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Why it’s right to charge a broker fee

As if we didn’t know, mortgage processing now takes longer and therefore costs more per application than pre-Mortgage Day. The figures from Marlborough Stirling suggest lenders’ costs for processing an application have risen by 69%, from 89.67 to 146.49, over the past 12 months.

Equally unsurprising is the fact that lenders are processing fewer applications each day. In other words, they have not recruited enough processors to counteract the increase in processing time. Mind you, they could argue that this was prudent given the low volumes of business.

But as bad as these figures are, they are not as bad as some brokers I have spoken to who tell me they are only processing half as many applications since regulation. I’m not looking for brownie points but I did predict some nine months ago that more brokers would be forced to start charging broker fees than have done in the past. I also suggested that those charging fees would have to think of increasing them to reflect the additional work.

For many trying to extract up to 1.5% of the loan as a commission is a problem as they are aware clients can walk into any high street lender and get a mortgage without paying a fee. This even applies to sub-prime. So how do you justify your broker fee?

Why not kill two birds with one stone? Many have a problem with fee justification, and even more worry about the dreaded sales ‘close’. There have been countless books and even training courses dedicated to the close. I got good closing advice early in my career so it was rarely a problem for me.

I was taught to first sell yourself as people buy from those they like, to start closing from the beginning and to justify the fee all the way through the presentation, not wait until the end. And the best way to deal with potential problem questions is for you, not the client, to raise them.

Regarding fee justification, tell the client what you offer in the way of service and that you are able to offer products tailored to suit them. Try not to generalise – make them feel you are giving them special treatment. To minimise the risk of the oldest problem in the mortgage industry – the client picks your brains then goes direct to the lender you recommended – have an exclusive as a back-up. Even if the client doesn’t meet the criteria for your exclusive, by saying early on you often have deals not available on the high street you suggest you have an edge over high street lenders. The sooner you learn to deal with the fear of asking for a broker fee, the sooner you will start enjoying selling and seeing your bank balance grow.

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