Ever wonder how a Real Estate agent picks their team? Well usually they partner with lawyers, mortgage agents, and home inspectors that are experts in their field, professional in their dealings, and can be be trusted to provide top notch service and products. RBC is trying a different approach. Royal Bank of Canada (RBC) is offering real estate agents $1,000 for referring first time buyers to them.
First time buyers typically require the most guidance and expertise in navigating their first mortgage. Currently mortgage brokers handle 50% of the market share for first time buyer mortgages. Mortgage brokers have developed strong relationships with real estate agents as the go-to network to provide the advice, explanations and solutions first time buyers need.
The highly competitive mortgage market combined with tighter mortgage rules is causing mortgage companies to come up with new and creative ways to maintain sales. Several “no frills” mortgage options have emerged as well as new names to market the same interest rate. Paying real estate agents is a strategy that could be effective but is ethically questionable at best. A kick-back by any other name is still a kick-back.
You expect your real estate agent to act as your trusted adviser. A trusted adviser will recommend people, products and services that are in your best interests, not theirs. Paying for mortgage referrals encourages the wrong behavior. Although the vast majority of real estate agents would never compromise their customers best interests for a $1000 hand-out, just the fact that it exists puts any RBC referrals under suspicion. RBC is Canada’s largest bank and as such needs to take responsibility for the integrity of it’s processes. Perhaps the $1,000 incentive would be better used to improve the mortgage and the service for the borrower instead.