This section is from the book "Practical Real Estate Methods For Broker, Operator & Owner", by Thirty Experts. Also available from Amazon: Practical Real Estate Methods for Broker, Operator, Owner.
The mortgage broker's business is to obtain loans for the borrower, and investments for the lender. It is customary for the borrower to pay the broker's commission. It would seem then that he is really employed by the borrower, but the good broker draws no such distinction. He tries to harmonize interests of both lender and borrower, to the sacrifice of neither, and to his own future advantage by retaining the good will and opinion of both.
The properly equipped mortgage broker must have a wide acquaintance among lenders, and be able to command their attention and interest in his applications. He must constantly watch the records of mortgage investments, keep posted and remember how big a loan was obtained on certain properties similar to that on which he is seeking a loan; the interest rate, terms, etc. The broker must watch the new buildings in process of erection and have an acquaintance among the builders, so that he may obtain their application for loans on the properties when completed. This is the most prolific source of opportunity for mortgage investment in this city, and the broker who can command a wide range of applications for loans on new buildings of desirable types, in good neighborhoods, is much sought by lenders, and accordingly popular with borrowers.
The broker should direct his efforts as much toward inducing the borrower to accept a reasonable loan, as he should in obtaining a liberal loan from the lender. Ability to present intelligent and obvious reasons to a borrower why a certain offer of loan should be accepted, and to the lender why a certain loan should be made, will always bring the best result.
In presenting loan applications care should be taken to express therein all accurate information obtainable, and to leave out any statements that are untrue or exaggerated. Nothing is so detrimental to a broker's success in obtaining loans as wilfully or carelessly to overstate the facts. On the other hand, a broker must be optimistic. The greatest professional asset of the mortgage broker is to have the reputation among borrowers of being able to judge correctly as to what loan can be obtained and, furthermore, to be able to deliver to the lender such loans as the latter offers to make. Nothing so harms a broker's reputation with the investor as to be unable to deliver applications which the latter accepts from him.
It is obvious therefore that the broker should be well posted, not only as to the amount of loans being made by the various lenders, to the prevailing rates of interest, and as to the various lenders and their preferences for particular locations and classes of property, but also to a reasonable extent, about building construction, rents, locations, etc. The determining point, however, in all mortgage investment, about which all argument centers, and to establish which all information is sought, is value - what is the property worth. The borrower sets a value on his property, and the lender confirms or refutes the owner's statements by an appraisal, made by some competent authority in whom the lender has confidence, or perhaps relies upon his own judgment. The broker must be able to discuss with both borrower and lender the question of value, so as to reconcile the generally different views of the two parties. The more conversant a broker is with the methods of appraising and determining the value of property, and the more convincing his argument, the greater his chance of success. Often he is thereby enabled, by showing the borrower that the latter's judgment of value is inflated or the lender that his, or his appraiser's judgment of value is over-conservative, to accomplish a meeting point of ideas as to a fair valuation, and to negotiate the desired loan.
A broker's office should be equipped with a system of records indicating where new buildings are going up, what mortgages are daily recorded, and a record of all mortgages, with the dates on which they become due. By this latter method it is possible to interview by call or mail, owners of property whose mortgages are past due and who may be influenced to take a new loan, either from necessity or from a desire to borrow more money, obtain a lower interest rate, or more favorable or different terms.