Are you being taken advantage of?

If you haven’t read the fine print, you might be getting shortchanged on your commission split and fees, writes Sarah Colucci

Are you being taken advantage of?

IT MIGHT surprise you to learn that some of the top earners in this industry, who make up a large part of their own mortgage brokerage’s volume, have been losing thousands of dollars each year in otherwise earned commissions.

Over my career, I have learned that commission splits are genuinely dependent on what mortgage brokerages want to disclose to their agents about what lenders pay them. As an agent, you might receive correspondence directly from the lender about what they are paying you on each completed mortgage transaction. What lenders often don’t advertise to agents is any other commissions they are paying the brokerage on the same deal.

Back-end commission models, and even some types of volume bonuses, don’t get paid to every agent. As a result, the commission split an agent thinks he or she has in place could be completely inaccurate.

For example, a well-known lender pays most brokerages 70 basis points on a specific mortgage transaction. However, most brokerages I’ve looked into only advertise the lender paying 50 basis points. Since the agents have no idea that the brokerage is earning an additional 20 basis points off the same deal, they think their split is right. However, the agent is earning less money than they think.

If the agent has a 90/10 split, for example, and believes their brokerage is getting 50 basis points only, then on a $500,000 mortgage, that 90/10 split is really a 79/21. The brokerage made an additional $900 (or 20 basis points) off the same deal, and they didn’t tell the agent.

It’s my understanding that the ‘total commission’ a brokerage receives gets negotiated by way of a split, but the definition of ‘total commission’ is a grey area – especially if agents don’t know about any other deals their brokerage has set up with the lenders independently. It’s becoming necessary for agents to take the time to probe more deeply into their commission splits and ask their brokerages about any other side deals they may have negotiated with lenders that could prevent them from earning more.

Marketing fees are another pet peeve of mine, mainly because they are a rip-off. Why do brokerages impose a marketing fee that includes a generic website and a crappy CRM system that most agents don’t use? Even if it did offer a hint of value, why is it mandatory? Could it be that it’s just another revenue stream that makes the brokerage millions at the expense of the agent?

When it comes to websites, anyone who has a fully functioning site will tell you that ranking higher in Google search engines and retaining business from the web always entails some search engine optimization, branding and marketing. None of the brokerages that charge monthly fees for websites offer any service remotely close to this. What they offer is discount web hosting and an illusion that the agent is getting a slice of value in exchange for their mandatory monthly payment. There is no upkeep, no maintenance, no effort. That’s what you get when you have a brandless website – and beware, that’s what you could be communicating to potential clients.

Mortgage origination is becoming automated, and big banks are spending millions on their web presence. No mortgage professional can afford to have a less than fantastic website. Could their money be better spent elsewhere? Yes.

Customer relationship management systems – another justification for the monthly marketing fee – often go unused for the same reason as the generic website. Services such as Salesforce require constant upkeep, customization and personal branding. No CRM program included with a mandatory monthly fee could compete. Monthly marketing fees are a hoax because they masquerade as a value-add to help agents get business, but in reality, they are empty shells for agents and treasures for brokerages.

It’s easy to not pay attention to everything going on around us, especially when we are busy closing deals and trying to retain new business, but we must look closely at every dollar spent. A small oversight can cost us big money.

Sarah Colucci is a mortgage agent with Mortgage Edge. She has generated most of her business via her own social media marketing, winning the firm’s Social Media Excellence Award twice.