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   ARTICLE   |   From Scotsman Guide Residential Edition   |   February 2018

Outshine the Competition

Niche-lending products help create a brighter referral future

Outshine the Competition

In today’s competitive mortgage market, it seems that an overabundance of originators rely on the same old, stale sales propositions. There is nothing inherently wrong with sticking to tried-and-true methods, unless the traditional levers originators have manipulated are no longer getting the same response from clients.

When your value proposition is no longer as effective as it once was, it can make it more difficult to stand out from the competition, establish a real connection with borrowers and referral partners, and communicate your value in the overall market. It may be time to try to shine a little brighter by choosing a niche. 

Rates and fees have always been the basic differentiators among residential mortgage originators. Although the bottom line is still the bottom line, and rates and fees are still relevant, they are no longer quite as important a differentiator as they used to be.

Originators need to find new ways to elevate their profiles and connect with real estate professionals. One of the most promising ways to increase connections is through the use of niche-lending products.

Niche loans represent a valuable untapped resource. Although the volume of conventional loan transactions is significantly higher than transactions using niche financing, nearly every real estate agent has a story about losing a deal that could have been saved with a little ingenuity and access to alternative-lending solutions.

Renovation niche

This is where resourceful originators can shine. Given the current state of the marketplace and the buzz of renovation activity, for example, niche products like construction and renovation loans might be exactly what homebuyers are looking for — and what real estate agents need to close the deal. In fact, home remodeling hit an all-time high in the first quarter of 2017, according to Metrostudy’s national Activity Index report, increasing 4.5 percent over the previous year’s numbers.

In a press release about the report, Mark Boud, chief economist at Metrostudy, said that “With housing affordability an issue in many markets across the country, millennials will be more inclined to purchase older, more affordable existing homes that will necessitate renovations.” In today’s competitive real estate environment, renovation loans can be a particularly effective and popular niche solution — a true win-win-win for real estate agents, buyers and the mortgage originators who have access to these products.

Every real estate agent has a story about losing a deal that could have been saved with a little ingenuity and access to alternative lending. 

With renovation loans, buyers can turn properties that are imperfect or in need of repairs into the exact homes they want — and roll all renovation costs into a single mortgage loan. This eliminates the need for borrowers to tap into personal savings and gives buyers the ability to build equity before moving in.

With access to renovation loans, real estate agents can capitalize on expanded professional opportunities while simultaneously doing their part to help revitalize the communities they serve. An originator with access to renovation loans can help the Realtors they work with appeal to more homebuyers and cut down on their time spent showing houses. Ultimately, by closing on properties that may have previously seemed unsellable, agents give their clients more options and opportunities and increase their own profitability in the process.

That value proposition is a strong one. It gives mortgage originators an opportunity to garner the attention of more real estate agents, solidify relationships with existing Realtors and strengthen their reputation in the community, all in one decisive move.

Realtor partner

Realtors are identified as the primary source of financing information by 45 percent of homebuyers, according to a recent MortgageSAT survey by the Stratmor Group, proving that agents are still a primary conduit to potential borrowers. Building a relationship with a real estate agent as a referral source begins with establishing trust and adding value to their business.

Originators can do this by offering different types of loan products that meet the needs of the agent’s clients, but it goes beyond that. Originators must help real estate professionals understand how they can use various types of niche lending products to their competitive advantage, and show Realtors how these loans can ultimately help them list and sell more homes.

Nothing is worse than making promises and then failing to deliver because of insufficient experience or knowledge.

At a time when the number of active homebuyers in the marketplace exceeds the supply of move-in quality properties for sale, helping agents better understand renovation lending, for example, and how they can use it is especially important. Work with the agent to help them educate their buyers on how the pool of potential homes expands significantly when there are mortgage products available that allow them to acquire the property and improve it to meet their needs.

It’s also worth pointing out to both Realtor partners and borrowers that the value of properties purchased with a renovation loan tends to increase more than it does with homes purchased with conventional products. As the old real estate saying goes, “You don’t make your money when you sell the home, you make it when you buy the home.”

Relationship process

Renovation lending is just one example of how originators can use niche-lending products to expand their referral business from real estate agents. Here are some thoughts on how to begin putting this information into practice with any niche product you can offer:

  1. Listen. Make suggestions based on the scenario at hand. Niche loans aren’t one-size-fits-all products, so don’t treat them that way.
  2. Be a resource. Reach out to Realtors in a productive and informative fashion. It could be as simple as scheduling a lunch-and-learn event at a broker or real estate office, or offering continuing- education courses. Position yourself as the go-to source for mortgage information.
  3. Think outside the box. Consider a range of niche-referral sources. Real estate agents are not the only audience that can bring you new business. Contractors, certified public accountants and attorneys all can be sources of referrals, depending on the type of loan product. 
  4. Be speedy, efficient and consistent. Realtors value speed and efficiency. Clear and consistent communication also is part of that value proposition. Keep agents advised on the status of loans, and maintain a consistent focus on the promised closing date. The ability to deliver by the scheduled date is a big deal. If something goes awry during the process, inform everyone quickly so the issue can be resolved.
  5. Don’t dabble. If you are going to offer niche-lending options as a way to get things done, make sure you and your company have a working knowledge and relevant experience in that specialized area, and that you know the products and processes inside and out. Nothing is worse than making promises and then failing to deliver because of insufficient experience or knowledge.
  6. Be prepared. Understand that even though you may have recommended a particular financing solution, it’s possible a transaction may take a different turn. Whatever loan comes in, you and your team must be prepared to handle it. Personal knowledge is critical, and sufficient processing and underwriting preparation helps you stay informed and ready.

•  •  •

Ultimately, everyone wants to put borrowers into financing options that are best for them. Knowledgeable access to niche products can increase access to referral sources such as Realtors and help them serve their clients. This allows you to expose potential borrowers and referral sources to your company and your portfolio of products as you emphasize your ability to serve as a trusted and reliable partner who can meet the needs of any client.


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