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

As much as anything I want to see what my 'team' is capable of.
Having a discussion, digging your brains, investigating your level of leverage is all a part of doing business with me. If you can prove your worth, you get a client.
Try to charge me up front for my due dilligence and it will be a short converstation... my due dilligence will be complete.

I can understand a pre-approval to bid at auction - as you cant make it subject to finance (or can you?). If they are going to offer, encourage them to make it subject to finance. You can still do a high level 'yay/nay' review to give them the confidence requried.

Blacky

 

i have had sit down meetings with a local broker who advertise as having investment knowledge and a local financial planner.
had i paid a fee i would of been utterly disappointed. there was no way i was going back to either of them if i bought or not.
so imo maybe i would pay a fee but not for the first visit. but then again if there an existing client it should be waived.

 

Should add a caveat that brokers aren't allowed to vote

 

I think a lot of client's don't actually realise that lodging a pre-approval is the same amount of work as a full loan application (it's exactly what it is). Industry standards peg the cost of lodging a loan at $800-1200 per loan, dependent on the business. The labour component alone can see a pre-approval (especially for investors) being upwards of 10 hours work.

This is very different to lost hours from unsuccessful quoting like some other posts have mentioned - that's just the same as the amount of time spent on initial assessments and meetings with clients - pre-approvals are a further commitment beyond that level.

Couple this with the fact that you may see less than 25% completion rate - it's not surprising at all that quite a number of brokers are now moving to charge for pre-approvals.

We do get a number of people coming along asking for pre-approvals "just because they're interested to know how much they can borrow" - realistically that's what the initial assessment before. Pre-approvals will reduce your credit score, so they should only be used in very specific circumstances.

Good for you Peter to bring up an important topic like this - that a lot of people don't necessarily fully realise.

 

I think a fee would be a lot more justifiable if the broker is already established and have too many clients (or prospect). It will weed out quite a few.

As noob investor, it will make me think twice if I never used the broker before. Good names doesn't mean good service. The first broker I have charge fee (but free for the first one because of BA referral). Then get the junior to do the work who can't even tell the difference between redraw and offset despite my specific request to have an offset "redraw works the same way"

Note - I prefer the fee to be refunded and ill choose my own charity

 

Quite a few large Sydney brokerages simply stopped doing them or doing what you've mentioned through the recent boom - there would have been a serious surge in business levels and stopping pre-approvals with low completion rates would have become normal.

These are normal questions to raise and ask as part of running an efficient and successful business. I think you could do it if targeting certain segments, i imagine if you have a large FHOB segment than it won't go down so well as tobe mentioned. Investors are more likely to see it as a cost of doing business.

I'm not sure whether these are costs brokerages should pass on though, or wear on the chin as 'a cost of doing business'. The competitive dynamics and product similarities of the broking industry often means you don't actually have much room to set prices, the market itself does that for you.

 

My thinking behind this is it's more of a commitment fee to ensure people are serious about what they're doing, rather than an effort to recover costs. There's plenty of evidence out there that suggests if you run a seminar and charge $30 a head, you'll get better attendance than if you run a free seminar.

Personally I'm not bothered about pre-approvals being a cost of doing business, I've already been doing this for 11 years. I actually kind of like the idea of donating the fee to a charity if it's not executed (I'm a big believer in karma).

I'm not intending to do this any time soon, it's just the other post made me think of this. I've never charged a fee, not even a claw-back fee. It's just very frustrating when someone is insisting on a pre-approval when you're 99% certain they don't need it, you're really busy and you're fairly certain they're not going to use it.

 

If charging for pre-approvals becomes the norm then people will move away from getting them unless necessary, I think.

I am happy to pay top dollar for top services. Wouldn't jump ship just because the fees have gone up. PC'ers know that you are a good broker so it may work for you even if you start charging for pre-approvals but newer clients may look elsewhere.

Ask me to donate to charity - I'll likely oblige but force me to donate to charity - not too happy. I would like to donate to the charity of choice of my own will.

 

I use a broker from this forum and he is exceptional, if he wanted to charge me then I would still use him but he is the sort of guy that I think would never ask for that.

My portfolio isn't very big but my sister has money and is soon to buy also my brother has a lot of cash and will eventually buy and soon I am looking at refinancing and he will get all of what I have "again" . I also have a good mate that works in the mines and he soon will buy.

I never would of used this guy initially if he had wanted to charge me, but many transactions later I can see he would of been worth every cent, also he was never refered to me I just took a chance cause I liked his posts on ss

 

I know that the builders groups are pushing for a fee for house building quotes. 10 hours huh A building quote can take days and if you get it wrong it'll send you broke.

 

If you're good and its word-of- mouth - Maybe.

BUT if I hadn't used you before I'd be thinking "If you're good at your job why do you have to charge for pre-approval? What's wrong with you that you can't retain enough clients to make a living off commission?". It's not about the money - I'd be concerned about the service.

 

If you want me to pay for your time, you'd better be sending me the trails?

As a serious answer - if it was a new broker I might be tempted to find someone else. If it was my current broker who I trust, then sure why not?

Who gets pre-approvals anyway? If you're broker can't tell you if you can go unconditional or not maybe you're sailing too close to the wind.

 

Peter knows his stuff so his time is worth money. However it's going to be tough trying to get people to pay fee's that even the banks don't charge.

The only time I've gotten pre approval before was for an auction. Rang Westpac, spoke to the lending manager I dealt with at the time, they got back to me in a day and gave the pre approval. No charge. I didn't end up using the pre approval because the seller sold before auction.

The difference I see is that you're an investment lending specialist. So maybe that justifies a premium. But $500 is too much. Maybe $99 or $199 max. And I don't think donating to charity softens the blow (most people that care about charities already donate themselves). Refunding on settlement does soften the blow though.

Or maybe offer a free initial assessment where you don't run the pre approval officially. Free assessment of borrowing capacity etc... (stuff that doesn't take too much time and effort). But if they want the official pre-approval then the $99 or $199 fee refundable on settlement.

But I'd only try that if you can afford any drop in business asking the fee may create.

If a fee does get put in place, it will have to be a big enough deterrence for time wasters. Otherwise you'll get the childcare late fee issue. Where a childcare agency got sick of parents coming late to pick up their kids, so they put in a $8 late fee if you're up to 30 mins late. After the fee was put in place the number of parents coming late sky rocketed. They figured $8 was a bargain for an extra half hour of child care, and they were no longer hurried along by guilt because they'd paid a fee, so they figured fairs fair.

So a $20 fee is probably going to backfire.

- I guess another way of thinking about it, is like a real estate agent. A real estate agent gets lots of time wasters. In fact everybody they speak to and show the property to...except the one person who buys it, is wasting their time. But they probably wouldn't get a way with a $500 fee to show people through a property.

People wouldn't be willing to pay it because the property might be rubbish. Just like someone's brokerage services might be rubbish. Plus no one else is charging it so they'd just move onto the next real estate agent.

But then if your business is generated by word of mouth where people can really sell you to others then they might realise you're worth the extra fee. But people just browsing on google will go to the next business for sure.