The Royal Bank of Canada is leveraging Realtors’ relationships with their clients to draw first-time homebuyers, and the reaction from mortgage brokers has been unsurprisingly cold.
Earlier this year, RBC announced a points program and cash incentive for Realtors who refer five first-time homebuyers to a mortgage specialist.
Some brokers questioned the ethics of the points program, which isn’t usually covered in typical Realtor disclosure forms.
“CAAMP and the provincial broker associations should bring this up to the regulatory bodies as the Realtor referral points programs are rarely mentioned in Realtor disclosure forms. Regulation around these programs is not as strong as it could be,” Michal A. said in the comments section of MortgageBrokerNews.ca, REP
’s sister site. “Points are harder to track and quantify as opposed to a cash payment and can be cashed in anytime down the road for either money or an object.”
Other brokers, meanwhile, argue that Realtors deserve more for a referral that has the potential to become a life-long and lucrative client.
“I find it hilarious that RBC is paying the referring party only $200 per closed deal; RBC is the largest bank in the country and they just reported over $2 billion in profit last quarter,” Lior Hershkovitz of Mortgage Edge said. “A real estate professional deserves more than 200 bucks for a deal where RBC will generate substantial income from the interest portion of the loan right from the onset.”
And others question just how many Realtors will take advantage of the opportunity.
“I don't know too many successful Realtors that would want their client to know about the kick-back unless they were forwarding the kick-back, back to the client,” Paul Mangion of The Mortgage Centre said. “The Realtors that will flock to this don't do any serious volume so it will only affect the mortgage agents that have crappy limited referrals anyways that get very little serious business.”
Since May 1, the Royal Bank of Canada has been offering real estate agents $1,000 for every five first-time homebuyers referred to an RBC specialist. The program is set expire September 30 and is part of a comprehensive rewards program, which allows real estate agents to also collect points for referrals that can be redeemed for plane tickets, gift cards and merchandise, according to the Globe and Mail.
Erica Nielsen, vice-president of home equity financing at RBC, said the bank is looking at the program as an opportunity to develop life-long clients.
“If you think about the context of the broad market, and slowing mortgage growth, understanding where there are pockets of opportunity is really important for our business,” Nielsen says. “The first-time home buyer is an opportunity for us.
“Because [first-time buyers] have never been through the process, they turn to the folks that they would trust and know best, like friends and family . . . the real estate agents play a role in that decision, and so we feel that’s an important place for us to participate."
The bank requires participating Realtors to sign an agreement stating they will disclose the details of the promotion to clients.
RBC isn’t the first bank to offer a referral bonus to Realtors who drive mortgage business through the door.
National Bank offered a similar incentive to Realtors in 2011 by offering 50-basis point referral fee for sending mortgage seeking clients to a branch.