AgentReal Estate

Can real estate brokerages survive without mortgage?

No! Industry leaders say agents must align themselves with mortgage-infused brokerages right away


Real estate brokerages can survive, but only if they seriously invest in mortgage.

So said members of a panel Tuesday on the evolution of the real estate brokerage during HousingWire Annual in Frisco, Texas.

Today the value of a single mortgage origination is that of 10 real estate sales, said Chris Kelly, president and CEO of Ebby Halliday Companies.

“It is increasingly important for agents to align themselves with a business model that includes brokerage,” Kelly said.

The Plano, Texas-headquartered Ebby Halliday is a subsidiary of the mighty HomeServices of America, the most prolific real estate brokerage in the country by number of sales in 2020, according to RealTrends.

But Kelly made clear that the only way HomeServices can make money is through mortgage, and through a lesser extent, to providing title insurance.

“A good title capture rate” is presently “70 to 80%” of customers who buy a home with an Ebby Halliday agent, Kelly said, describing title as a commodity that most consumers only dimly understand and want to finish up so they can nab their house key.

The contemporary brokerage ought to also provide home insurance, the company president said. But Kelly also called that division a “wild card,” which cannot be profitable until after four years when customers begin renewing policies.

A company in every corner of a housing transaction is the business model of Better, a seven-year-old New York City outfit that has become profitable largely thanks to the mortgage refinancing boom of the past year.

Christian Wallace, head of real estate services at Better, said Tuesday that the company’s mortgage business has enabled it to grow a real estate arm. Better has hired about 400 real estate agents in 25 states, Wallace said, agents who are paid a yearly salary plus monthly performance-based bonuses as opposed to the traditional commission-based independent contractor model.

Wallace wants Better to handle every aspect of the home transaction (including appraisal). But she said most agents Better onboards don’t really understand the importance of mortgage and need to do “Mortgage 101” training.

The idea of a “one-stop shop” that “seamlessly” handles each part of a housing transaction has been around since at least the 1970s when Sears and Merrill Lynch gave it a try, panel moderator Tracey Velt of RealTrends noted.

Past attempts have failed not just because of costs and logistics, but complying with the Real Estate Settlement Procedures Act, which prohibits kickbacks for referrals from one element of the housing deal to another.

Better has an advantage, Wallace said, because RESPA laws are more relaxed for employees than independent contractors. Part of agents’ monthly bonuses is their ability to keep each part of the transaction – the home sale, the appraisal, the title insurance, the mortgage – in-house at Better.

Though brokerages are facing a margin squeeze – and hunting for other sources of income – the overall housing market is bright, said HousingWire lead analyst Logan Mohtashami.

At a panel earlier Tuesday, Mohtashami dismissed concerns that the present high-demand, low-inventory market is headed toward a cliff as the scare tactics of “untalented” market analysts.

Such analysts have “bombarded” the public with a “theory that there is this affordability crisis” or “student loan crisis” when the “doom-and-gloom” post-2008 narrative is flat wrong.

“The U.S. economy always leads the way out of a recession,” Mohtashami said.

The analyst’s presentation focused largely on demographics – he stated that demand will stay strong through at least 2024 due to the emergence of millennial generation members entering the market.

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