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The Nation's Housing

Making the Push For Package Deals

By Kenneth R. Harney
Saturday, February 12, 2005; Page F01

Call it one-stop shopping. Call it a real estate supermarket. Call it packaging of services. But whatever you call it, get ready to see your real estate broker offer a growing list of in-house services such as home loans and all-inclusive fixed-fee settlements.

The National Association of Realtors is urging its million-plus members to explore ancillary services including title, settlement and "packages of services to consumers for their complete real estate related needs." The move is part of a strategy to ensure that realty brokers retain as much influence over home-purchase transactions -- and the revenue they produce -- as feasible.

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It also holds out the possibility of competitive, discounted-fee settlements to home buyers who sign up for multi-service packages.

The initiative comes barely a year after the association helped derail a Bush administration settlement-system reform plan that would have encouraged lenders and others to create "guaranteed" mortgage and settlement cost packages using new federal guidelines. The Bush plan would have allowed consumers to shop for ironclad guarantees of mortgage fees and closing costs from competing lenders at the same time they received their interest rate quotes.

Along with other trade group lobbies, the Realtors opposed the Bush plan in part because they thought it gave mortgage lenders too much control over real estate transactions. The association's new plan would instead seek to put brokers in the catbird seat, potentially offering home buyers title searches, property insurance, mortgage products and settlements in one up-front package at the time of purchase.

You might, for example, sign a contract to buy your new house, and moments later sign up for an all-inclusive fixed-fee mortgage and settlement services package that would carry you through the entire transaction.

Many of the 50 largest realty brokerage firms around the country already offer some ancillary services, especially mortgage financing, home improvements and property insurance. But most smaller and medium-sized firms focus on brokerage. In its 2004 survey of members' business practices, the realty agents' association found that barely 6 percent of realty companies offer any form of mortgage-related services, just 3 percent get involved in settlements, and 4 percent offer homeowner hazard insurance.

The association's new packaging strategy may dovetail with movements under way among major lenders and large title insurers to form joint ventures and "affiliated business" relationships with realty brokers and home builders. Prominent lenders such as Countrywide Home Loans, Wells Fargo Mortgage Corp. and Metrocities Mortgage Corp. have created dozens of joint ventures recently to ensure a steady flow of home buyer loan business in exchange for sharing revenue with participating builders or realty firms.

Often the joint ventures offer customized financing options and other incentives to home buyers who use their services. Homebuilders, for example, frequently offer extras such as finished basements or discounted settlement fees to buyers who use their affiliated lending, title and settlement subsidiaries.

Such offers generally are legal under federal real estate settlement rules as long as the affiliations are properly disclosed, and consumers are free to choose independent service providers if they prefer. Joint ventures among realty brokers, lenders, and title companies also generally are legal, provided the partners follow federal rules designed to discourage kickback arrangements.

With the Realtors' association now endorsing "packaging" for brokers nationwide, you can expect a move to one-stop-shop offers covering the entire home buying process. Some brokers might also form joint ventures with lenders who already offer fixed-fee mortgage and settlement packages that guarantee customers that their transaction costs will not exceed a preset dollar figure.

Hypothetically, you might buy a house through XYZ Realty, and walk away with a discount-fee mortgage deal, plus a guaranteed bottom-line price for all other services through settlement. Better yet, ABC Realty down the street might compete for your business by offering lower total costs on the entire transaction.

At its best, that should lower costs to you as a home buyer and bring price competition -- and bottom line certainty -- to an arena where both are seriously deficient today.

Kenneth R. Harney's e-mail address is KenHarney@earthlink.net.


© 2005 The Washington Post Company