As published in Scotsman Guide's Residential Edition, August 2012.
For many mortgage brokers and originators, the idea of working with rural properties may seem as alien as country life seemed to Eva Gabor in the 1960s television show Green Acres. If brokers do work with these properties, they tend to try to shoehorn them into products and niches they’re already familiar with — and that doesn’t work. Country homes and acreage properties won’t fit into a conforming Fannie Mae or Freddie Mac mortgage.
Because of this, many mortgage professionals avoid acreage properties entirely. And that’s unfortunate, because there is a large and steady demand for amenity country properties and large homes. There are a multitude of opportunities to be had in this niche — if brokers and originators are willing to do a little work.
The secret to working with homes on acreage property is turning to a lending source that’s familiar with rural- property transactions. These lenders may be a little more difficult to find, but they are there. When brokers find the right lending partner for this niche, they just may discover that the lender has an arsenal of products to meet the demand of consumers in terms of rate security and affordability.
Working with rural properties means not only finding the right lender, but also understanding the property type — and the clients who are in the market for these homes. To these clients, that small barn and pond aren’t liabilities; they are attractions. Those 35 acres aren’t a waste of ground; they may provide contributory income. That horse and livestock on the property aren’t unappealing; rather, they’re the reasons why the buyer is attracted in the first place.
By learning about this often neglected niche, mortgage professionals can add yet another product to their toolbox and perhaps enjoy some of the benefits of country living — and lending. Here are some tips to find the right fit for your clients and your business with rural and added-acreage properties.
Know your buyer
Mortgage brokers and originators who work with rural properties must understand why their clients are seeking homes of this nature and what they are hoping to achieve in terms of lifestyle with the property. Try to put yourself in the mindset of the buyer. Are they seeking added farm income? Are they looking to get away from urban sprawl?
Knowing the answer to these questions will help you find the right financing for your clients. For instance, if the property has horses or other livestock attached to it and your client wants to acquire them as well, this will require separate financing from the property itself.
Broadly, there are often two types of buyers of rural properties:
Lifestyle buyers: These property owners aren’t financing a home as much as they are buying into a whole lifestyle. You must be empathetic to that. Maybe the responsibility of feeding animals and repairing a fence isn’t your cup of tea. But to the buyer, that’s almost a recreational pursuit. That’s why having a conversation about the property and their interests is paramount, and that conversation should come long before any talk about product or price.
Genetic buyers: Purchasing a rural property almost is a genetic thing for some buyers. Anecdotal evidence suggests that the majority of buyers for these properties come from families that grew up on property that was no more than three farms away. They may say things like, “I used to go out to Granddad’s farm as a boy,” or “I remember Grandma raising a garden.” Listen carefully to your buyers. These memories have influenced the way that they want to live. College-educated and career-minded, they now have the desire (and the money) to come back to the country.
By listening to your clients about why they want to purchase an acreage property, you now know the customer — and the driver of the deal. For some buyers, product and price may take a back seat to the dream they want to accomplish. That is an absolutely critical point when it comes time to finance the property.
With rural or added-acreage properties, mortgage professionals must prepare their clients for a different kind of pricing. This kind of lending doesn’t fit into the Fannie or Freddie model. Added acreage, farm buildings, farm production next door, animals — all these characteristics mean a different lending source will be needed. And finding that lender often means a different and higher price.
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