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   ARTICLE   |   From Scotsman Guide Residential Edition   |   September 2014

Your Customers Should Come First

Remember that you work for homebuyers — not real estate agents

There’s been a historical trend in the mortgage industry of brokers and bankers spending the majority of their time chasing down real estate agents for business, and in the process spending surprisingly little time on attracting the actual consumers that employ them. Getting referrals from real estate agents can be an important aspect of originating loans, but those relying on them for the majority of their production are in danger of putting these business relationships before the best interests of their clients.

This needs to change, considering the negative impact it may have on the mortgage industry and the consumers that it claims to serve. Real estate agents play an important role in the homebuying process, and it’s usually wise for buyers and sellers to have representation and contractual protection. Although the role of agents is important, there is nothing more important to consumers than the mortgage process and the long-term debt liability that comes with buying real estate.

Your customers should come firstNot only does the mortgage process control the transaction for the buyers and sellers in a noncash home purchase, but consumers also face one of the biggest financial responsibilities and commitments of their lifetime. When the home-purchase honeymoon is over, the reality finally sets in on the marriage to the mortgage. What this means is that your role and counsel is the most important part of the process for a consumer buying real estate and must be treated as such by all parties.

The problem in focus

Looking at real estate is more exciting for consumers than budgeting and analyzing mortgage options for pre-approval, which is where the industry’s problematic focus on real estate agents begins. There is nothing wrong with consumers getting excited about the homebuying process, but unfortunately this may result in new buyers meeting with real estate agents before they meet with mortgage lenders.

It’s often unwise for consumers to rely exclusively on their agents for lender referrals, because these agents may know little about their consumers and their financial stories. Not only is this a bad decision due to omitting pre-approval and appropriate budgeting, it may also lead to less desirable terms and a potentially bad experience if the homebuyer’s real estate agent does not follow best business practices. Relying on a sole referral with the potential for special interests over credential review, self-education and comparison shopping is not a prudent financial decision.

Unfortunately, some real estate agents do not understand — or even care to understand — the analytics in the primary mortgage market and what each channel means to their clients. This simply cannot continue; the basic details of mortgage lending must be clear for the sake of consumers entering the housing market who rely on their agents’ advice.

Ultimately, every professional involved in the homebuying process must be accountable and responsible for consumer interaction. Originators should strive to work with agents who refer their clients, on average, to at least three mortgage providers that they trust and have worked with successfully. This will help your real estate partners to protect themselves should a bad experience arise, but even more so it protects the best interests of homebuyers through diversity, competition and choice.

The right partners

Related to all this, the mortgage industry is currently facing a huge problem when it comes to phony marketing agreements, joint ventures and Section 8 violations of the Real Estate Settlement Procedures Act. A shocking number of businesses in the housing sector continue to steer consumers toward higher-cost, lower-quality mortgage providers for financial gain. There is certainly a moral and ethical issue that the mortgage industry is facing, but more importantly, these activities are illegal and detrimental to consumers.

When targeting real estate agents to work with, originators should make sure that their partners share a client-first business platform. Everyone knows what it’s like working with a bad agent or those who believe that they can bark out orders that defy common sense or the factual conditions of a loan transaction. It’s a good idea to pull data on recent production and do research on the credentials or customer complaints of agents you work with to confirm that they are full-time, committed professionals. This will help you prepare for those agents who might get wrapped up in their own balance sheets and commission over all else.

Make no mistake: There are some excellent real estate professionals in the market. Good real estate agents understand and respect the importance of the mortgage process for the consumer and never enter into questionable marketing agreements or accept financial incentives for referrals. Although real estate agents offer a service, mortgage professionals offer a service and a financial product. This is where consumer protection applies and why it’s such a crucial aspect of the origination business.

Tips for success

According to the National Association of Realtors (NAR), in 2013, 92 percent of homebuyers used the Internet at some point in their real estate searches, and 42 percent of them turned to the Internet as the very first step in the homebuying process. Consumers, in other words, are getting more access to data online than ever before.

Service professionals relying on commissions must sharpen their online skills, have a broad level of experience, and communicate their services and products to attract these well-informed consumers. Originators must embrace and support consumer education and awareness, but also manage and control public data to ensure that accuracy and integrity exist.

Technology and consumer self-education are already changing how real estate is bought and sold, and this trend will doubtlessly continue in the future. Embracing technology and following these statistical trends is vital in preparing for the market’s new generation of homebuyers. If you fail to prepare, you’ll be left in the dust by those who technologically adapted their marketing and operations. Originators must also educate consumers about starting the mortgage process by seeking out a lender before a real estate agent, which thankfully seems to be a growing trend.

Brokers and bankers should diversify their referrals and refrain from submitting or relying predominately on real estate agents. To achieve a more enjoyable and sustainable business, don’t get wrapped up in tailoring your marketing plan around real estate agents, and focus instead on the consumers that you want to influence. Have access to the products and pricing you need to be competitive, and don’t be sold the snake oil from certain unscrupulous recruiters and managers.

Finally, work to influence your database and the public both online and offline via reviews and general accessibility. Your own clients can help you build your brand, stimulating activity via their workplaces, families and circles of friends. If you simply put your interests in line with your client’s best interests, a favorable outcome is inevitable.

•  •  •

In a mortgage transaction, authority ultimately rests with the consumer — the only person who dictates who they hire. Nothing is more important than the consumer during the homebuying process. The minute any industry professional loses sight of this through appeasing a referral source, applying pressure, steering customers for financial gain or simply making excuses, this professional needs to exit the industry, having no right to be involved with such an important financial transaction. There is too much at stake for the consumer, and integrity should be treated at all times as aprerequisite for the origination profession. 


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