So I have a family member that is interested in purchasing a home.  They asked if I could join them at the mortgage brokers office to look over the documents and make sure there wasn’t anything weird going on with the process.   First, I have to give you a bit of a background and you’ll understand why we ended up here.
A few weeks ago, person x found a home they were interested in purchasing.  Person x asked for my help to look at the property and share some thoughts on the possible purchase.  I drove over, checked out the home and thought it was a reasonable deal. Nothing out of the ordinary in my opinion until……I got a call from person x a few days later saying the Realtor suggested a particular mortgage broker. We’ll call mortgage broker “Greedy Selfish Bastards Mortgage Broker” or GSBMB for short.
Immediately alarms went off in my head.  Hmmm…Realtor suggests mortgage broker….where have I written this story before?  So without going into a long convoluted story, the quick summary is that GSBMB came in with a ridiculously high loan rate, ridiculously high fees, and ridiculously high selfish greed.  So person X is advised to get someone else by another family member to comparison shop.  Sure enough, the second mortgage broker (SMB) is a bit cheaper because Person X gave them a COPY of what GSBMB and they reduced the fees, interest and lowered their greed (a small bit).
I come into the story when Person X is heading over to SMB to sign some paperwork. We get there, I sit down and start looking at all the paperwork and that’s when I go “ugh” and sigh a bit.   I immediately start off by asking why there is $1000 in fees for doing nothing more than shuffling paperwork and the response from SMB agent is immediately, “it’s cheaper than what GSBMB was charging and Person X is getting a great deal.”
Now if you paid close attention, you’ll note that the fees were still high just not as high as GSMBM which made Person X feel better but it’s still a big waste of money.  Unfortunately, Person X is too busy and too much in a hurry to take a step back and consult with another bank or broker and simply wants to get the deal run. The meter is also running on their contract and they have to close within a particular date and time is dwindling away.
Person X signs the paperwork and we go to lunch.  “What do you think?” is the question I get and I respond, “You were in a hurry and probably paid an extra $2,000 for this home that you didn’t need to spend” is what I say back.   At the end of the day, we both agree that the interest rate is irrelevant because Person X plans on paying off the mortgage within a year or two so it’s no big deal but the fees are pure profit for the worthless mortgage broker. As best I could tell, the SMB was making at least $3,000 in profit for doing virtually nothing but signing paperwork.
At some point in the near future, I suspect technology will overtake the real estate industry. We’ve seen companies like Redfine and Zillow start chipping away at Realtor commissions of 6% (ridiculous) and some enterprising young man/woman will come up with a system to automate the whole process.  With the advent of things like Google streetview, Google earth, automated property tax records there is no reason why appraisals can’t become more automated and there really is no reason for the existence of real estate mortgage brokers anyway since you can go to places like Lending Tree or BankRate and get quotes for loans from most banks.
So to all mortgage brokers, I hope you’ve enjoyed the quick and easy cash but it’s all going away over the next generation or so and you will go the way of the dinosaurs!