: Copyright 2006 : Precision Broker Services : All rights reserved : Precision Broker Services is a division of Hagemeister, Inc.

broker secrets: A California broker's license is very easy to obtain!   There is no college degree requirement.  There is no specialty school or training program requirement.  The applicant  basically has to take a few online courses, get someone to say that the applicant is "experienced" and then take a multiple choice test.   The broker's exam is only 150 questions and applicants are encouraged to bring a calculator.  If one gets 70% or more correct, the license is issued.  If not, the applicant can take the test over and over until they do pass.  The test is so simple that one-day prep courses guarantee that the applicant will pass or get their money back.   A broker's license is very broad in scope! After the exam, the State of California's Department of Real Estate issues the applicant a license to broker residential and commercial real estate deals, broker loan funding deals and broker the buying and selling of businesses.  And there is no limit to the size of the deals.  The broker is now "qualified" to the DRE to handle multi- million dollar real estate transactions, multi-million dollar loan transactions and multi-million dollar business transactions.    Most brokers have no experience understanding, reviewing or negotiating contracts! How would they?  They get around this by using boilerplate forms printed in triplicate with tiny font so you don't feel like it is appropriate to negotiate anything.  If you question a provision or ask for an explanation, the smart ones will tell you to ask your lawyer and the less-than-smart ones will answer (which they are not supposed to do because that would be considered "practicing law" in California). Huh?  When was the last time you used a lawyer when purchasing property or getting secured financing?   The only contract language most brokers truly understand is the waiver and release -- the language  that says that you will not sue them for their incompetence!  To top it off, the broker usually has one of their "Sales Agents" or the broker's administrative assistant truly handling your paperwork.  And after they get the deal signed, everything is handed off to the escrow company (who charges a separate fee of course). Almost all commercial and residential property is sold and leased using a single online listing database! Brokers pay to have access to a database called the "Multiple Listing Service."  The seller's broker places the ad on the MLS and the buyer's broker finds potential property on the MLS.  All of the advertising in magazines, newspapers, fliers and online media is done to make you think they are "working hard for you" to justify their commission.  They also know that property owners like to see their property in print with lots of pictures.  While it makes the property owner proud, is has very little to do with actually selling the property. Many mortgage brokers will push you into loans that make them the biggest kickback from the banks! Some mortgage brokers are "approved" by many banks and can offer many types of loans.  These legitimate brokers will ask you about your expected ownership time horizon and evaluate your budget.  They will talk to you about your loan options and make sure that you understand each one completely.  They will assist you with the application and guide you through the process.   However, more often than not, the brokers doing all of the advertising these days operate in a "boiler room" office setting.   They have one big room with a bunch of desks and multiple telephones.  The broker hires salesmen and telemarketers to answer the phones and "sell you."  Behind the scenes, they only have a couple of types of loans they can offer.  They will get you excited about these loans with a lower monthly cost (at first at least) and then downplay the chances of interest rate increases or needing to refinance in the future.  Here is the shocking part.   On many of these loans, the broker can make 2% or more as total commissions and fees they load into the closing statement.  On a $500,000 loan, the broker can make more than $20,000 for shuffling a few papers.  Again, if you ask them about the meaning of any terms in the loan documents, they probably did not even take the time to read the document prior to telling you to sign it.   Good luck refinancing because these loans usually have a huge pre-payment penalty. Many mortgage brokers will "exaggerate" your financial status to the banks in an attempt to get you "approved" for certain loans! No big deal you say?  Everyone does it?  Well that is not true.  It is not only dishonest (would you tell your kids to do the same?), but it is "fraud."  Civil fraud and criminal fraud.  Not a misdemeanor but a felony.  And since you are the one verifying the application as "true and correct" they will be coming after you if they find out. This is also done by the broker in an attempt to bond with you.   You think "hey, this guy is willing to do whatever it takes for me!"   Well guess again.  If the bank ever asks, your broker buddy will be long gone or have no recollection of your deal whatsoever.  One other point.  The banks have financial formulas for a reason.  If circumstances change (like the variable interest rate), you will need a little extra in your monthly cash flow to handle the fluctuation.  If you over-borrow, you are taking a very big risk. Many business brokers know nothing about business! The broker's license exam focuses on real estate transactions, not business acquisitions.  And as stated above, there is no college degree requirement.  These brokers will charge you 12% of the purchase price for listing your business on a database and then use form contracts.  Ask them the meaning of language in the purchase/sale contract and they will tell you to ask your attorney. Let's look at the numbers.  In the sale of a $200,000 small business, the broker will earn $24,000 for putting your business on their website and then getting the buyer to sign a form agreement.  It sure seems like a broker should do more for that kind of dough!           + MORE TO COME!