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Commission-based workers

Email|Link|Comments (9) Posted by Rona Fischman June 11, 2009 03:35 PM

A fellow broker met me at a property all stressed-out because a last minute closing snag. The buyer and the seller were ready to buy and sell, respectively. It was the lender that was the fly in the ointment. She bought up a perspective that I had not thought of before. Does the way the staff members are paid influence the service at a lending institution?
She ranted:

Never, ever work with ____________! Their loan department are all on salary. They couldn’t give a darn whether the loan gets processed on time or not. It took six weeks to get the loan commitment. Now, the day before the closing, they have a list of papers they want from the buyer…

I don't see the commission system as more motivating than salary work, but then again, I have put up with the commission system for years. Could it be that salaried workers don't care as much about whether the job gets done?

I spoke to her again about an hour later. She's still fuming:

Now they tell me that they have the closing scheduled for June 16th, not tomorrow. It’s a good thing that the seller didn’t plan on double-closing…I have all the extensions in place --you do realize that the buyers could lose all their deposits if the extensions weren’t done. Never, ever depend on ________________. This could have been a disaster. I am lucky that the buyer and the seller were not buying or selling anything else and can move a couple of weeks later.

What do we learn from this?

Borrowers, do you think that a loan originator who works on salary is less motivated to get your loan processed? Do you think one on commission is too motivated?

Buyers and sellers, have you gotten bad service from a lender? Do you think it was related to how the loan originators were paid?

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9 comments so far...

Two questions. Didn't the buyer have a mortgage contingency (and isn't the point of the contingency to protect the buyer from loosing their deposit in a situation exactly like this?

And second, do you think the bank was intentionally trying to kill the deal? It sounds like with the jump in rates some banks are trying to get out of their locks, see:
http://globaleconomicanalysis.blogspot.com/2009/06/mortgage-market-remains-solidly-frozen.html

There is an example of a bank holding up a sale over a 20k difference between the appraisal and sale price of a 1.2 million dollar house.

Posted by W June 11, 09 03:25 PM

If she is working with a lender that has had mass layoffs then moral could be lower there in general.

I have always felt that commissioned workers seem more motivated.

Posted by just me June 11, 09 04:04 PM

i bet the lender was Citi

Posted by cdog June 11, 09 04:55 PM

This is the most ridiculous thing I've ever heard. The rest of the world is salaried and work gets done on-time. Its about poor management on the part of the bank. Plenty of people looking for jobs. If they aren't performing or meeting expectations, NEXT. That's the reality that most workers deal with. If the bank were to track delayed closings they could very easily identify their poor performers.

Posted by Stop9 June 11, 09 07:56 PM

I have had several real estate purchases in the last two years and every one has been a protracted mess. The general contractions of the credit market are to blame. In the backlash of the mortgage crisis lenders are reducing risk and requireing more and more qualifying paperwork. My last deal was delayed for a month by the lender and cost me $1500 in penalties from the seller. Salaried workers often make bonus for volume but if the bonus requirements are out of reach maybe motivation is a problem.

Posted by kten June 12, 09 06:57 AM

Salaried loan officers seems like a good idea. Less pressure to approve loans that have no business being approved.

Posted by James June 12, 09 08:48 AM

Loan originators on commission is a large factor in the current real estate situation. These originators processed loans that should not have been processed in order to get a commision.
These people are just paper pushers ,and if there is an opportunity to make additional money by overlooking deficient paperwork ,you can be sure it will happen.

Posted by REmaven June 12, 09 09:22 AM

I guess the link locked up my previous post. The claim was that some banks are going to great lengths to kill deals with rates that were locked at 4.5 % because they didn't hedge so they're looking at eating the difference. The article mentioned using appraisals but I would imagine stalling tactics could work as well.

Do think that could be what is happing here?

Posted by W June 12, 09 11:19 AM

Are we really using a single scenario to define the work ethic of salaried vs commission-based employees?

I'm sorry, but there were lots of commission-based employees who helped unqualified and out-of-their-league buyers to purchase homes over the past several years. The complaints of a single broker won't stir up any sympathy in me. Brokers have their own referral networks - eliminate that bank from your list of "suggested" lending institutions and move on.

Posted by esmith June 16, 09 01:51 AM