Selecting a broker
An increasingly large proportion of Australians are enlisting the aid and experience of a professional broker when they decide to dabble in the property market, and with good reason. By using a broker, you can save time and get a better deal, in addition to breathing easier knowing that you have someone with years of experience in the business to turn to in moments of doubt or confusion.
Often, brokers will investigate a range of product alternatives for their clients, since it is usually the case that they have a number of banks and lenders (known as a panel of lenders) with whom they have a professional relationship. Consequently, brokers are in a position to evaluate the best finance solutions tailored to their clients' individual circumstances. In the case of first-time buyers, brokers can be an invaluable support, providing advice to help their client navigate the sometimes perplexing waters of property purchase.
The tips that follow are designed to help you to choose a broker with the resourcefulness and dedication to land you the place you're after at the best possible price:
- Ask your family, friends and colleagues for advice or recommendations. It might seem like a fairly clumsy way to go about things, but it's the best way to track down a broker with a good local reputation. If someone whose judgement you trust has had a good experience with a property finance professional, it is certainly worth at least making an initial phone call to investigate further. On the flip side, if someone close to you has had a noticeably bad run-in with a dodgy or lazy broker, it is good to know who to look out for and avoid in your local area.
- Ensure that the brokers you contact have personal/professional indemnity insurance.
- Investigate your prospective broker's panel of lenders. If they have a large network of established lenders of good reputation to draw on, it means that you benefit from increased flexibility and price competition. If, on the other hand, their range of lenders is a small band of companies that you have barely heard of, not only are your choices restricted, but it could mean that this broker has had run-ins with the bigger-name financial institutions, which is why they no longer deal with them.
- Find out how your broker gets paid. In addition to whatever fees and charges they take from you in exchange for their services, most brokers receive commission from the lenders that they deal with. This can be either an up-front fee or a fixed-percentage commission on the loan balance. If you are in doubt, ask – in Australia, brokers are required by law to disclose to clients the details of commissions they receive, in order to mitigate against potential conflicts of interest.
- Establish the criteria that the broker works with to decide which lenders to approach and deal with in which situations, and make sure you are happy with the terms. This will avoid potential confusion further down the track.
- Make sure you have with you documentation relating to your finances when you meet the broker, especially those documents relating to existing personal and credit card loans.
- Ask lots of questions, and trust your instincts. If something doesn't feel right, make sure you hold off from any sort of agreement until you have managed to satisfy all of your concerns. If in doubt, don't. There will always be plenty of other brokers eager to do business with you. If you feel uneasy, it's better to be safe than sorry.