Setting the mortgage industry in motion

The ability of a buyer or an owner to obtain financing is an integral component of most real estate transactions.

The submission of a mortgage application to a private or institutional lender is the catalyst which sets the machinery of the mortgage industry in motion.

In this context, the buyer’s agent owes their buyer the duty to ensure their buyer negotiates the best financial advantage available among a variety of mortgage lenders.

As viewed and identified by lenders, the buyer’s agent is called a transaction agent.

The principles of agency law impose a duty on the transaction agent to represent the best interests of their client. These duties include:

  • helping the buyer locate the most advantageous mortgage terms available in the market;
  • oversight of the mortgage application submission; and
  • policing the lender’s mortgage packaging process and funding conditions.

These transaction agent activities ensure all documents needed to comply with the lender’s requests and closing instructions are in order. If not, funding cannot take place and closing the sales escrow is jeopardized.

The transaction agent neither arranges nor makes a mortgage. Further, they are barred from receiving any compensation for simply referring the buyer to service providers or policing lender activity. Events related to the transaction serviced by the transaction agent are covered solely by the broker fee negotiated on the sales transaction.