June 27th, 2018
The old way of doing business is about to disappear and if you don’t change you will go the way of the dodo.
Some large lenders are now offering no closing costs loans by paying all of the buyers closing costs if they use their real estate company to buy a home.
Companies like Zillow are getting into the real estate brokerage business and Amazon wants to do mortgages (check out this article on Bankrate.com), the future is here and now. The days of 6% commission are gone!
While this is great news for consumers, it’s bad news for Realtors. But there is a way around this that can turn you into a real estate all-star.
If you cant beat them, join them!
I know that what I’m saying here will not be easily accepted by most real estate agents, but I rather make 50% of something than 100% of nothing.
We all have to give part of our commision to pay for your buyer’s closing costs to stay competitive.
But you do not have to go at this alone, you need to partner with a lender that can give your buyer’s lender credit at closing.
Lenders are restricted on giving out part of their commision to homebuyers. It is considered a kickback and prohibited by RESPA.
The workaround for lenders is to offer lender credit and lower their compensation to keep their rates low.
By doing this a lender can offer to pay for part of the homebuyers closing costs. It is also very important to use a lender without junk fees.
By partnering with a lender that can give your home buyer lender credit, you can also contribute to their closing costs from your commision.
This strategy will place you above your competition by allowing you to offer a no closing costs solution to your home buyers.
You can now compete with the big guys and sell more houses than you ever thought possible!
A local lender that has their real estate company has sold over 100 houses in just three months. That’s over one a day.
Just imagine if you and your real estate team do the same.
Closing costs are defined as title company charges and lender fees. These can be found on the Loan Estimate (LE) under the following sections:
A. Origination Charges
B. Services You Cannot Shop For
C. Services You Can Shop For
Closing costs do not include the following:
E. Taxes and Other Government Fees
G. Initial Escrow Payment at Closing
Home inspections, appraisals, HOA fees and other charges are not considered part of the closing costs, but this does not mean that you as a realtor cannot offer to pay for these.
All down payments must come from the buyer, either from their own funds, as a gift, or a grant. Neither the lender or the realtor can contribute towards the down payment.
You can also use seller contributions to cover closing costs. This will increase your bottom line by reducing the amount of cash that you as a realtor would have to contribute.
Now you and your agents have real motivation to get that seller contribution.
By combining lender credits and realtor contributions for closing costs with loan programs like USDA or VA you can now offer a true no money needed to buy a house. It would be like giving them out for free!