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BRX Mortgage Blog – Journey to $1 Billion
We are on a quest to transform the mortgage industry.
We believe there needs to be more transparency, which is one of the reasons 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 own mortgage business.
Welcome to October 2022
October Report
Production since August 1, 2021
Total Volume: $251,162,030
Total Units: 543
Agent Stats
Rookie Agents: 112 (+11)
Pro Agents: 26 (+7)
Total Agents: 138 (+18)
Funding Update
We launched BRX Mortgage on August 1, 2022. Since then, we have funded 543 mortgages, for a total volume of $251,162,030.
In the past month, we have added 18 agents. This represents a one-month record for us. I believe this happened for two reasons.
First, the slower market has given busy agents time to evaluate their current brokerage and decide whether it makes sense to make a switch. (Many of them are switching.)
I predict a massive movement in agents in the next three to six months, as agents decide to vote with their feet and head to a brokerage that adds value and has better long-term vision.
Second, we hired a full-time onboarding specialist to assist with bringing on agents. This has increased our efficiency and is creating a much better experience for agents who join the brokerage.
Where Does The Name BRX Come From?
Naming a company or a product is a big decision. I love it when a name also conveys a message or meaning.
I once took a course on how to write a book (more on that in a later post). The presenter stated that you should spend 50% of your time on the title, and 50% on the content.
That may be an exaggeration, but they weren’t entirely wrong. Titles really do matter.
The “I Love Mortgage Brokering” name was inspired by the podcast, “I Love Marketing,” which was named that because I wanted listeners to know exactly what the show was about.
I believe this helped us gain traction and find our ideal audience right from the beginning. I knew I couldn’t compete with the likes of Tim Ferris as a business podcast, but I wasn’t trying to—instead, I was looking for a very specific listener.
To be fair, the name is a bit too long.
Imagine you are at a store and the clerk asks for your email address, and you have to spell out S-C-O-T-T @ I-L-O-V-E-M-O-R-T-G-A … I got tired just typing this out.
You get the point. Shorter names are often better (and so many people spell “mortgage” wrong that it makes my head hurt).
The name BRX Mortgage came from the idea that we were going to build a brokerage that was broker-centric, meaning that I would build it exactly as I would want it to be if I were still brokering, with all decisions being made from the perspective of the broker first.
Since I am a bit of a math nerd, it reminded me of solving for X in Grade 9 Algebra. However, in our case, the BR is the Brokerage and the X is the Broker.
Now, a name like BR=X would be a bit strange to write and definitely tricky to share with a clerk at a store, so we shortened it to BRX.
If I were to break this down into an equation, it would look like this:
We are fanatical about building a brokerage that is completely focused on our brokers.
I also like it when a name has multiple meanings, or we can use it as a play on words.
For example, we pronounce BRX as “Bricks.”
Some of the oldest structures on Earth were built out of bricks, and any great structure is built one brick at a time.
The name BRX reminds us to focus on the broker but also, to always be building.
Plus, as I jokingly ask our agents, “What did the smart little piggy build his house out of?”
Bricks, of course. :)
Our Un-Contract
What exactly is an Un-Contract?
It’s a contract unlike any other brokerage contract because it is written to protect the broker.
We believe that the best way to keep our brokers is by innovating and providing value. If we are not doing that, our brokers should leave.
If I convince you to sign a seven-year contract with me, where is my incentive to be constantly improving and innovating?
As a broker owner, if I am not constantly experimenting, seeking more ways to help my brokers, I believe I have failed.
Before joining any brokerage, you should ask them the following questions:
Who owns my clients?
Are there any special deals available?
Are there any penalties for leaving?
What happens to my outstanding commissions if I leave?
Can I see a copy of your contract?
Here are BRX Mortgage’s answers:
1. Who owns my clients?
You own 100% of your clients.
You did the hard work of finding the client, convincing them to work with you, and closing their mortgage.
They belong to you.
We are so committed to this that, when an agent joins our brokerage, we don’t issue them a BRX email address.
Instead, we show them how to set up their own email address, so if they do leave, they will continue to receive all communications from their clients.
Now, we hope they never leave, but if they do, we don’t want to hold them hostage with their email address.
I have heard too many horror stories of brokers who thought the company was doing them a favor, only to discover this was not the case when they decided to leave.
The email below was sent out to a broker's clients when he left the franchise.
Did you catch that?
‘Hey client, your broker has left the company, but don’t worry—we can help you out.’
This sort of thing happens far too frequently, and brokers don’t find out until it is too late.
As a side note, there are three things that you should always own:
Your cell phone number
Your primary domain name
Your email address
Do not let anyone convince you otherwise.
We do keep copies of documents for any mortgages you fund with us for compliance purposes, but we will never market to your clients without your consent.
2. Are there any special deals available?
I love that you ask, but the answer is still “No.”
We will never use cash and restrictive contracts to entice brokers to join us. If you don’t believe in our vision or values, we are not a good fit.
There are some franchises that will write you a check if you sign a 5-to-7 year contract. When I spoke to a friend of mine who closed $400+ million last year, I asked if he was offered a special deal.
He said he was offered a very large check, but didn’t take it. As he explained to me, “Most brokers are not business owners, and they don’t do the math. There is no such thing as free money.”
The reality is that most of these cash incentives function like a cash back mortgage or a credit card advance.
You might get a quick hit of cash but the person writing the check has done the math, and they are not going to lose.
3. Are there any penalties for leaving?
No.
We have no penalties if you leave our brokerage. If you decide we are not a fit, you can leave by giving us 30 days’ written notice.
4. What happens to my outstanding commissions if I leave?
We will pay you every nickel of commission we owe you if you leave for any reason. The only thing we ask is that you give us 30 days’ written notice.
We will not hold your commission ransom, or threaten to not pay you. This is a small industry and, even if a broker does leave, I prefer not to burn bridges because I believe many of them will be back working with us again in the future.
That may be naive, but we are obsessed with creating a broker-centric company, and with always innovating and improving.
I believe in playing the long game, and know that the right people will find us in their time.
5. Can I see a copy of your contract?
Yes, absolutely. As I mentioned, every one of our agents gets the exact same contract. We believe that everyone should get a good deal, but no one should get a special deal.
We have nothing to hide; when you don’t give special deals, you don’t have to worry about everyone seeing your contract.
View the contract here.
I guarantee that if you were to approach top brokers who work at the same franchise, you would find that many of them have dramatically different contracts.
This is not always the case, but it happens far too often.
In fact, some of the examples I have seen recently are:
One franchise within a network being allowed to use a technology that other brokers are penalized for using.
Brokers being charged considerably higher royalties because they didn’t negotiate as well. For example, I know of a female broker who paid $80,000 more in one year than a male colleague, because she didn’t negotiate as well. (As a father of two daughters, this really pisses me off.)
Cash incentives to the owners for switching franchises that are not disclosed to the agents of the brokerage. Incidentally, the reason you see lawsuits between broker owners and franchises is usually because of these incentives.
Penalties being imposed for breaking a contract early, but no clear definition of how this penalty is calculated. The highest amount I have seen was a broker owner charging an agent $300,000 for leaving. Nowhere in the contract did it explain how the penalty was going to be calculated. We scold clients for taking mortgages with punitive penalties, but we don’t even ask this question when signing a contract for our mortgage business.
A broker being told she has to pay out her monthly fee for the next two years because she left a brokerage, even though she left because they didn’t provide the support she was promised. (Again, this was not disclosed in clear terms in her contract.)
These are just a few of the games I have seen played with contracts.
This is the year 2022, and I personally believe that we need to do better.
To be fair, there are a few great brokerages out there running honest businesses, and if you are one of them, I challenge you to share your contract publicly, to demonstrate that you also have nothing to hide.
Again, here's a link to our contract here.
How to Earn 100% Commission
At BRX, we have capped commissions, which means that anyone can earn 100% commission splits.
To explain how it works, let me share a quick example.
Jeff Mudrick joined our brokerage on August 1, 2021, and took the Rookie to Rockstar program. It took him 166 days to fund his first 10 files. (We help our rookies find and fund their first 10 mortgages.)
Once Jeff funded his 10th file, Jeff turned Pro, which means he switched from a 50/50 split to an 85/15 capped split for the next 12 months.
It then took him 115 days to fund his first $100,000 in gross commission. (Way to go, Jeff!)
This means that Jeff will earn 100% commission for the next 250 days.
(365 days/year - 115 days to $100k = 250 days at 100% commission)
The company charges a maximum of $15,000 commission per agent per year. Now, let’s assume that Jeff closes 20 mortgages after hitting his cap.
He would then pay 20 x $99 = $1,980 in file fees. After an agent hits $100,000 in gross annual commission income, we only charge a file fee on the next 40 files.
What is the $99 File Fee?
We charge this because we still have to do compliance on, and review of, all the files.
I have broker friends who crush $100,000 in commission in two months, after which we have to review their 180+ files for the next 10 months.
In this scenario, we would actually lose money on this broker because 50% of the $15,000 company commission goes into our broker revenue-share plan.
The $99 file fee only applies to the first 40 mortgages you fund after you have reached $100,000 in annual gross commission income (AGCI).
What is included in the AGCI Calculation?
We pay on all revenue received from the lender.
Volume bonus, efficiency bonus, super-secret-don’t-tell-anyone bonus. If the lender pays us on your file, we include it.
To explain this a little better, I will share two examples.
Example 1 – Fred and his volume bonus
Imagine that Fred closes a mortgage with TD, and when we get his commission check, he breaks $100,000 in AGCI.
Now, in 30 days, TD will pay a volume bonus on Fred’s file. When that volume bonus is paid to the company, Fred will receive 100% of the volume bonus.
Your commission split is not tied to a specific file. Instead, we just track your progress towards $100,000 in AGCI.
Example 2 – Jane and a large commercial mortgage
So far this year, Jane has earned $50,000 in AGCI. She now closes a large commercial mortgage that pays a $75,000 commission. (Well done, Jane!)
Because Jane only needed to earn another $50,000 in commission to cap and be on a 100% commission split, we would only charge 15% on the first $50,000 of that commercial file, and Jane would earn 100% of the remaining $25,000 commission.
To calculate Jane’s commission:
Total commission on file – $75,000
Commission required to cap – $50,000
Commission Jane would pay the company on the file – $50,000 x 15% = $7,500
If Jane had made a $100,000 commission on one file (which would be a great payday, but it happens), she would be on a 100% commission split on her next file.
We focus on AGCI, annual gross commission income, and do not delineate whether it is a commercial file or residential file.
To us, commission is commission.
How We Now Hire Underwriters
An old mortgage client and friend of mine, Chris Priebe, built a chat monitoring company that he sold to Microsoft.
I jumped on a call with Chris to find out some of the lessons he learned over his nine-year journey to building and exiting his company.
He shared with me that, when he was hiring for a technical role, such as a programmer, he would give them a problem to solve during the hiring process.
He explained that, even if they solved it differently, he really wanted to see how they thought about solving the problem.
This prompted me to realize we needed to create technical questions for hiring underwriting coaches. Since I am not an underwriter, I am not the best person to come up with technical questions.
We therefore asked our four underwriters to each come up with three questions—one easy, one medium, and one hard question—that we could ask a potential hire in an interview.
We also told them they could not collaborate with each other because we wanted to create a bank of 12 different questions.
This was a lot of fun and the UWs came up with questions that were much harder than I would have thought of.
Once we had our 12 questions, we asked each UW coach to answer the nine questions that they didn’t write.
We wanted to get a baseline, to determine what was an acceptable answer. As you know, underwriting is not binary but nuanced, and we wanted to capture this by having them answer the other questions.
When we recently decided to hire another UW coach, the bank of underwriting questions was extremely valuable.
Let me break down the numbers on our most recent hire for an UW position:
Number of underwriters who applied | 17 |
Number invited to complete a timed UW quiz | 13 |
Number who completed the quiz on time | 7 |
Number given an initial interview | 6 |
Number invited to a final group interview | 3 |
Number hired | 1 |
There is a lot to unpack here.
First, 17 is the most applicants we have ever had when posting for an UW position.
I believe this is a reflection of the current market slow down, and that we will see more and more quality candidates available in the New Year.
After an initial screening, 13 of the applicants appeared to be a good fit and were invited to take a timed UW quiz. We created this quiz using Google Forms, and took the questions from our bank of 12 UW questions.
Only seven of the applicants filled out the quiz. This was great, because it immediately eliminated half of the candidates, who were either not really that interested, or not willing to do a little bit of extra work to see if this was the right fit for them.
Our underwriters reviewed their answers and thought that six of them were really strong.
My HR manager then invited the six candidates to a one-on-one interview, where she asked questions that would test whether the candidate matched our company values. (At our last company retreat, we got clear on our values and created questions to test for those values.)
Of the six interviews, three candidates stood out above the rest, so we invited each to an interview by a panel.
I know this may be intimidating for the candidate, but we are in a high pressure business and I figure that anyone suited for this job will be able to handle it.
The final interviews helped us narrow our search down to two amazing candidates. We hired one and have the other one in the batter's box, so to speak, and hope to hire them when we need our next UW.
Here is a sample question that we asked our UW candidates. Keep in mind that we are looking for detailed answers, and the candidate has to complete six questions within a time limit.
"What do you consider a red flag in a loan application?"
As we continue to grow, I believe we are going to need to get better at hiring the right people. We have not always gotten it right, which has led us to implementing a more structured approach.
My hope is that BRX Mortgage becomes known for its ability to attract and retain top talent.
Next Month:
Our Company Mission Is Probably Not What You Think
What Do You Get For Your $150 a Month Anyway?
How Do We Keep Our Agents Updated?
Check it out! -> Nov 2022 - Journey to $1 Billion
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