A top real estate industry researcher is calling on brokers to pay attention to how their brothers in the building industry do business if they want to maximize their profits from things like selling mortgages.

In the current newsletter of the Real Estate Service Providers Council, researcher Weston Edwards is quoted as saying builders have done a much better job in capturing the consumer dollars spent in the homebuying process.

According to his research, "builders were able to capture 70 percent of their customers' mortgage business, while the average capture rate for real estate-based mortgage operations was 24 percent."

Edwards said the difference in percentages primarily was a difference in business methods.

"The builder is not driven by profits, because he is making an average of $20,000 on the home and about $1,000 to $2,000 in the mortgage," he says in his research report, "Changes in the Way Homes are and will be Bought and Sold." "Instead, (the builders) offers mortgages to control the sold - but not closed - inventory. The real estate broker-owner, on the other hand, can make two to three times more on his motgage business than he can on real estate brokerage services."

Edward suggested another key difference in builder vs. broker is the people who work in the office - employees vs. independent contractors.

"Builders hire and train employees to market their in-house mortgage product, and make their (employee's) job dependent on their cross-selling performance," he writes. "The real estate sales agent, who is an independent contractor, prefers to use the outside lender because anything that goes wrong with the inside mortgage loan could place his commission in jeopardy."

The RESPRO newsletter report also noted that Edwards focuses on who builders consider their customers to be - the consumer - as opposed who the broker feels his customer is: his sales associates.

"Builders focus on meeting the needs of the homebuyer. They use substantial consumer incentives, such as a discount of $3,000 to $5,000 off the home buyuer's closing costs or design center costs if he uses the builder's mortgage company. The real estaet broker focuses on earning the support of the real estate sales associate" to direct customers to the broker's mortgage operation.

Edwards is one of the country's top industry researchers. His current report, "Changes in the Way Homes are and will be Bought and Sold" his is third report on industry behavior and attitudes. His research focuses on maximizing the benefits of one-stop-shopping.

RESPRO can be contacted at: 202 408-7038.

Published: December 14, 1999

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