Real estate agents appear to be playing a significant role in determining who writes their customers’ mortgages. The results of a new study, Key Factors in the Referral of Homebuyers to Mortgage Originators has found that homebuyers rely on their real estate agent to recommend a specific lender in about one-third of the mortgage-financed home purchases in the U.S.
The study, sponsored by Inside Mortgage Finance utilized a survey of 1,800 real estate agents and was conducted by Campbell Surveys in January. The research was aimed at understanding the factors that are involved in mortgage referrals to lenders and to identify the issues most likely to impact a home purchase transaction in the current environment.
The report says that, “Although real estate agents have never been shy about recommending lenders to homebuyers,” it appears that agents pay a particularly important role in referring customers where financing contingencies have become so central to the transaction. Agents reported that they recommended one or more specific mortgage providers in nearly 60 percent of the transactions where they represented the homebuyer. Of those lenders who reported making such referrals, more than three-quarters said they had recommended more than one firm.
Agents reported that their recommendations were accepted by homebuyers more than 58 percent of the time. This indicates that real estate agents control or influence 34 percent of mortgage-financed home purchases. Where homebuyers did not follower their agents’ recommendation, agents reported that it was generally because the homebuyer had an existing banker relationship or a pre-approval letter from another mortgage provider.
Real estate offices frequently partner with a lender or, in the case of large firms, have their own lending division. A majority of the respondents in the Campbell survey reported that such a relationship existed in their firm but they also indicated that this was not a significant factor in their recommendation of a lender. Only 16 percent of home purchases involved a lender in such a partner relationship.
The report says this lack of enthusiasm for “mortgage partners” is partially explained by the perception that real estate agents get little out of referring business to these partnerships. It quotes one agent as complaining that such referrals are a one-way street. “Our company has an in-house mortgage person. We do not use him because he generates no leads for us. The lender our team of agents uses sends many leads our way. We believe we should support those who help support us,” the agent said.
Responding agents were asked to rank 22 factors that determined which mortgage providers they chose to recommend. The top ranked factor was “reliable preapproval letters. However, this also ranked first in their ranking of 22 significant problems with mortgage financing. The report says, “In a housing market where getting approved for a mortgage can be a big challenge, the new study found that preapproval letters play an outsized role in how mortgage lenders are perceived by agents. In fact, the possibility that even with a preapproval letter a borrower could face a mortgage rejection helps explain why cash homebuyers generally pay about 10 percent less than homebuyers requiring a mortgage when purchasing a home
Agents rated “returns phone calls and emails” and “reliable in meeting a closing date” almost as high as reliable pre-approvals in recommending a lender. “Competitive rates” ranked number five.
When asked to rate specific national direct lenders as well as a generic “local lender” on a range of factors. The results showed that local mortgage lenders with reliable preapprovals and strong personal service tended to rate the highest among agents.