Fee Agreement with Commercial Mortgage Brokers

We can never fully put so much emphasis on how important it is to have a good
commercial mortgage broker by your side and our fees agreement with him. If
you are a commercial mortgage broker or you are somehow, in one way or another,
have any kind of involvement in this industry you’d understand that professional
brokers for mortgage arrangements nowadays don’t have much of a choice but to
originate their commercial mortgage offerings via the use of the traditional resources
such as from smaller or regional banks.

For many years now, these are the banking institutions that have seen how the
market share in the industry has gradually shrunk in numbers. But only recently,
these sane banking institutions have gained good control as well, which is a good
indication of better things that are to come for the whole industry. A good number
of these banking institutions have never bothered increasing their expected risk
thresholds. They didn’t even bother making any significant change in their underwriting
guidelines in an effort to remain competitive in the market and thus protect as well their
business interest. Presently, these financial institutions, these banks are all reaping the
best rewards that may only come with such kind of prudence they have just displayed.
And they all boil down to one thing only, they still have a good amount of money that can
be put on offer for lending purposes and in many aspects of it, the rates they offer are
considered to be among the best to have in the industry, way better than anything else
offered in the market.

But this also brings to surface something that is a bit of a challenge to mortgage brokers
these days, and this has something to do with these banking institutions not being at all
too friendly to brokers. To be more accurate on this aspect, I would like to put it this way
instead, this has something to do with how the framework of these banking institutions are
built in such a way that it is not at all conforming to work with brokers. Like for instance, you
will seldom find a banking institution that is willing to pay rebates to their clients. There are
rare occasions though that you will stumble upon banking houses that are willing to offer
0.5% or 1% referral fee. But that is it and nothing more to follow that can somehow exceed
that amount. And as mentioned, they are very rare to find.

These banking institutions are in anticipation that you’d be able to get paid on top of the 1%
fee they have on offer. Naturally, the majority of them would want you to have your fee or
make it out of close… do you still remember the last time that you need to chase some
borrower to get your $20,000 commission? If things are not in proper place the first time, then
it comes to follow that you will eventually find it too challenging to collect. Aside from collecting,
you will certainly have a hard time completing the deal.

What I am pointing out here is that besides this current reality in the market, which can never
be fun, if you are under the impression that you will need to take your deals to, say, to one of
the local banks in your area you would need to have your commercial mortgage broker rates
agreement signed. This helped start put everything else in their right places, especially with
the thing you can expect from your mortgage broker. Setting the right expectations will be the
foundation of a fruitful and rewarding working relationship with your broker.

It is important to have this in place already prior to working on the deal with your broker. If you
start the work rolling right away without the agreed fees settled, sticky points may come along
the way. Determining the right and suitable commercial mortgage broker fee is a sensitive task
that should be worked on together so that seamless road can be anticipated ahead.