Daily Observations - Broker Chains

This evening I would like to address the issue of broker chains. What are broker chains? Broker chains are when one mortgage broker contacts another mortgage broker, who contacts a third mortgage broker trying to get a loan closed.

Why would I address the issue of broker chains? It appears that all the large transactions that all the brokers are talking about are part of a broker chain. From my experience 99.9% of all the broker chains never close. The reason they never close is that there are too many participants between the lender and the principal. With so many brokers to go through to actually reach the principal, the deals just never come to fruition.

If we get a call about a large transaction, and we find out that there is more than one broker between us, the lender, and the principal, we pass on the deal. I cannot recommend enough to other brokers to do the same.

What we have found is that many of the new loan originators get involved in broker chains, and wait, and wait, until they find out that there really is no deal there. The problem is that the new loan originator has chosen to wait for the big fish, and has not continued to prospect for the smaller fish; the ones that can be caught regularly.

If I can share any words of wisdom from my past transactions don't wait for the big one. It may never come. Go to work every day, finding small business and commercial loans, and leave the broker chains to the other mortgage brokers.

For more on investment property and the role of the financial broker, please visit loanforbiz.com.