Big changes are coming to the real estate industry next year.
On May 1, 2020, real estate brokers will no longer be able to take commission for referring a client to a bank. Until that comes into force, they will have to disclose any finder’s fees they get.
This is something you may not have realized; your real estate broker may have been getting paid for referring you to certain lenders for a mortgage.
It’s been unique to Quebec, according to North East Mortgages President Terry Kilakos.
“It’s been a huge conflict of interest for years because you’re doing business with a real estate broker, and the real estate broker says to you, ‘Let me send you to my guy at the bank. It’ll speed things up. He’s got really good rates.’ And they would send off the client to the bank, and then the bank would basically pay the real estate broker a finder’s fee for sending them a client,” Kilakos said. “In the rest of Canada, that’s illegal.”
The rules will change and force real estate brokers to get a mortgage broker’s licence in order to get those fees. And, according to the governing body, the fees can no longer be dependent on whether a mortgage deal is signed.
He said because of this, salespeople at banks were flourishing because they had a steady flow of clients that were being diverted away from brokers working outside the big banks. This is because mortgage brokers could not offer those same finder’s fees to realtors. This puts you, the consumer, at a disadvantage because you’d be at the mercy of the banks.
When Kilakos would get a call from a real-estate broker, asking what their fee would be, he’d have to tell them there was no fee in it for them.
“It creates huge, huge issues in the industry. And it was only in Quebec that this was going on,” Kilakos said.
“The loans that are set up by banks typically are a lot more restrictive. They have clauses in there that can actually damage clients; they’re not able to refinance, they’re not able to do certain things. They’re very limited,” Kilakos said. “Interest rates typically are a little bit higher, in many cases than what you would be receiving if you were in the going through the brokerage channel.”
Come May 1, 2020, those issues will be gone. That’s good new for you, and good news for members of our industry who are committed to saving homeowners as much money as possible.