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Would you be willing to pay a (refundable) fee for a finance pre-approval?

Discussion in 'Property Finance' started by Peter_Tersteeg, 25th Nov, 2015.

?

Would you pay a (refundable) fee of $500 for a pre-approval

  1. No I wouldn't pay a fee at all, I can go elsewhere.

    31 vote(s)
    75.6%
  2. Charge $500 fee, refund 110% at settlement even if the pre-approval has expired no time limit

    7 vote(s)
    17.1%
  3. Charge $500 fee, refund 110% at settlement, after 90 days donate to charity instead no refund

    2 vote(s)
    4.9%
  4. Charge $500 fee, refund 110% at settlement, after 90 days broker keeps money

    4 vote(s)
    9.8%
  5. Charge $500 fee, no refund but money immediately goes to charity

    0 vote(s)
    0.0%
Multiple votes are allowed.
  1. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Based on the post: Mortgage preapproval necessary?

    Borrowers often want a pre-approval so they can make offers or bid at auction with confidence. The problem from a brokers perspective is that most pre-approvals expire before people find a property, indeed many people never execute a pre-approval. This costs brokers and lenders a significant amount of money and time getting the pre-approval completed without any remuneration.

    I've been thinking about charging a fee for pre-approvals, I'm guessing $500. This wouldn't cover the brokers costs of obtaining the pre-approval, but it would give borrowers an incentive to actually find a property. Some caveats on the idea:

    * Probably wouldn't charge for a pre-approval where the client has engaged a buyers agent. Almost all pre-approvals are executed when there's a BA involved.
    * The 110% of the fee would be refundable or donated to a charity in the event that a purchase is made.
    * If the pre-approval fails for any reason, the money would be refunded.
    * Its worth noting that most pre-approvals expire after 90 days.

    The poll has some ideas I've come up with.
     
    Corey Batt and Xenia like this.
  2. Biz

    Biz Well-Known Member

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    Crazy talk.

    Time wasting is just part and parcel of running a business.
     
  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    I charge a fee of $550 for the initial meeting, whether face to face or via telephone. Non refundable.

    This way you get to know if someone is a time waster or not.
     
    Jess Peletier likes this.
  4. Biz

    Biz Well-Known Member

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    Is that for a loan or legal advice Terry?
     
    York likes this.
  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Either

    I have a lot of people come for 'loan' advice and then start asking for tax and legal advice on the side.
     
  6. Biz

    Biz Well-Known Member

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    So someone calls you up from the forum saying they want to use you as their broker for a 350k IP and you say "Yes, but $550 first" ??
     
  7. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Yep
     
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  8. Biz

    Biz Well-Known Member

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    I thought you only had to pay for hookers up front? :D
     
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  9. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Strong Posture !

    ta
    rolf
     
    Terry_w likes this.
  10. abbyfresh

    abbyfresh Well-Known Member

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    If you are serious about buying then this should not be charged as part of the brokers standard service. I understand there is a lot of effort involved, but thats the brokers job. Maybe fee could be imposed all or part of if you don't buy before the pre-approval expiry date.
     
  11. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    I think there are many brokers who charge an upfront fee. Some waive it if the loan settles others don't.

    I recall many years ago I received a call from someone with an Indian accent who sounded like they were driving. He gave me a brief run down and asked if there were any 'low doc' lenders who could fit. I said "Oh yeah are a few A B and C". He just cut the phone off and never rang back. I am sure he was a broker driving to his next appointment and the scenario was that of his client.
     
    MTR likes this.
  12. MattA

    MattA Well-Known Member

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    Personally, I think the initial coffee / phone call and subsequent review of documents which leads to a 'Yeah, you should be good / No, I don't think you'll qualify' verbal answer should be completed no charge.

    Beyond this, if the client wants you to 'start working' on the file and gain pre-approval then it's only fair that they pay for your services...

    Having said that, in a crowded market place such as MB, I would expect that the majority of people who only purchase / re-finance a property once every 5 - 10 years, who find your web site via a Google search could well be turned off by the idea of having to pay for pre-approval when the bloke down the street advertises he'll do this for no charge.

    In line with Terry's comments, if your prepared to sacrifice the number of cold enquiries you receive it could be a good way to get rid of the tyre kickers.
     
  13. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    A few years ago I ran a special promotion which involved a free meeting with myself and a financial planner during the month of Jan when it is usually quiet. We had about 35 meetings and only one of these clients came back for a loan and another for a legal matter who also did some financial planning.
     
    MTR likes this.
  14. MattA

    MattA Well-Known Member

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    And I am the latter :)
     
  15. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Giddy up!
     
  16. JacM

    JacM VIC Buyer's Agent Business Member

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    Wow what a lazy person. Why can't he earn his craft properly and pull his own weight.
     
  17. tobe

    tobe Well-Known Member

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    Most of my client base wouldn't wear it. I have enough trouble convincing them I can get them a loan, they wouldn't pay for it upfront. Many would pay a fee after the loan was approved, but that's be double dipping. The rest are referrals from existing clients friends and family so it'd be hard to charge them either.
    Personally, as an investor, Id be happy to pay a fee after I had a meeting with Peter and decided to go ahead, because he would have (has!) impressed me with his broad knowledge about investment lending.
     
  18. chylld

    chylld Well-Known Member

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    If I respect my broker enough in the first place, I just shoot them a quick email to say "is this doable" and if they say "yes" then I go bid at auction :)

    However my broker knows I'm not a time-waster as I'm an existing client.

    If I was getting my first mortgage, I'd go with the free option largely due to the fact that at such an early stage, I'd be tossing up between a broker and approaching my favourite bank directly.
     
  19. Joshwaaaa

    Joshwaaaa Well-Known Member

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    I wouldnt be happy, a lot of places just like my work can spend a lot of time doing quotes for jobs that never come to fruition. It's all part and parcel with it.
     
  20. York

    York Finance Broker Business Member

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    It might depend on how established/busy one is as a broker. If you are low on business and you need as many enquiries as possible to get a possible client, then you'd be entertaining any pre-approval applications at no charge. If you are flat out with existing clients and new serious clients and you don't need the '40% chance of expiry' clients then you can take them with a fee that would be refunded once loan settles as Terry said.