Real Estate Agents as Mortgage Brokers: Understanding Dual Roles

A real estate agent and a mortgage broker serve important but distinct roles in the home buying process. However, in some cases, one person takes on both jobs, acting as both the real estate agent and mortgage broker for a home buyer. This dual role arrangement can provide convenience but also raises some concerns. Understanding the nuances of real estate agents also serving as mortgage brokers is key for home buyers.

What is a Real Estate Agent?

A real estate agent is a licensed professional who helps clients buy, sell, or rent residential or commercial property. Real estate agents assist home buyers with activities like viewing potential properties, making offers, negotiating prices and terms, and navigating the legalities of a purchase. 

Real estate agents have in-depth knowledge of the housing market and local neighborhoods. They can advise clients on factors like pricing, competition, and amenities when buying a home. Real estate agents work on commission based on the sale price of the home.

What is a Mortgage Broker?

A mortgage broker is a professional who facilitates mortgage loans for clients from various lending institutions. Mortgage brokers take a client’s financial information and desired loan details to shop mortgages from multiple banks and lenders. 

The mortgage broker presents loan options to the client, advising them on the interest rates, fees, terms, and other variables of the available mortgages. The client chooses the mortgage option that best fits their needs and budget. Mortgage brokers receive commission from the lender when a loan closes.

Can One Person be Both a Real Estate Agent and Mortgage Broker?

It is possible for one person to hold both a real estate license and mortgage broker license. This allows them to provide services on both fronts, acting as the real estate agent who helps find and buy a property as well as the mortgage broker who facilitates obtaining financing for the home purchase.

There are 20% of real estate agents are also mortgage brokers. Real estate agents who are also mortgage brokers generally have extensive expertise in navigating real estate transactions from start to finish. However, there are some benefits and drawbacks to be aware of when working with an agent who serves this dual role.

Benefits of Having a Real Estate Agent who is also a Mortgage Broker

1. Convenience

The top benefit of using a real estate agent who is also a mortgage broker is convenience. Home buyers only need to work with one primary point of contact throughout the purchase process. The dual-role agent coordinates both finding the right home and securing financing for it.

2. Seamless Communication

When the real estate agent also brokers the mortgage, communication stays completely internal. The agent can ensure the mortgage application and underwriting moves forward properly during the home buying proceedings. This helps avoid delays from any miscommunications between separate real estate and mortgage professionals.

3. Better Understanding of the Process

Real estate agents who are also mortgage brokers have expertise across the spectrum of buying a home. They understand both the real estate transaction itself as well as mortgage qualifications, underwriting, and funding. This holistic knowledge helps them guide clients through every step from start to finish.

4. Potential for Negotiation and Savings

Because the real estate agent is involved in both selecting the home and obtaining financing, dual-role agents may be able to negotiate some costs. For example, they may be able to secure a lower real estate commission or mortgage interest rate for their client. Real estate agents who are also mortgage brokers earn an average of $100,000 per year, compared to $50,000 for real estate agents who are not mortgage brokers.

Potential Drawbacks of Having a Real Estate Agent who is also a Mortgage Broker

While there are benefits, potential risks do exist when the real estate agent is also the mortgage broker:

1. Conflict of Interest Concerns

Critics point out that it poses a potential conflict of interest for the real estate agent to also coordinate financing. There is a risk they may steer clients toward mortgage products that ultimately earn the agent higher commissions over the client’s best interests.

2. Limited Options

Relying on a real estate agent for both services means the client only works with that one broker’s mortgage offerings. The client does not get to shop rates and terms from multiple outside mortgage providers. However, 70% of homebuyers say they would prefer to work with a real estate agent who is also a mortgage broker.

3. Overwhelming Responsibilities

Serving as both real estate agent and mortgage broker is demanding. Excessive multitasking could potentially cause the quality of service on either front to suffer. However, 80% of real estate agents who are also mortgage brokers say that their dual role helps them better serve their clients.

How to Choose the Right Professional for Your Home Buying Needs?

Ultimately, the ideal real estate agent and mortgage broker depends on the client’s specific needs and priorities. Home buyers should think about factors like:

• Desired level of convenience versus mortgage selection 
• Their tolerance for sole reliance on one real estate/mortgage professional
• How involved they want to be in researching rates and options themselves

Openly communicating these preferences will help identify the right real estate and mortgage team.

Is it Common for Real Estate Agents to also be Mortgage Brokers?

It is relatively common for real estate agents to hold dual licensing as mortgage brokers. This allows them to provide end-to-end services and cash in on commissions from both the home sale and financing. Many large real estate firms now employ agent/broker teams or have mortgage lending divisions.

However, it is still more typical for real estate agents to work separately from specialized mortgage brokers. Some agents choose to maintain singular focus within their real estate practice. And some buyers prefer to get mortgages from dedicated brokers who offer a wider array of financing sources.

What are the Legal Implications of Being Both a Real Estate Agent and Mortgage Broker?

Real estate agents and brokers must hold proper licensing for each respective role. The legal and ethical requirements around dealing honestly and fairly with clients still apply. Dual agents should disclose they are receiving commissions from both the home sale and mortgage origination.

Many states prohibit “self-referrals” where the same broker refers a client to their own mortgage company without offering alternatives. Contingency offers based on mortgage approval with the broker’s own company are also often banned. In general, transparency and properly setting client expectations are legally required.

How to Ensure Transparency When Working with an Agent who is also a Broker?

If you decide to use a dual-capacity real estate/mortgage agent, there are steps you can take to promote transparency:

• Ask how they are compensated on both transactions to identify any conflicts of interest.
• Make sure alternatives are presented such as quotes from other lenders.
• Seek pricing and rate details in writing rather than verbal assurances. 
• Research pricing and get pre-approvals from other sources before committing.
• Ask direct questions and voice any concerns about them acting as both your real estate agent and mortgage broker.

Conclusion

A real estate agent who also works as a mortgage broker can streamline the home buying experience. However, it does consolidate control into the hands of one provider. Home buyers should weigh the advantages and disadvantages when deciding. Carefully vetting any dual-role real estate/mortgage agents and asking the right questions ensures your interests remain protected. Seeking outside pricing and rates as a comparison can help guarantee a sound decision.