Anyone who owns a web site that is related to real estate or which provides services to high net worth individuals (accountants, attorneys, insurance salesmen, financial planners, etc.) should pay close attention to this article. It is perfectly legal for a commercial mortgage company to pay referral fees for commercial loans, and the recipient does not need to be licensed in any way. Remember, I am an attorney. Still doubt me?
"But George, I thought that referral fees were illegal?"
A little history will help. Many decades ago real estate agents used to steer their home loan clients to particular lenders and to particular settlement companies (escrow companies, title companies, closing attorneys, etc.) in exchange for hefty kickbacks from from those companies. The home loan lenders then would then charge these unsuspecting borrowers extra points or a higher interest rate. The title companies would also charge these innocent, trusting folks extra high fees.
Finally in 1974 the Federal government stepped in and passed RESPA, which stands for the Real Estate Settlement Procedures Act, which made it illegal for a residential lender or a settlement provider to pay anything of value for a referral. The power of the Federal government, however, is not unlimited. For example, the Federal government could not order the citizens of any state to wear only white shirts and black shirts.
Therefore RESPA only applies to transactions involving a federally-related mortgage loan, which includes most loans secured by a lien (first or subordinate position) on residential property. Residential property includes only one-to-four family dwellings; which, translated into English, means single family homes, condo's, duplexes, triplexes and fourplexes. Mortgage loans, by definition, includes home purchase loans, refinances, lender approved assumptions, property improvement loans, equity lines of credit, and reverse mortgages.
But note: RESPA only applies to 1-4 family loans. It does not apply to commercial property.
Now most states do not require a license to broker commercial real estate loans; but even those states that do require a license still allow commercial mortgage companies to pay referral fees, as long as the referral source is not quoting rates and terms and is not playing document fetcher. It's fine to pay a referral fee for the name and telephone number of a prospective commercial borrower; however, the referral source cannot be running around playing unlicensed mortgage broker.
Now that we have the legality issue settled, let me tell you a real life story. By the way, a real life story told to a sales prospect is called a verbal proof story; so let me tell you a verbal proof story about referral fees.
About six years ago, a guy named Wayne owned some sort of real estate web site. For all I know, Wayne could only have owned a tiny residential real estate brokerage in some small town in the boonies. Or heck, he could have been a really smart financial planner. Anyway, Wayne put a link on his website that read, Commercial Loans, and he pointed it to C-Loans.com. He didn't even tell us about the link. He didn't need to tell us. He just did it.
Well, six year ago a very productive mortgage broker named Mario visited Wayne's website. Mario saw the Commercial Loans link, clicked on it, discovered C-Loans.com, and then entered a commercial loan. The deal closed!
C-Loans, Inc. then went into its database of loan applciations, found the original digital application on this closed loan, saw printed at the bottom a link to Little Wayne's Bayou Tackle Shop and Real Estate Brokerage, looked up who owned the site, called Wayne, and then gave him the good news! Wayne was paid an unexpected referral fee of 12.5 basis points, probably around $1,500.
Important note: On deals larger than $5MM, our referral fee is slightly less (8.33 bps.) because we only earn 25 bps. ourselves. A basis point is 1/100th of one percent. Therefore a half-point would be 50 bps.
But the story gets even better! Mario turned out to be a hot agent, and he has already closed a total of 8 deals on C-Loans. C-Loans pays its referral sources (hyperlink partners) on every subsequent closing as well, until the C-Loans user changes his email address. After that it becomes economically infeasible for us to track the deals.
So far we have paid Cajun Wayne on 8 closings for a total of $17,798.75! And the reason this came up is because Super Mario is poised to close his 9th deal for Wayne, a $935,000 commercial loan where Cajun Wayne will earn another $1,168.75 referral fee. That will be a total of $18,967.50 - all for spending just ten minutes six years ago to put a link to C-Loans.com on his website.
But watch out for the Hyperlink Police! If you put more than one link to C-Loans.com on your website, ten heavily-armed SWAT guys might kick down your door in the middle of night, drag you out of bed, hogtie you, tickle your wife, and then shoot your dog with a squirt gun!
Helloooo? I'm kidding here. Do you want to make a little bit of referral fee money or a lot? We once paid a guy named Alan Dunn a referral fee of $21,250 for the referral of a $17 million land development loan.
I therefore urge you to put three links to C-Loans on every page on your website. I would make a Commercial Loans tab at the top, a Commercial Mortgages navigation link along the left side, and a Commercial Mortgage Rates link at the bottom as a footer. And not just on your home page. Do it on your interior pages as well.
And remember, you do not have to notify us that you have created these links. C-Loans.com is programmed to automatically capture the referring URL (website address) and to print it at the bottom on the application.
"But George, how do I know that you won't cheat me?"
Blackburne & Sons manages about $51 million in hard money commercial first mortgages for about 1,500 elderly investors. On any given day, we might have $2 million or more sitting in our loan servicing trust acccounts. We are audited every quarter, and we have been in business for over 36 years.
Do you regularly email a newsletter to your clients? It is possible - and super smart - to put a similar link in your newsletter; but in this case you will need a special partnership code. To get this partnership code, please call or email Mick Carlson at 574-855-6292.
Got a AAA-quality deal that deserves to be financed by a life company, conduit, or commercial bank?
Continue to be on the lookout for the contact information of any banker making commercial real estate loans. We'll trade you the contents of just one business card for a free directory of 2,000 commercial lenders.
The ninth largest bank in the world joined C-Loans.com this month. Their minimum loan is $20 million! OMGoodness. Why did they join? They want to use their ability to fund these huge loans as an entre to meet super-high-net-worth individuals, so they can sell them other services, like wealth management and trust servcies.
Hmmm. Anybody remember me saying, "There is no easier way to meet high net worth investors than to be a commercial mortgage broker?" Maybe I've said it TWENTY times. Sorry. I got excited. But every commercial-investment property brokerage should have a one-man desk that arranges commercial financing, in order to meet TONS of filthy rich investors.
