Broker/Developer Relationship

DRMANTISTOBOGGAN

Hi All,


Currently in the process of buying a new build and wondered if anyone else had any thoughts on using the developer suggested mortgage broker.


We did go with the broker suggested by the developer and don't have any major complaints, he's been responsive and quick, hit all the timescales he'd promised and took us from application to offer in around 2 weeks.


There were a few occasions however in which the developer was aware of our application position before we'd informed them, the sales woman in the sites office let slip that she'd been in contact with the broker.
I feel like this could've compromised our negotiating position with the developer as at the time we were still trying to agree on incentives (mortgage lender has restrictions on cash incentives) so in return for us not pulling out with the lender we'd got the DIP with and finding one without the cash incentives restrictions potentially slowing the process we wanted more non-cash incentives in return. Luckily the developers were happy to swap incentives but they already knew we were moving on with the application and not pulling out.
Anyone else had something similar? Did you see it as a conflict of interest?

dunstonh

Currently in the process of buying a new build and wondered if anyone else had any thoughts on using the developer suggested mortgage broker.

Normally it is best not to. Treat them the same as estate agent brokers. That is not to say there are good ones out there. However, brokers with developers and estate agents tend to be tied to one insurer, often limited panels and its more of a sales process than an advised process compared to local brokers.

Plus, you lose a bit of independence in that the developer/agent knows what is going on when you may not want them to.

DRMANTISTOBOGGAN

dunstonh wrote: »

Normally it is best not to. Treat them the same as estate agent brokers. That is not to say there are good ones out there. However, brokers with developers and estate agents tend to be tied to one insurer, often limited panels and its more of a sales process than an advised process compared to local brokers.
QUOTE]


I think if we could go back we would go Independent. Do you know how brokers get themselves into these relationships with Developers - as in who pays who and what the upside is for either party?

dunstonh

Do you know how brokers get themselves into these relationships with Developers - as in who pays who and what the upside is for either party?

Depends on the developer. It can range from a local independent relationship right through to an in-house sales force.

kingstreet

We are the appointed brokers for four different builders.

For one, we charge their purchasers no fee and receive only commission from the lender.

Three pay our fee as an incentive for the purchaser to use us and this is combined with a further incentive for using one of the builder's panel solicitors.

Otherwise we receive nothing from and/or pay nothing to the builder.

Their interest in using us is purely speed and control that we will ensure the purchaser is in a position to exchange contracts at the appointed date.

DRMANTISTOBOGGAN

kingstreet wrote: »

Their interest in using us is purely speed and control that we will ensure the purchaser is in a position to exchange contracts at the appointed date.

Interesting reply, thanks.
I can see how this would be beneficial for both parties (speed/exchange on time) but for the situation I mentioned above it does seem like a conflict of interest.

There isn't really a way to police it but knowing what I know now I'd probably go with an independent broker - I'd prefer there was no relationship between them/the developer.

dunstonh

There isn't really a way to police it but knowing what I know now I'd probably go with an independent broker - I'd prefer there was no relationship between them/the developer.

In the cases where the developer (or estate agent) uses a small local firm, then that is absolutely fine. It is the in-house reps or attached salesforce where the reputation is poor.

Jon_B_2

We used a developers preferred broker. Overall I was happy, but like the OP - I was disappointed that certain aspects of our application was shared with the sales office - including knowing that our mortgage was being provided by Nationwide. Surely the data protection act must come into play at some point?

amnblog

A question for Kingstreet

Our OP says 'There were a few occasions however in which the developer was aware of our application position before we'd informed them' .

How do you handle confidentially with the Developer. How much about the buyers mortgage and financial situation would they get to know/should they know/can they know?

kingstreet

We get an enquiry, we qualify it financially, we feed back to purchaser and builder it meets lender (and HTB) affordability.

All we confirm is £x purchase price with £y mortgage is affordable.

We produce and forward illustrations requesting permission to carry out agreement in principle.

We obtain agreement in principle from lender and feed back to purchaser and builder that a reservation can now be taken.

Reservation done and copy supplied to us.

Meeting arranged and builder notified of date. Docs obtained and application submitted to lender. Purchaser and builder notified of developments, such as valuer instructed.

Mortgage offer issued and purchaser, builder and solicitor notified.

Sometimes, if there is something unusual in the case, such as incentives, the builder will run past us what they plan to offer prior to reservation and we will tell them if this is acceptable to the selected lender, of if another lender will be required.

We are not involved in any other way in negotiations over price, discounts or incentives.

amnblog

If the Broker is working with our OP in the same way they do not have too much to worry about KS.