How does a mortgage brokerage earn its revenue?

A brokerage’s statements often show one large income number, which hides how the money arrives. Different lines behave differently, and a buyer needs to see them apart. The seller or the seller’s accountant can usually label each line from the firm’s records. Treat these as questions to ask, not conclusions, and have your own accountant read the answers.

Compensation paid by lenders

Brokerages may be paid by the lender once a client’s mortgage funds; ask the seller how its income is earned. Ask the seller to separate new purchases, refinances and renewals. Ask which lenders pay the most of it, and whether any of that income depends on an arrangement tied to a person rather than the firm. A heavy reliance on one lender is worth understanding early.

Ongoing and repeat income

Some lender arrangements pay something over time, and past clients may return at renewal. Ask what is contractual and what is only hoped for. Ask how the firm tracks client renewals and whether the records are kept in the firm’s own systems. Your lawyer can tell you how these arrangements behave when ownership of the firm changes.

Client fees and agent splits

Some firms also charge clients fees on certain files. Ask which files, and whether the practice would continue after the sale. Then ask how income is shared with the agents who work in the firm, since what the firm keeps is what remains after those shares. The guide to what a mortgage brokerage is worth lists more questions about income.