On today’s show we’re talking about the predicted extinction of realtors and mortgage brokers.
It used to be the case that in the old days, knowledge was power. In many ways it was perceived that in order to complete a real estate transaction, or a real estate financing, you needed access to someone with inside knowledge of the process in order to navigate the complexities of a transaction.
It used to be the case that information about a specific property was hidden in a database that only the brokers had access to.
Today, almost any information can be searched online. Some of it requires paying a small fee in some areas, but most is freely accessible.
So if the real estate broker or the mortgage broker isn’t required for your to get information, why do you need them?
Information falls into two categories.
- Information about a property that is either timeless or has happened in the past
- Information about what people intend to do in the future.
Info in the first category doesn’t require a realtor. You can find the legal description, the assessed value, a property’s dimensions, any liens on title all using online resources.
If there’s lots of choice out there, investors can often do the research themselves using online tools. But if you’re looking for something specific, the proverbial need in a haystack, that information is unlikely to be contained in searchable form online.
The goal of a broker is compress timeframes, to lubricate the relationship building process between buyers and sellers, between landlords and tenants.
Many people approach these types of business transactions with a healthy degree of skepticism and mistrust. But if the seller has a relationship of trust with their broker, and the buyer has a relationship of trust with their broker, the amount of time spent in due diligence can be reduced significantly.
Some people think that what is being brokered is the property. But in many ways, what is being brokered is trust, and the relationships.
The same is true on the lending side. Lenders can easily waste lots of time with borrowers who won’t qualify. By requiring the broker to qualify the borrower before bringing the file to the lender, the lender can save lots of time. The borrower too saves a lot of time by increasing their chances of having a successful financing. Lenders often decline a loan that for reasons that have nothing to do with the borrower. They may be facing other constraints in their business that cause a loan to be declined.
Simply having a business card that lists a license to operate in an area isn’t enough. The true value of a broker is the relationships that they have developed over time. This takes the broker a long time to develop and doesn’t happen overnight. That’s why the more established brokers get the lion’s share of the business. They have the strongest relationships, and they’ve established the longest track record in the marketplace. After all, that’s what is really being brokered, not the property.
So when you go out into the marketplace and look for a broker, whether you’re looking to transact real estate or complete a financing, the track record and reputation of the broker in the community and the quality of the relationships are the first two things I believe you should be evaluating.