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Brought to you by the NAR Real Estate Services Initiative and RISMedia’s Power Broker Network Report

By Ann vom Eigen, Esq. 

RISMEDIA, August 2, 2007—For affiliated business arrangements (ABAs), growth is always a challenge. Even in the best of times, convincing a real estate agent to use a company’s mortgage banking and title agency affiliates can be a struggle. Enticing agents to abandon outside service providers they have used and relied on for years requires commitment and effort. However, as we face a market slowdown in many areas of the country, generating revenue from ABAs will become even more important and new opportunities for revenue generation should be explored.

Now is a good time to take a look at the way you manage your affiliated business operations and identify new techniques to integrate those operations into your real estate business, so you can improve your capture rate. This article reviews some winning management techniques used by successful affiliated businesses and can serve as a partial management checklist.

As a first step, take keen look at how closely your current affiliates are integrated into your real estate operation, your customer relationship, and your service. How would you answer these key questions:

–         Do you incorporate regular, periodic management meetings with your affiliates to review order counts and the percentage of your transactions which are referred to affiliates by particular agents? 
–         Are these done on a quarterly basis, the standard for some ABAs, and would more frequent meetings generate improved focus? 
–         Are the results of these meetings distributed within the office, so management and agents know who is doing the most referrals?      
–         Are your affiliated business operations integrated into your daily office operations, versus merely holding periodic management meetings? 
–         Are the affiliated business arms actually part of your office culture? 
–         When a potential buyer comes in the door, are they guided to a mortgage consultant who can tell the buyer what they can afford? 
–         Are representatives of the settlement entity and the mortgage arm included within your weekly sales meetings? 
–         Are they given an opportunity to make presentations about new products or industry and legal developments or trends at least once a month, so they remain a visible factor in your agent’s sales catalog and presentation?
–         Do your settlement and mortgage banking arms truly view both the consumer and the real estate agent as customers?
 
RESPA presents compensation limitations, but proactive management can produce results despite limitations on financial incentives. Many large Realtors who provide year-end recognition take a close look at integration issues on an annual basis. However, some companies have produced results from simple positive recognition at weekly meetings and in monthly marketing letters as a non-financial incentive. Brokers find that using techniques normally employed to provide incentives to agents can also help increase the use of affiliates. 

Are agent referrals to the ABA included within internal and external communication vehicles?  While recognition of past accomplishments may be sufficient reinforcement for some agents, many companies set goals for use of their affiliates. As long as these goals are RESPA compliant, they can work.

Most important, how can you make sure that both your internal and external customers are happy with your affiliated services? 

Some companies have put their money behind a financial guarantee. For example, Greg Mason, president/CEO of Edina Realty Title has met this challenge by partnering with Edina Realty Mortgage to provide two guarantees. The mortgage company guarantees, with certain caveats,  that a transaction will close on time, or the customer will be reimbursed one monthly principal and interest payment, or be credited $1,000 toward closing costs, whichever is greater. 

Like Barbara Griest’s operation, Trident Land Transfer Company LP in Pennsylvania, Edina Realty Title guarantees that closing costs will match the amount quoted on the Good Faith Estimate.  Trident, with their affiliated mortgage company guarantees that the costs on their final HUD1 at closing will match the amount quoted on the Good Faith Estimate at the time of the mortgage application or Trident will pay the difference. Griest indicated recently that her company guarantees that the HUD 1 with all mortgage fees and title fees will be provided to the consumer to review five days prior to closing for compliance with Trident’s closing cost guarantee. The customer receives a “guaranty certificate” at the time of their initial mortgage application. 

In addition to the guarantee of the closing costs, Trident also guarantees that the settlement will take place on the scheduled date. If the closing is postponed Trident will pay the buyer $500 towards their closing costs. Honoring these guarantees establishes reputation and credibility. 

Are you ready to put your affiliate operations to the financial guarantee test? Doing so is one way you can get more out of your affiliated business arrangements and add value for consumers that makes the affiliated business more valuable to your agents as well. 

Ann vom Eigen, AvE Solutions, is a compliance expert with 20 years experience advising members of Congress, and business experts including professionals at the Mortgage Bankers Association and the American Land Title Association on RESPA and other statutes regulating financial services and settlement practices. For more information, please visit www.vomeigen.com or e-mail her at vomeigen@verizon.net.

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