Love thy broker
At the moment we feel like squirrels! Everything is rushed. There are lots of pre-auction offers, and auctions being brought forward on a daily basis. Deal, after deal, after deal. The system is stacked up and getting anything done has become harder. At the moment mortgage approvals can take anywhere from 4 days to 2 weeks in extreme cases.
Given the current craziness, if you are in the market to buy it pays to plan ahead and not leave everything to the last minute. The challenge we face in our profession is that our service is free. We only get paid when a client buys and settles their property through us, which can be a six-month journey, or longer. In some instances, our "fussier" clients have taken over 2 years. The time we spend upfront discussing a client’s portfolio and strategies, providing feedback on various deals, analysing properties, is all free. Equally, the time spent preparing clients for auctions they don’t win – is free. So, given the time we invest upfront, it is important for us to have the right clients.
We have gradually learned (the hard way) to differentiate procrastinators from doers, and price shoppers from clients wanting an adviser. It’s trial and error with plenty of scope for us to improve. Brokers are advisers. We are like your Lawyer or Accountant, and not simply an alterative to negotiating rates directly with the bank. Sure we negotiate pricing but its only a small part of what we do. I had an investor ring me to refinance his properties last week. It transpired during the conversation that he’d already arranged to refinance through another broker. Bad start, but it gets worse. Turns out he just wanted to find another broker willing to "buy-the-right" to earn a commission from his deal. Apparently his existing broker had already offered to part with $2,000 and had negotiated good rates, but this guy wanted a bigger cut. It was a surprisingly easy phone call to take. I politely told him to piss off. There are some excellent mortgage brokers around and there are some duds. If you have a crap one then find another one. The same applies with any profession and any other adviser you have.
How to spot a great Broker
The best mortgage brokers I know are passionate about property. They are investors themselves, some very active investors. They know the market. When it comes to property, they know a good deal, and they know a lemon. I'd always advocate an independent mortgage broker.
Brokers who work for Real Estate firms will risk having a bias towards pleasing the Agent (their referral source) who works for the vendor not the buyer. Better still the brokers around today will have survived the credit crunch. That is no small task when your life revolves around property. Of course brokers will also negotiate rates and provide advice around mortgage structures. That is their bread and butter. They’ll also have a good grasp on the economy and what’s going on. They’ll be self-employed or in small businesses and be self-starters. They thrive on doing deals and getting amongst the action.
It is also reassuring that if you get into financial trouble, your broker will know you, and they are in the best possible position to get you out of it. Contrast that with your bank mortgage manager. They dress well. They have a reliable high paying job and low risk. The only risk is when they didn’t hit sales targets. They can tell you how much you can borrow and your mortgage options, but they probably don’t know much about the property market or the economy in general. If you get into trouble, it’s not their decision what happens next, and they don’t know how to get you out of it. At this point, even your banker will refer you to a broker.