Fees - Mortgages Brokers and Estate Agents

Ian_Griffiths_Halifax

How come people on here are so against paying Brokers a fee for Mortgage Advice and for arranging that mortgage, when they are willing to pay Estate Agents.

People on this site usually recommend going to non-fee charging brokers rather than a fee charging one, and yet you never get a non-fee charging Estate Agent.

A Mortgage Broker saves you money and usually charges a reasonable charge of up to £1,000 WITHOUT VAT and yet an Estate Agent usually charges somewhere in the region of 1.5/1.75% of the Sale Price + VAT, meaning a client selling a house for £250,000 would pay an EA £4406 (@1.5% +VAT) and yet that same client moving into a £300,000 house with a £200,000 mortgage would be paying a Broker £1,000.

How is this acceptable to pay an EA and not a Broker when the Broker is the one saving the client money and Brokers have a far better reputation than EAs?

This isn't an attack on EAs, but a question on why people think it is acceptable to pay 2 people such a big difference and still recommend that Brokers be paid less despite spending more time with a client and processing a Mortgage Application (sometimes multiple), than an EA spends with them? It just doesn't make sense Especially when there is such tight regulation of Mortgage Brokers and none whatsoever of Estate Agents.

GDB2222

Ian_Griffiths_Halifax wrote: »

How come people on here are so against paying Brokers a fee for Mortgage Advice and for arranging that mortgage, when they are willing to pay Estate Agents.

People on this site usually recommend going to non-fee charging brokers rather than a fee charging one, and yet you never get a non-fee charging Estate Agent.

A Mortgage Broker saves you money and usually charges a reasonable charge of up to £1,000 WITHOUT VAT and yet an Estate Agent usually charges somewhere in the region of 1.5/1.75% of the Sale Price + VAT, meaning a client selling a house for £250,000 would pay an EA £4406 (@1.5% +VAT) and yet that same client moving into a £300,000 house with a £200,000 mortgage would be paying a Broker £1,000.

How is this acceptable to pay an EA and not a Broker when the Broker is the one saving the client money and Brokers have a far better reputation than EAs?

This isn't an attack on EAs, but a question on why people think it is acceptable to pay 2 people such a big difference and still recommend that Brokers be paid less despite spending more time with a client and processing a Mortgage Application (sometimes multiple), than an EA spends with them? It just doesn't make sense Especially when there is such tight regulation of Mortgage Brokers and none whatsoever of Estate Agents.

Well, in two words, 'endowment scandal'. I don't think that mortgage brokers have a great reputation. Sorry to disappoint you. If you're arguing that mortgage brokers are more highly regarded than estate agents, then possibly yes, but it's rather like asking children to choose their favourite between brussel sprouts and cabbage.

Estate agents clearly perform a useful/essential role, putting buyers and sellers together. That requires local knowledge, negotiations, an office, adverts, etc.

Mortgage brokers just need access to a computerised list of mortgage providers. It seems a much simpler job, although of course the FSMA means it's terribly bound up in red tape. It's not entirely clear why the whole thing can't be offered from a website on a self-service basis, and probably is.

However, given the present position, is your question really why people prefer that you be remunerated by commission rather than fees? In that case, apart from cash-flow considerations, I really don't know the answer.

MarkyMarkD

I think most people object to paying fees to mortgage advisers because they are well aware that the lenders generally pay a procuration fee to the advisers, so by charging a fee as well they are getting paid twice.

Obviously if a mortgage adviser charged a fee and returned the procuration fee to the client, that would be a different matter. But somehow I guess that isn't the idea you are referring to.

In which case, it's not exactly the fee/commission debate that GDB is talking about - it's double fees versus single fees.

Ian_Griffiths_Halifax

Well thanks for your replies guys and some of what you say surprises me but other bits don't.

First of all I don't know of any Mortgage Brokers who have sold Endowments as they are Investment Linked and they are/were usually sold by IFA's, Banks and Building Societies

EA's do provide a useful role if they are a useful EA. Chickmug who comes on here regularly is obviously a decent EA, but I can't name many and there is only one locally who I would recommend.

GDB2222, if you think that all a Broker needs is a computerised list of mortgage providers, then you are sadly mistaken and that is the mistake that people make them selves when they try and do a mortgage themselves online. There is more to mortgage advise than finding the lowest interest rate or the lowest monthly payment.

Also, my question wasn't 'would people prefer that we were paid by commission or fees', It was why would an EAs service be worth paying £4406 (less VAT) and a broker a fraction of that when they are saving a client money. The lenders don't pay nearly as much as people obviously thing they do and a typical 'Procuration Fee' (commission) on a £200,000 mortgage would be 0.3% i.e. £600. However, I used this example and the typical mortgage size is nowhere near £200,000 and is nearer £140,000 in our area (regions vary), and so the typical procuration fee would be only £420 for the same work.

MarkMarkyD, see my above response to GDB2222 re proc fees, but more often than not the fees charged to clients are low BECAUSE we get a procuration fee from the lender.

If a broker were to charge 1% of the advance (note - not property selling price) and rebate any commission to the client, then the broker would still be earning £2,000 on the £200,000 mortgage, which is far more than earning £1,000 plus getting £600 Procuration Fee and would still be less than half of what an EA would receive. It doesn't make sense, though if a broker were to charge 1% he'd be shot down in flames on here.

Thanks for your response guys. Everybody has their own opinions on what their 'worth' is, but I can't see why a 1.5% + EA fee isn't questioned, and yet a fee to a broker who spends more time on a case is.

pawpurrs

How does a mortgage advisor spend more time. It can take monthes to get a sale to completion.
EA have much more costs too,advertising, being one of them. They also do a lot of work that produces no fee, when house sales fall through or people change agents.
They have to pay for their shop,a typist, details, lots of phone calls, staff etc.
How much time in average does a mortage broker spend on each case? A day? Well £400- £600 commision isnt bad for that amount of work is it?

Ian_Griffiths_Halifax

pawpurrs wrote: »

How does a mortgage advisor spend more time. It can take monthes to get a sale to completion.
EA have much more costs too,advertising, being one of them. They also do a lot of work that produces no fee, when house sales fall through or people change agents.
They have to pay for their shop,a typist, details, lots of phone calls, staff etc.
How much time in average does a mortage broker spend on each case? A day? Well £400- £600 commision isnt bad for that amount of work is it?

Wow, that's all a bit random!

Mortgage Brokers also have costs such as advertising. Even if they don't advertise, they have offices, phones, computers, photocopiers, printers, software subscriptions, Professional Indemnity Insurance, Public Liability Insurance, Data Protection Registration, Gas, Electric, Rates, Cars, Staff, etc etc etc.

Brokers also have a lot of work that produces no fee, such as when a client lies and doesn't tell the whole story and they get declined for mortgages after you've spend 1 1/2 to 2 hours with them, or when an application has been submitted and a chain falls through etc.

As for a broker spending a day on a mortgage :rotfl: try anything from 1 week (the absolute exception, maybe one in 500) for a very smooth remortgage, to 7 YEARS in one case (the absolute exception again). Usually between 4 and 8 weeks it takes for a remortgage, but a purchase takes just as long as the Estate Agents sale, afterall, it's our clients mortgage that is funding that Estate Agents sale.

Just in my time alone, I estimate an average 1 hour travel time, 4 hours of Face to Face meetings, 3 hours of compliance paperwork. Then there is my staff time in chasing/updating the Client, Solicitors, Lenders and EAs and the costs involved.

pawpurrs

So 8 hours work (about a day) not the amount of time it takes to go through as thats obviously more. I appreciate you have some of the above costs, but I dont think your costs are as much as the EA, obviously there are cases where a house is sold to the first viewer, but there is still all the sales chasing to do,etc.

Ian_Griffiths_Halifax

Do you not think that a Broker does any chasing? Does the processing time 'not count'?

Does an EA spend 8 hours before putting it in their window?

MarkyMarkD

I think you're making an interesting point, Ian.

I think, though, that most would accept that estate agents' overheads are higher. As previously pointed out, they also suffer more than mortgage advisers from the "no sale no fee" nature of the business - although this might admittedly be less of an issue since the introduction of HIPs put off the "suck it and see" approach to selling.

I agree without a doubt that mortgage advisers can make a huge difference to an individual's financial position for many years, and that people should take mortgage advice seriously and therefore be willing to pay for it.

But you'll struggle to get that view accepted on MSE where most people have a problem paying for anything.

Ian_Griffiths_Halifax

I think that's the problem.

Having looked into helping a client sell their house privately recently, it was £498 +VAT to do it via a Private Sales Website and there's virtually no work at all involved for that site.

This is partially what has prompted my questioning.

dwsjarcmcd

I can see your point Ian but I think there are some perceptual issues here. These may not be real, but that doesn't matter. They are

1. It is clear that the public don't really know what brokers do. Until the industry overcomes that, then they will continue to think '£600 for picking a lender from a computerised list' even if that's not the case.
2. There is something inherantly strange about brokers charging fees and taking a commission, which means people lack trust. EA can only earn from the customer (HIPs & Conveyancing aside, but the public don't really know they earn from these)
3. Even in today's internet world, online EA haven't taken off really, so unless you do it yourself, you NEED an EA to get on Right Move, for example. Fee charging brokers are an avoidable cost, either by not using one, or by going fee free.
4. Why would you pick a fee charging broker, over a fee free one, when they say they offer the same service?
5. You can find an Estate Agents office on the High Street, it is rare to find a Mortgage Broker, and even if you do, they seem very unwelcoming because brokers don't have the corporate money behind them to 'brand' them.
6. Everyone knows someone who knows, or thinks they know about mortgages. There is trust there even if it's not correct!

I could go on, and to be clear, I'm not saying any of the points I raise are correct, just what I feel the public perception to be.

Also living in Sowerby Bridge, I agree about Estate Agents I would use i.e. not many!

David