By Harold Copher, Jr. Willow Bend Mortgage
The first decision most people make when they decide to purchase real estate is simply “am I going to do this myself or use a REALTOR?”
If they choose a REALTOR, they’re expecting their agent to help them find the right property, negotiate the concessions and price, provide guidance with regards to financing and lending sources and oversee the legal transfer and closing of the transaction.
Most of the real estate agents I know consider themselves full service providers, but they know they can’t do it all by themselves. Besides growing their own skills, they develop a team to meet their client’s expectations. You don’t have to know it all, you just have to know your specialty and work closely with a great team so you can have satisfied clients.
There are two ways to avoid disappointing those buyers we mentioned in the second paragraph – just limit yourself to the “standard” real estate buyers, or actually develop the team that will enable you to satisfy a wider range of clients.
Why bother with that “wider range” of buyers? For one, when things become more challenging in the real estate market, a greater percentage of your prospective clients will probably begin to fall into that classification. Develop those skills now so you’ll be better prepared if things change later.
For most transactions, the process is basically the same. The buyer is pre-approved for traditional financing, you wade through a fluctuating inventory of available properties, you counsel them through the negotiations, have no title issues and they close on time.
However, how well are you positioned to provide the same level of service to the “wider range” buyer? Do you have confidence in your referral partner’s ability to exhaust every financing option available in the market?
When you receive a call from the seasoned investor looking to expand their portfolio, can your lender partners help them with additional acquisitions? With the fairly consistent appreciation we see in residential real estate, experienced investors in residential properties are stirring. They see equity in their portfolio that they want to tap to acquire more properties. Does your referral team have the ability and resources to help this client? If you pass on this business or leave them on their own to acquire financing for the new acquisition, are you meeting their expectations as a full service provider?
Mortgage financing options typically fall into one of these five categories.
- Government Insured Agency – FHA, USDA and VA.
- Conventional Conforming – FNMA, FHLMC and GNMA.
- Institutional Portfolio – Mortgage Banking Portfolio Programs.
- Depository Portfolio – Traditional Bank Portfolio Loans.
- Alternative Financing – Owner Financed and “Hard Money” Lenders.
Every loan program will have guidelines that set parameters for the buyer’s ability to repay: (1) Loan Amount, (2) Debt-to-Income (DTI) Ratio, (3) Credit Score and/or credit history, (4) Appraisal of the Property, and (5) Funds to Close. Five categories of loan programs, and each of those will look at the buyer’s ability to repay within these five parameters – do the math, that’s a lot of different considerations, just for one loan.
Okay, Harold, this is all good information. I don’t question it, but how does you sharing this with me make me a better person, or a more valuable resource to home buyers?
The answer lies in the structure of your team. Does your referral team include a partner that can provide access to loan programs in each of the five categories? Can a full service provider afford not to have someone on their team that can?
Almost all of the mortgage lenders do agency and conventional loans well. That’s where the bulk of the business is, right? But shouldn’t you have someone on your team who can assist with all five categories? If your lender team is comprised of agency and conventional lenders, are you really positioned to be a full service provider?
Why send someone who needs to rent a truck to three rental companies that offers only cars?
Builders and REALTORS can make a decent living today catering to just the “standard” real estate buyers. Inventories are low. Buyers are plentiful. Are you willing to bet that will never change? RL