Make connections in the construction-loan market and electrify your business

Craig Peterson, vice president and national sales manager, National Construction Lending Center, Webster Bank

As published in Scotsman Guide's Residential Edition, February 2006.

Wherever I travel in the country, loan originators tell me there is more new construction in their areas than ever before. My question is, if construction is that hot, why aren't more loan originators taking advantage of the available construction products?

The answer seems simple: Most loan originators are like electricity, and they look for the path of least resistance. The fact that originating construction loans requires you to invest some time to learn the variations is the reason there is a huge void that you can fill.

Originating construction loans does call for learning some new information, handling a few more forms, and developing some new sales techniques and new referral sources. But look at the opportunities to increase your income and to develop lead sources that will last for years to come.

You will quickly realize that: 1. Construction lending really isn't complicated; 2. Most investors who offer construction loans provide free training assistance; 3. Your average loan size is typically greater than standard purchase or refinance transactions; and 4. Relationships with as few as three or four active builders can yield as much business as 20 Realtor relationships.

Service is your power plant

Construction lending is 90 percent service and 10 percent price. You will spend little time discussing price with your prospective borrowers and more time discussing features, benefits and how best to structure their loan.

The level of service you give borrowers and builders will outweigh any question of price. Remember that builders just want to build houses. The better you can show them how you can help convert more of their prospects to buyers of homes they are building -- while lifting the financing burden from their shoulders -- the better chance you have of earning their referrals.

What's the catch? You must invest some time to learn the products and to learn how to properly structure and document a construction loan. This is the only way to differentiate yourself from your competition and to earn the business. With this knowledge, you can ask questions to identify borrowers' and builders' needs and to show them how you can satisfy those needs.

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