Mortgage Brokers: Here Is How To Buy A Trail Book

Organic growth strategies often take years to achieve. Trail Book acquisition is THE premier strategy for scaling a mortgage broking business. It offers unparalleled opportunities for rapid growth and market expansion. It diversifies revenue streams, integrates existing client bases and propells brokerages to new heights of success. When we decided to keep a register of interested buyers, we soon realized we might as well list ALL our active brokers. Even a new broker who has been a broker for a minute wants to buy a trail book to get access to leads.

As the trail book market is highly competitive, the prices are inflated and one can get swayed with emotion - getting someone knowledgeable with these details to guide you is imperative. There is no shame in admitting you haven't bought a trail book before. It will only make a good aggregator give you more support as you have not done it before. You could read endless books on 'acquisitions' but unless you do one yourself, the learnings in the book will not make sense. As they say, "Hindsight is 20/20"

Here are the 7 steps to follow to buy a trail book:

Step 1: Assess the Need

Before embarking it is crucial to assess your business's current position. Consider how a trail book aligns with your growth plans and budgets. It is not just about expanding your revenue base. It is also about delivering value to both existing and purchased clients to ensure the long term sustainability of your business.

Step 2: Prepare Financially

Acquiring a trail book is a significant financial commitment given the current market prices. It requires upfront investment as the sellers are not prepared to wait. Prepare by keeping as much cash liquid as possible, secure funding and establishing a budget. This budget should not only cover the purchase price but also account for marketing costs, potential attrition due to clawbacks and dicharges and any immediate liquidity needs like hiring an operator to manage the trail book post-acquisition.

Step 3: Source Opportunities

Finding the right trail book to buy involves networking with brokers, contacting your aggregator BDMs and lastly engaging a business broker who specializes in trail books. Sources for potential acquisitions include retiring brokers, brokers that are burnt out or wanting to partially sell their trail book that is getting too big to manage. Don't buy a book from either from an unreliable source or from a broker you or your aggregator know nothing about.

Step 4: Due Diligence

This step is critical. Some brokers completely disregard this step as they are desperate to get their hands on a trail book. Due diligence involves analyzing the trail book's quality of the loans, understanding the client base and evaluating how long the trail will get continued to be paid. It's also important to review legal and compliance records to ensure that the lenders don't stop paying trail due to legal issues. Engaging a professional legal experty during this phase is non negotiable.

Step 5: Negotiations

Determining the right price for a trail book is both an art and a science. Some buyers analyze and go into great details working out the return on this Investment. Other buyers go with gut feel and self belief that regardless of the quality of the book, they will make it work. Negotiation is a critical phase where both parties come together to agree on price, terms, payment structure (lump sum v earn-out arrangement), clawback and non compete clauses.

Step 6: Integration

Once the purchase is finalized on the settlement date the focus shifts to integrating the trail book into your existing business operations. This involves transferring contacts, deals, tasks and data from client profiles files to your broker profile in the CRM and communicating with the clients to reassure them of a smooth integration process.

Step 7: Business Expansion

Finally, you have the opportunity to expand your client base, cross-sell to generate alternate revenue streams and enhance your services. Develop and implement strategies to engage with these new clients, stay in constant touch to understand their financial goals and provide value their previous broker did not.