Broker vs. Banker - Posted by Jeff

Posted by dealmaker on March 23, 2006 at 07:54:41:

I was taught that a banker earns the same no matter how many deals he KILLS. A broker only gets paid on CLOSING. The broker should have many arrows in his quiver, the banker has only one solution for you.


Broker vs. Banker - Posted by Jeff

Posted by Jeff on March 22, 2006 at 22:13:38:

What would some seasoned investors consider the pro’s and con’s of broker’s and smaller private banks?

Looking at both for next deal and they say almost similiar things. Which one is more advantageous to an investor?


Re: Broker vs. Banker - Posted by Rick in Erie

Posted by Rick in Erie on March 23, 2006 at 20:22:22:

As a banker myself, but with experience with brokers, the main difference is in what you need. To contrast dealmakers post. not all bankers get only a salary. I earn salary, but also get paid on the loans I do. I would say the defining factor is who is more motivated to work for you, and who offers the best solution. To generalize, brokers have more options, but cost more. They usually can do well on long term financing, but you will probably pay more costs up front, or added in to cover their commission. Bankers have a lot less to lose if they can’t do a deal for you, as they probably do earn a salary, but can offer different options. I deal with a large amount of investors, and love working with them. I have set many up with interest only lines of credit at a very low or no upfront cost which is great for short term flips, purchase money, etc, and probably couldn’t be gotten through a broker. I would talk to both, and decide which works best for the particular situation. The key is to find someone motivated to work with you, let them know your goals, and you will learn from both, and find what is best for you.

Re: Broker vs. Banker - Posted by Pat

Posted by Pat on March 23, 2006 at 18:11:23:

It depends on how you use them. When I want financing, I go to the local guys. They know me and I know them. I’ve been doing REI with them for years. However since the bulk of my clientele is often borderline as regards credit scores, I send them to the brokers who have lenders more in tune with the buyer’s needs. Additionally the lenders aligned with the brokers often are more creative when it comes to getting the deal done. The downside of using brokers is that it often takes longer to get the deal closed and there are often more hoops to jump through.

Re: Broker vs. Banker - Posted by Ed Garcia

Posted by Ed Garcia on March 23, 2006 at 10:09:36:


Both of these lenders fulfill a need in the lending community.

MORTGAGE BROKERS, do not use their own money; they make the loan and sell it on the secondary market using matrix and credit scores as their guidelines.

Their best use is LONG TERM financing. They?re good for niche programs such as, easy docs, lite docs, no docs, stated income etc, which are programs that don?t verify income. As I said this lender is best for long term financing and for an investor who is building a portfolio and is holding.

This is the lender that most REI utilize and think they?re a catch all lender which they?re not. Once the investor gets a half a dozen loans under their belt they do what we call hit the wall and financing becomes more difficult.

BANKS, make loans to people and then collateralize them. They are portfolio lenders, meaning they make the loan and keep it and have more flexibility meaning that they can tailor a loan to the individuals needs.

Their best use is SHORT TERM financing. They are an outstanding source for flippers, and are more competitive on pricing for short term financing. The average person who goes to this lender will be quoted 80% of appraised value or purchase price which is ever lower. I teach my students how to get credit lines to do multiple deals at 100% financing and get fix-up money from this lender.

The key is, knowing how to fully utilize both of these lenders. Both lenders will attempt to do the deal in the lenders bust interest. You need to know how to get these lenders to do the deal in your best interest.

Ed Garcia

Re: Broker vs. Banker - Posted by John Corey

Posted by John Corey on March 23, 2006 at 07:58:50:

Dealmaker raises some good points.

You will find that some bankers can offer solutions brokers can not offer. Lines of credit or construction financing where the loans are retained on the books of the bank. Some options are not set up for brokers to participate.

There is no reason not to consider both sources and see who can do the deal with the best solution. When you want more than a mortgage or other standardized product the banker might have the upper hand.

For really odd deals (some hard money, etc) a broker with access to private investors will win the day. Bankers can only offer solutions that the bank is willing to stand behind (even when syndicating).

John Corey