As published in Scotsman Guide's Residential Edition, October 2011.
This past August, the Mortgage Bankers Association (MBA) reported that its weekly mortgage-applications survey reached its lowest level for purchase activity in 15 years. Nonetheless, mortgage originators across the country are shifting their focus to a purchase-driven market. With home affordability reaching historically low levels, the purchase market likely will soon emerge as a key driver of mortgage activity.
Loan originators who change their marketing approach ahead of this shift can better position themselves to tap the purchase market. Those who refuse to look outside their refinancing box, on the other hand, could be left behind.
For many mortgage pros, the days of relationship-based marketing ended long ago. The real estate market dropped so steeply, so quickly that many of your former referral partners are no longer in business.
So where does that leave you?
Before you answer, consider this: MBA projects $931 billion in mortgage originations this coming year. Granted, that would be the lowest origination volume since 1997, but that’s still a lot of money, and there’s plenty of room for you.
By some estimates, as much as 70 percent of that business could be from purchase loans. If that plays out, the time to prepare for a major shift in market dynamics is now. After all, mortgage originators who four years ago had the foresight to shift to a business model focused on Federal Housing Administration loans flourished. Those who two years ago honed in on refinance loans also cashed in.
This, of course, still leaves us wondering how you can best adjust your marketing approach to focus on purchase volume. For starters, you must realize that homebuyers are completely different from refinancers. For example, they typically conduct hours of online research before contacting a real estate agent or mortgage broker, both of whom they expect to be extremely knowledgeable.
Today’s buyers also expect more service for lower fees. They know mortgage and real estate professionals need the work, and they have no intention of paying steep commissions. If you want to win purchase business today and next year, you must prove your worth. Listen carefully to prospects’ desires and explain alternatives they didn’t previously know or understand. Then give them time to make up their minds.
Many buyers today will take their time to make a decision. They know the market is weak, and they want to make sure they’re buying at the absolute bottom — or at least with the best combination of sales price and interest rate.
Don’t tell potential buyers they must act quickly or risk losing the opportunity. We all know opportunity abounds in today’s market. By applying false pressure, you’ll only make yourself look foolish and drive away clients.
Instead, concentrate on educating prospects about their options. Tell them things they don’t know. These tidbits could refer to loan programs, neighborhood specifics or market fundamentals.
In other words, the new best approach to marketing isn’t about cold calling, creating newspaper ads or otherwise putting yourself out there. Instead, it’s about focusing on being the best service-provider you can possibly be. When you do, you’ll not only establish your expertise, you’ll also earn clients’ loyalty and referrals, both of which have far more value than the best marketing plan you could ever devise.
Whether or not 2012 brings a rush of purchase business, originators who put their clients first can continue to set themselves up for long-term success. You see, the more things change the more they actually stay the same.
Peter Harvey is founder and CEO of Intellidyn Corp. Prior to founding Intellidyn (intellidyn.com), Harvey held senior marketing positions with
Bank One, Chase Retail and GE Capital. Reach him at (781) 741-5503, ext. 100, or email@example.com.