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We are on a quest to transform the mortgage industry.
We believe there needs to be more transparency, which is one reason why we decided to share a monthly report on what we have learned, what worked and what didn’t, and what’s next in our plans to grow a Billion Dollar Brokerage.
We hope you find a few useful ideas and tidbits to help you in growing your mortgage business.
Welcome to April 2024
Brokerage Stats
Production since August 1, 2021
Volume: $1,393,899,052
Files funded: 3,208
March Production
Volume: $76,441,956
Files funded: 162
March Agent Stats
Rookies: 129 (+4)
Pros: 138 (+7)
Total: 267 (+11)
I decided to compare the volume and files funded in March over our first three years of operation.
We have seen an increase of 623% in files over the first three years, and an increase of 711% in volume.
I think the higher increase in volume is due to an increase in the average file size.
Exclusive Partnership With Rocket Mortgage Pro
I am excited to announce that Rocket Mortgage Pro has officially entered the broker channel as an exclusive partner with BRX Mortgage!
As the first brokerage in Canada to have access to Rocket Mortgage, we couldn’t be happier with this important partnership.
Rocket Mortgage is an industry leader in the US, and entered the Canadian market in March 2020 with a direct-to-consumer division.
Most mortgage brokers in Canada think of Rocket Mortgage as a direct-to-consumer lender only. However, in the US, Rocket works with mortgage brokers and loan officers through a division called “Rocket TPO” (Third Party Origination).
In 2023, Rocket TPO funded $28 billion, and was the second-largest wholesale lender in the country.
Rocket has lots of experience in creating great partnerships with originators, which they will apply to this new venture.
This unique partnership will allow our BRX agents to serve their clients with Rocket mortgages and products.
In April, Denise and I had a tour of Rocket’s offices in Detroit, and the scale of their operation is inspiring.
Establishing key partnerships like this is just one of the ways that we provide value to our BRX agents.
How to Determine Whether Anyone Else Is Getting Paid Before You
Several brokers have recently told me that, despite being told they are on an 80/20 or 75/25 split, they find they are not.
To be fair, this can happen if the brokerage is part of a franchise, and the broker owners pay their agents after they pay their franchise fees, which, for example, is 5.65% for some of the national brokerages.
What you need to ask is, am I paid before or after the franchise fee?
Unfortunately, not all broker owners are completely upfront about this.
I have devised a simple test that will determine whether anyone else is getting paid on your files before you.
If you close a $500,000 mortgage with TD Bank, you will earn a volume bonus of 35 basis points, which is paid 30 days after closing.
This means that the gross VB should be $1,750. We will use this number to run our test. (Check out my post on how VB works.)
$500,000 × 35BPs = $1,750
Now, depending on your split, you should be paid the following:
TD Volume Bonus Test
If you are being paid less than the above figures, someone else is getting paid before you.
Now, maybe you didn’t read your contract well enough, or this detail was glossed over when you joined your brokerage.
While that’s fair enough, I think broker owners have an obligation to be transparent when it comes to compensation.
I don't really care how much a brokerage charges, as long as they disclose it and make it easy for the brokers to understand.
If your brokerage passed the test, give them a high five!
If your brokerage failed the test, you may want to consider what else they are not telling you.
Finally, if you value transparency and want to talk to someone at BRX about how we work, book a call with us below.
“But Scott, I’m Going to Make Less Money!”
Prior to starting BRX, I had several conversations with broker owners, who would ask me how they could best grow their business. I would explain that I thought EXP Realty’s business model (EXP model) would do really well in the mortgage industry.
Nearly every broker owner I spoke with had the same reaction. They would get very excited, and tell me they were going to implement this right away.
However, a couple of days later, they would come back to me and say, “Scott, I’ve done the math, and I love this idea, but I am going to make less money.”
My reply was always the same: “Yes, you will make less in the short term, but in the long term, you could build a much bigger business.”
Every owner bailed on the idea because they didn’t want to give up their short-term profit, and didn’t see how the model could make money.
Businesses like ours require scale in order to generate profit. The way I see it, there are two ways to build a business like this.
The first option is to raise a pile of money, and then hope you can figure out a working model before you run out of cash.
The second way is to have a unique profit centre that is hard to replicate, and use that to fund your growth.
At BRX, we have a unique profit centre.
To understand what I mean by “unique profit centre,” let me share an example from one of my favourite companies, Costco.
Costco is a high-volume, high-value, and low-margin business.
In the traditional retail market, this is unique—most high-volume, low-margin businesses tend to offer lower-value products and services.
Costco is able to compete with the big retailers because it has a unique profit centre—its membership fees.
Membership fees account for up to 72% of Costco’s profit, which effectively allows them to be a high-value discounter. (Yes, that is a bit of an oxymoron.)
Walmart and Target look at Costco’s membership fees with envy. You do not need to pay to shop at most retailers, yet Costco members don’t seem to question this.
What’s interesting is that Costco’s membership fees were not initially intended to be a profit centre at all.
Like many things in life and business, it was simply a lucky outcome.
The membership fee was a response to lawsuits that Costco was facing because they were upsetting traditional retailers.
Price Club, which eventually became the Costco we know and love today, was started by an innovator named Sol Price. (What a great name, BTW.)
Price Club was a high-volume discounter that marked up products by the small, fixed amount of 12–14% rather than by the 40+% that most retailers added, to arrive at the manufacturer's suggested retail price (MSRP).
This enraged their competitors, who cried, “No fair!” and promptly tried to sue them out of business.
The membership fee was created to circumvent the California state laws at the time, which decreed that retailers had to honour the MSRP.
I know that sounds like price fixing on a large scale. It was a different time.
The initial membership fee was a paltry $5 per year, which was not exactly a profit centre.
However, due to that one decision, today’s membership fees now account for most of Costco’s annual profit.
That’s certainly a lucky outcome.
Now, back to the problem that my broker-owner friends discovered when they considered implementing the EXP model in the mortgage industry.
They recognized that it would create a high-volume business, but wondered how to get it to scale without raising a pile of money or having some unique profit centre.
At BRX Mortgage, we are fortunate to have a unique profit centre that was not created by design but—like Costco—was also unintentionally lucky.
Let me explain.
BRX Mortgage started out as a temporary brokerage, whose purpose was to train the next generation of rookies and then send them off to other brokerages.
Even though I believed it would be valuable, we had no intention of building the EXP model.
Instead, we focused on helping rookies become rockstar mortgage agents.
In fact, in the first two years, our rookies and grads funded 1,007 mortgages. (You can see a full breakdown here.)
It was only when our rookies came to us and said, “We don’t want to go to another brokerage,” that we started to rethink our initial plan.
At the same time, a few experienced-broker friends reached out, asking if they could join us.
This got me thinking about the EXP model that I had promoted to other owners over the past several years. In August 2022, we rolled out our version of the EXP model at BRX Mortgage.
However, since we started out as a training brokerage, we ended up creating our very own unique profit centre.
Not unlike Costco’s membership fee, our rookie program generates a lot of our profit. This allows us to effectively operate as a high-value, low-margin brokerage.
In turn, we can add additional value and services to our experienced agents, providing both high value and capped commission splits, including the opportunity for our agents to earn 100% commission splits.
Why We Charge Rookies a $5,000 Commitment Fee
One question we get asked is why we charge a $5,000 commitment fee for our rookie program.
We do this for two reasons: personal commitment, and financial capability.
First, we want to ensure that our agents are committed to their own success. In general, I have found that the less someone puts into something, the less they get out.
For example, the most successful program that I have ever signed up for cost $10,000 USD for 10 weeks (with a no-refund policy).
Was the program good? Yes.
Part of the reason for that program’s high success rate was because people who plunked down $10,000 were going to be far more committed, and would do the activities necessary for success.
It is a law of human nature—your attention flows where your money goes.
In general, people don’t value what they don’t pay for, which is why I don’t offer free training.
It is usually a waste of both my time and the time of the person being trained. Because they have little commitment, they typically put in little effort.
Low Commitment + Low Effort = Poor Results
From day one, we decided to charge a commitment fee, which is refundable under very specific conditions.
We currently refund $2,500 of the $5,000 when a rookie agent closes their 10th file, and the other $2,500 when they close their 20th file.
We do not refund it under any other condition.
As I tell new agents, “We don’t want your $5,000—we want to know that you are going to show up and do the work that it takes to build a mortgage business.”
If you follow our plan, it works.
We want you to be as committed to your own success as we are.
The second reason is financial capability.
Starting a business costs money—even one as low-cost as being a mortgage broker.
The cost and barrier to entry for the mortgage industry is so low that it lulls people into thinking this must be an easy industry.
It is not. It is a difficult industry, and it is getting more difficult.
I think it’s crazy that, in Ontario, you can get licensed for about $1,000 and two weeks of training, whereas it takes $10,000 and 10 months to become a hairdresser.
If you are moving to a commission-based business such as being a broker, you will need to have the ability to sustain yourself financially while you build your business.
I can’t tell you how many new brokers I have seen enter the industry and have some success, only to flame out because they did not have the financial means to sustain the momentum.
It is sad to see, and charging a commitment fee is one of the ways we test for financial capability.
The truth is, to build your business, you are going to need to invest some money.
Coffee meetings, lunches, networking events, and training are all normal expenses of starting your mortgage business.
What if you can’t afford the $5,000?
Unfortunately, if $5,000 is not in the budget, starting a career as a 100%-commissioned mortgage agent may not be your best choice right now.
You might be better off staying at your current job and saving until you have a bit of a cushion, or finding a job where you work for an experienced broker or lender. (These are hard to get if you have limited experience, BTW.)
There are many ways to enter the mortgage industry. Building a referral-based mortgage business from scratch is just one of them.
Listen to my podcast on six things to do before starting your own mortgage business.
However, when you compare the cost of starting a mortgage business with practically any other business, you will realize that it is still ridiculously inexpensive.
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