There is an old saying among
horseman, "If you ain't been
been thrown, you ain't riddin' very much." The same is unfortunately
true for commercial mortgage brokerage. If you haven't been
screwed out of at least four or five $10,000 commissions, you haven't
been working as a commercial mortgage broker for very long.
most obvious assault is the "commission-dectomy" You
agree with the borrower on a one point fee. You work for months
on the loan, shuttling the deal from lender to lender. You finally
find a lender. You get to the close, and the borrower says, "You
either take just one-quarter of a point, or you get nothing." You're
starving, and you can't afford an attorney, so you take the 75% cut
and limp home to lick your wounds.
you get raped every year in other ways as well. The
borrower agrees to a loan, you deliver, and he says, "Never mind." Or
how about this one. You work for two months on a deal. You
find a good lender. The lender issues a proposal. The
borrower accepts it. And then he refuses to pay for the appraisal
or refuses to supply his tax returns, making it impossible for your
to deliver the loan.
enough to make a saint fantasize about murder. Anthills. Honey. Lots
of tiny, painful bites...
1987 I realized I had a problem. I had charted
out every anthill in a four county area, and my garage was stacked
to the ceiling with honey. :-) Instead of going to jail, I decided
to go to law school. For four long years I attended law school
at night, while raising two kids in diapers and running a multi-million
dollar company. I never missed a class in four years, and I
briefed every case. Man, I was ticked. Not surprisingly
I graduated with honors and passed the Bar on my first attempt. Then
I never really practiced in the traditional sense. I am a commercial
mortgage broker by profession and proud of it. I simply use
my attorney's license to sue every borrower who lies to me or cheats
I am forced to sue a lot of borrowers, at least ten or twelve every
year. That's not even counting
the ten or so repudiating borrowers that I successfully "encourage" to
go back down to escrow to sign off under the threat of a lawsuit. As
a result of filing suit against forty or so borrowers, I have a gained
a whole lot of experience in enforcing mortgage broker fee agreements.
fee agreement form that I sell is the result of 23 years' worth of
commercial mortgage experience. It is not
so long that it scares away the borrower, yet it has enough meat in
it to give you an excellent position at trial.
are some of the major features. First of
all, the contract provides for arbitration under the Rules of the
American Arbitration Association. When a borrower in a real
estate transaction agrees to arbitrate, he waives certain rights. As
a result, the arbitration clause must be carefully worded. A
layman's homemade fee agreement would probably not survive a challenge
by a skilled real estate attorney.
of all, the contract provides that the arbitration will take place
in your backyard. Therefore if the borrower
lives in the other part of the state, or even in another state, he
will have to drag his attorney 400 miles at $200 per hour all the
way to your hometown.
about attorney's fees? It has been my experience
that most arbitrators are fairly loosey-goosey about the rules of
evidence in an arbitration. You speak to them and present your
evidence pretty much like you were talking to Judge Wopner. You
can represent yourself in most cases pretty reasonably, thereby saving
yourself about $12,000 in attorney's fees. Since I envision
you representing yourself, my fee agreement specifically precludes
the award of attorney's fees. This means that if you lose, you
will only be out-of-pocket about $800 for the arbitration costs, instead
of the opposing side's $12,000 in attorney's fees.
you try to use your own homemade fee agreement, and you don't get
the arbitration language just right, you will be
forced to litigate the case in civil court. You will need to
hire an attorney for around $25,000 (because of discovery, civil court
is much more expensive). Since you are only suing for $10,000
you will need to have an attorney's fee clause to recover your legal
fees. But if you lose, the prevailing party gets to recover
his attorney's fees, so you will have to pay the opposing sides' $25,000
in attorney's fees. Are you going to risk $50,000 to sue for
$10,000? I don't think so. The moral is: "Don't try
to use a homemade fee agreement".
what our fee agreement does to the bad guys. The
borrower will have to drag his attorney all the way across the state
at $200 per hour. Even if the opposing attorney kicks your butt
all over the courtroom, the defaulting borrower won't get his $12,000
in attorney's fees back. He would be better off to pay you your
$10,000 than to pay $12,000 successfully defending your claim!
in the fee agreement is a provision whereby the borrower is responsible
for your fee if a title problem kills
your deal. In addition, if a borrower promises to deliver a
subordination, but at the close, he can't deliver it, then the borrower
still legally owes your fee.
fee agreement gives you the authority to shop the package to lots
of lenders. It also make it clear that you
are an agent for the sole purpose of arranging the loan. You
are not the borrower's general agent with a fiduciary duty for everything
under the sun. In addition, this fee agreement clarifies that
you are not liable for damages if the deal falls out.
fee agreement also protects you if you are in the process of delivering
the loan and the borrower cancels. This
is by far your single biggest risk. Finally, the agreement protects
you against the borrower sneaking back to the lender behind your back.
took a lot of work to pack all of these provisions onto the front
and back of a single sheet of letter-size paper and
in such a manner that will not scare off the borrower. The agreement
is carefully modeled to track the standard residential listing form. If
a question should ever arise, simply show the borrower the similarity
in wording between our Loan Broker Listing and the standard residential
listing he must sign every time he lists his house for sale.
I am not some head-in-the-clouds attorney drafting some ten page listing
form that will scare off every borrower. I
know that even the best agreement is worthless if the borrower is
too intimidated to sign it. That's why my agreement is carefully
crafted to come across as light and airy and standard and no big deal
- until the no good S.O.B. lies to you or tries to cancel on you. Then
this airy little agreement suddenly grows barbs.
signed agreement is also the law in California. Recently
enacted Civil Code Section 1520(g) states that any agreement to procure
a loan in excess of $100,000 secured by other than a one-to-four family
dwelling is unenforceable unless it is in writing. Other states
are likely to follow California's lead and impute such a requirement
by case law.
you attempt to practice commercial mortgage brokerage without a professionally
prepared fee agreement, you are also going
to look like a rookie to both your borrower and your lender. There
is no such thing as an experienced commercial mortgage broker who
doesn't use a signed fee agreement on every deal. It's a painful
lesson that every new broker learns before too long.
got some bad news for you. You are going
to die. Despite your best hopes, God is not going to make a
special exception in your case. In addition, if you should ever
buy a horse and ride it a lot, you are going to be thrown often. And
if try to broker commercial mortgage loans without getting a signed
fee agreement on every deal, you will be screwed so often that you
will look like a piece of Swiss cheese. You will work on loan
after loan, get them approved, only to have the borrower cancel on
you at the last moment when he hears a slightly lower quote from the
liar down the street. It will drive you mad, if it doesn't kill
you. Sad but true story: Tom O'Keefe, a buddy of mine, died
on the phone when escrow called him to say that his borrower had just
many times have I snarled at my lovely wife or at one of my precious
little sons because I came home from work so
outraged by a cancellation? Well, no more. Now I simply
fill out a one page form in pen (I don't even bother to type it!)
entitled Demand for Arbitration and fax it to the repudiating borrower. Then
I call him up and say, "Guess what, Jack. You've just been sued. That
fax is the legal equivalent of a summons and complaint in civil court. And
because this is arbitration, I will see you at a hearing in just six
weeks, not three years. You will have to fly halfway across
the state, and please be sure to bring your attorney at $200 per hour. Please
spend $12,000 defending my $10,000 suit. But guess what, Mr.
Borrower? Even if you drop-kick me all over the courtroom, you
won't get your $12,000 in attorney's fees back. Now, do you
want to withdraw your cancellation?"
you tell I've done this before? I haven't
worked on a loan without a signed fee agreement for 20 years. I'll
bet I have saved $1 million in loan fees over the past ten years alone
by forcing repudiating borrowers to accept my loans. There is
a whole lot more money to be made in commercial mortgage brokerage
than in residential mortgage brokerage. Many commercial mortgage
brokers net over a half-million dollars per year. It's a classy
profession with the opportunity to meet and rub shoulders everyday
with multi-millionaires. But you cannot succeed without a good
fee agreement. Don't lose another $10,000 commission. Order
your fee agreement today.
fee agreement comes with a 90 minute video tape where I explain in
detail how to actually enforce one of my agreements. Never
bluff. If the borrower says, "Go ahead and sue me," I'll
show you how to initiate the arbitration with 30 minutes. As
they say, "Don't get mad. Get even."
cost of this fee agreement and fee collection training course in just
$199. You'll make that back ten-fold
in your first two months of brokering commercial loans. To order
a copy of this fee agreement, simply e-mail to us a note expressing
your request for a fee agreement. Please include your name,
company, address, telephone number, and fax number. Also include
your Visa, Mastercard or American Express credit card information, the
name on the account, the account number and the expiration date. You
can also call your order into Alicia Gandy at 916-338-3232 or fax
it in to her at 916-338-2328.
Click here to order a Fee Agreement by credit card
More interesting stuff for mortgage brokers.
Or mail your check for $199 plus $8 for shipping and
George Blackburne, III, Esq.
Blackburne & Brown Mortgage Company, Inc.
4811 Chippendale Drive, Suite 101
Sacramento, California 95841
Telephone: (916) 338-3232
Fax: (916) 338-2328