“You do not want, as a buyer, not to be represented on a million-dollar contract. It’s a legal contract and there’s myriad ways you could lose a fortune if you don’t do that.”
Knowing that the option will be there to refinance borrowers to a lower rate down the line, Medve said pricing in the upfront cost – a realtor’s fee, closing cost, or appraisal – to the original rate can help ensure realtors get paid and borrowers can plan for the future.
Cause for optimism for both purchase and refinance activity
Overall, the mortgage market has seen a significant acceleration in recent weeks, Medve said, amid falling rates and a general appreciation that now could be the right time to secure a favorable refinance.
On the purchase side, plenty of competitive markets have expanded dramatically, with conventional buyers jumping in and offering lower prices, while availability issues are also beginning to resolve themselves.
That said, certain markets – for instance, Los Angeles and Denver – are still experiencing inventory shortages, meaning quality properties there are being picked off quickly, with buyers also starting to accelerate their offers.
When it comes to refinancing, while plenty of borrowers are waiting for rates to go down further before they take the plunge, others are starting to realize that an upcoming interest rate cut is already priced into the market.
Now marks the opportunity for the first round of refinances, Medve said – “and over the course of the next year to two years, our strategy is to refinance and not necessarily provide the lowest rate, but to get them out of that extremely high rate for very little cost so they can prepare for the next refinance.”
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