With the Irish Property Market entering a new phase it will be vital, if you are in the market already or planning to enter it, that you have a few key professionals on side. The people you will ideally work with are a Solicitor, a Broker, and an Estate Agent. In order to separate the wheat from the chaff you should be armed with a few questions. I have to warn you, some of the questions I’m posing here may be interpreted as being ‘rude’ but there are good reasons for asking them and you should mention the reasons you ask if any of the professionals you are speaking to seem to get offended. The best defence in the current market is a good team.
I’ll start with questions to ask a Mortgage Broker because this is the one I know the most about! Over half of the mortgages done in the Irish property market are placed by brokers, and while there are those who are extremely savvy in the area of finance and who don’t need a broker, there are equally huge sections of society who need a broker in order to capitalise on the brokers knowledge of the market and find the best deal, because they don’t have the time to deal directly, or because they simply don’t want to trust only one financial institution with every aspect of their finances, in fact, the larger loans tend to come from brokerage and smaller ones are often done directly, so in my opinion it is the serious client, the one who values financial advice, who will use a broker. So here are the questions you need to ask…..
Q: Are you regulated by the Financial Regulator? If so are you the employee of a firm that is regulated or are you individually regulated?
A: Ask to see the brokers Certificate of Regulation. If their personal name is on the cert that’s the best scenario because those who are directly regulated are state body approved, and they would face the full wrath of the Regulator if they mess up, they are also also required to have Professional Indemnity Insurance. Obviously if the person is not approved directly or as an employee of a firm that is regulated then you shouldn’t be getting your advice from them to begin with.
Q: Are you Independent?
A: Independent mortgage advice is (to a degree) a grey area, if a person has five agencies they can be classified as ‘independent’, however, that still implies a limitation in the scope of who they do loans with. Ideally you want to deal with brokerages that are Independent Brokers and who have at least more than ten agencies, if they are working on a regular basis with ten lenders then it’s a sign that they are a serious mortgage operator and they are trading well. Find out if they are independent on the life and pensions side of the firm as well (if they have one), because many ‘Independent Brokers’ are actually ‘tied agents’ on the life side, so on one hand they offer choice but on another they don’t, make sure you find this out before doing business with a broker.
Q: Are you a member of a professional representation body?
A: You should also ask them if they are a member of any professional body such as PIBA (Professional Insurance Brokers Association) who are the largest in the nation by membership (900 members) and they encompass insurance brokers as well as mortgage brokers, there is the IBA (Irish Brokers Association) who are the second largest by membership (450 members) and they are primarily general insurance and life/pensions focused, then there is IMAF (Independent Mortgage Advisors Federation) who are mortgage specific and they have about 80 members. Our firm is a member of PIBA, however as long as a firm is a member of at least one of the official bodies it is a good thing as these trade organisations encourage (and indeed often demand in their terms) the meeting of certain criteria – for instance independence of the broker member.
Q: Can I find out what other clients thought of your service?
A:While sometimes people are taken aback by this question it is in fact the absolute test of transparency to allow a prospective client to speak to a past client, and if you are not convinced when you meet your broker for the first time then perhaps speaking to a few clients is the best way to find out what other people thought, ideally these clients won’t have the same last name!
Q: Do you charge fees? If so what are they and what do they cover?
A: Historically banks paid brokers a commission which meant that for the most part the client didn’t have to pay a fee, at least not in the ‘upfront’ sense, they did pay mortgage interest to the bank which is where the funding for that came from, however it wasn’t more expensive than going direct to a bank and because of this brokerage grew at a rapid rate as people were able to enjoy the personal touch of a broker while also enjoying the independent decision making they could offer.
However, banks are now cutting broker commissions, however, lease prices and every other expense are not reducing by 50% and for that reason brokers will now have to follow the British model and charge a fee for their services. We had a great situation in Ireland for all concerned because there was a level playing field and bank choice didn’t matter, however that is all changing, so find out what banks pay what commission and you will be able to tell by examining this and the fee structure if your broker acting in your best interest. Mortgage brokering is heavily regulated and there are many laws and guidelines but that is no excuse for not taking a self protecting measure for the microscopic percentage who are unscrupulous.
We will cover other professions and the questions you may want to ask them in later posts, if you found this article useful let us know!