This is a guest post written by Sarah Stelmok, an associate broker in Virginia, and published on her blog at http://sarahiouslyspeaking.com/. For those of you in WNY considering using a USAA broker, please understand that while you may benefit, your agent stands to take a significant hit! Please see Sarah’s post below in it’s unedited form.
I have received a nasty-gram from USAA about this post. They aren’t very happy about my disclosures. They have pointed out that some of my information is inaccurate, in their eyes, while admitting to most of it, or choosing to read my words in a way that suites their purpose. The purpose of this post is to explain to consumers why I will not participate in their program, nor will I work for a company that does. If a consumer chooses to be a part of their incentive program, that is their right. It is my right and duty as a licensed REALTOR(R) to offer the best services to my buyer clients without the intervention of a bank. If you would like more information about their incentive programs, go to their websites and look it up.
It seems that as the market begins to show real signs of stabilization, more and more buyers are looking at purchasing a home. In recent weeks I’ve received several calls from perspective buyers asking about my services and wanting to hire me. For the first time in 2 years, many of these buyers are bringing up the USAA and NAVYFED Incentive Programs. For those readers who are not familiar with these incentive programs here’s a recap. If a buyer or seller uses a USAA or NAVYFED Preferred REALTOR(R) and obtains a USAA or NAVYFED loan product, the buyer will enjoy a cash incentive at closing. The cash incentive is based on the purchase price of the home and changes depending on how the market is doing. Most cash incentives are around $1000. Seems like an awesome deal, doesn’t it. However, cash isn’t free and banks aren’t in the business of giving money away. USAA and NAVYFED are not required to make many disclosures about this program to the consumer. So, I will make the disclosures for them.
The buyers calling me are a little shocked to find out that I am not a USAA or NAVYFED Preferred REALTOR(R) and if they choose to be in that program they have to choose a buyer’s agent from specific brokerages in the area. So, if they want to be in the program, USAA or NAVYFED will require them to use a brokerage and agent they may not have chosen on their own? Yes. To top it off, not all agents in a preferred brokerage are certified or qualify to be in the program. How does an agent qualify for the program? The agent has to take classes to be certified for the program. Some agents are told they must pay a few hundred dollars for the privalege of taking the class. This fee can be charged yearly. Is the training good? If you are not a disciplined agent, yes, the classes can be beneficial. They teach you how to make yourself accountable to your clients. But more important to USAA and NAVYFED, they teach the agent to be more accountable to them. It’s the agent’s job to make sure the buyer doesn’t stray from the USAA or NAVYFED loan product… even if another lender has better options. An agent can lose their certification by not closing enough business with USAA and NAVYFED. So, who does the agent work for? The buyer or the bank? As a buyer’s agent I have a legal obligation to look out for my client’s best interest. How can I do that with a big bank breathing down my neck every other week?
Let’s move on to another issue. Where does the incentive money come from? As I stated earlier, banks don’t just give money away. It has to come from somewhere. If it’s not coming from them and it’s not coming from the consumer, then it must be coming from the agent. Yes, in order to be a Preferred REALTOR(R), the agent must agree to pay USAA and NAVYFED a portion of their commission to cover the incentive program. Some consumers may say, “$1000 isn’t alot for an agent to give up if the bank is funneling clients to them.” It’s not $1000. The agent actually gives up upwards of 47% of their commission to participate. If a house costs $250,000 and a 3% buyer’s commission is being offered by the seller, the commission is $7500. If an agent is paying the highest referral fee they would be giving the bank $3525. The consumer is only getting $1000. Who gets the rest of the money? USAA and NAVYFED. They are getting the equivalent of a loan origination fee out of the real estate agent. By the way, I’ve just made 2 disclosures for these banks. 1. The money doesn’t come from the bank, it comes from the agent. And 2. The bank is not required to tell you what they do with the overages.
Here’s my last disclosure about this program; and this only has to do with USAA. If your loan is not a jumbo loan, roughly $625,000 and over, you aren’t getting your mortgage from USAA. This can account for the crappy service you receive. The mortgage is actually coming from PHH. PHH Mortgage is a “mortgage outsourcing solution.” Yeah, otherwise known as a third party originating loans under someone else’s brand. This is NOT disclosed to USAA mortgage clients. When most consumers are getting a USAA loan, they aren’t actually getting a USAA loan. They are calling into a large call center and becoming a number on a file. I can’t tell you how special I feel when I become a number at a call center. You won’t meet your loan officer which limits the accountability needed in today’s real estate transaction. I’ve actually been told by a PHH loan officer, working under the USAA name, that my client’s file had been placed on the back burner while she dealt with larger loan amounts for others. Okay, I’m paying a company thousands of dollars to treat my buyer like crap? How does this make sense?
In case you missed it, I don’t like the USAA and NAVYFED Preferred REALTOR(R) programs. It’s not because I’m jealous that other agents are getting the clients. I’ve actually had many clients opt out of the program in order to work with me. I don’t like the program because it is dishonest. If the bank thought the program was on the up and up, they should have no problem disclosing all aspects of the program. They actually forbid Preferred Agents from disclosing these things to consumers. I also believe that once an agent starts losing money on a transaction, even the most ethical and fantastic agents, customer service begins to slip. It’s the difference between a server at McDonald’s and a server at Old Town Steak and Seafood. You do your job better when you know you will be rewarded for your work. The policies of the program also don’t allow me to carry out my fiduciary duties. I can’t be loyal to a bank and be loyal to my client. One of them has to lose out. In my world, it will always be the bank.
** It would only be prudent for me to disclose that I was banned from being a USAA Preferred Agent 4 years ago for expressing my dislike for how my client was being treated by USAA on the internet. I took to Twitter and tweeted that I hated USAA. USAA contacted my broker and demanded I be sensored. I chose to work for another broker. **