If banks are allowed to get into the real estate brokerage business, here is what I foresee will happen.

First and foremost, banks will primarily be interested in the buying side of the transaction. The buyer is where the action is, where the money is. Sellers have a liability, a home they need to sell. Buyers have an asset, money or the ability to borrow money. Real estate is all about sellers trying to find a buyer who is willing to trade his/her asset for the seller's liability.

Second, buyers almost always need mortgages, insurance, title work, home inspections, appraisals and warranties. Many of them need new checking accounts, savings accounts, IRAs, trust accounts, savings bonds, CD's, and a new investment broker.

If you walk into a bank the first thing you see are nicely dressed educated people sitting at desks waiting on customers. Their desks are nice looking, neat and fully equipped with all the tools necessary to deliver a high level of service to the customer. You don't see paper stacked on the desk and you don't see day old McDonald wrappers on the desks.

The people working there are employees. They are paid a decent wage, provided with benefits, and have a retirement plan. They typically work form 8:00 to 5:00 Monday through Saturday.

What I foresee is something very similar. I think the banks will have an area where their real estate desks are located, but fully in sight of everyone who walks through the door. I think that consumers will be told that if they are in the market to buy a home, they need to stop by one of the desks to see how much they qualify for. I think that the person at the desk will then coordinate the transaction with a field representative who will meet the person at the home and show it to them. This person will be driving a very nice bank owned vehicle, will be dressed in a suit, and will have all of the newest tools available to mankind to help make the process as easy as possible.

I think everyone working for the bank will wear a suit, be highly educated, paid a salary plus end of year bonus, and will be very professional. I think the banks will have an outlet for all of the services a buyer could possibly want or need. I think they will make true "One Stop Shopping" a reality for today's homebuyer.

The bottom line is, I banks are capable of bringing a very high level of professionalism to the industry and traditional real estate brokers are going to have to really work to match it.

I suspect that the banks will be providing non-agency level services for many reasons. First, to attempt to limit their liability. Banks of course have deep pockets for upset people to go after. Most real estate companies have very small pockets. Second, the door will be open for them to sell many more in-house services with less disclaimers and disclosures. If they go with agency, they will be able to make those services available, but with less sales pressure involved. I believe that even though banks have for years considered making this move, it was not until NAR abandoned agency that the door was thrown open for banks to walk through.

Banking regulations have in the past made sure banks did not force their customers to buy services they did not need or want. For instance, banks are very careful not to require a borrower to also buy credit life insurance, even thought they do make it available if the borrower is interested.

Probably the most interesting question will be: Will banks, especially national banks, fall under the local state real estate commission? For the most part states either cannot or do not regulate federally chartered banks. States generally only have the authority to regulate the activities of state chartered banks. If this is so, it will be interesting to see if a nationally chartered bank is required to have a state real estate license and to abide by state real estate regulations. If they are exempt from this, then we could expect the real estate industry to go berserk, especially if they are allowed to advertise differently, pay referral fees to unlicensed individuals, offer inducements to get clients, and do various other things traditional real estate offices are not allowed to do.

If banks are allowed into the real estate business, then how will they grow this new business? I suspect for the first year or so, we could expect little to happen. But, I expect soon after that, we would hear that one of the major national banks has purchased, or gone into partnership with, one of the major franchises or at least one or more of the large regional independents. If this happens, it will be interesting to see how they are able to convert traditional part-time agents into full-time bank employees. I suspect there would be a very large fall out and in time a reduction in the number of agents. How the banks handled this conversion would for the most part spell how well the banks performed as real estate brokers.

If on the other hand, banks were less aggressive and built their own chain of offices, I suspect their growth would be somewhat slower, but their overall success would be much greater.

Published: January 23, 2001

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