This year has turned out to be a true bonanza for the majority of the mortgage industry — record volumes and higher earnings for originators than anyone could have anticipated during the first quarter. With interest rates declining to their lowest levels in the past couple of years, the industry has seen robust purchase and refinance activity.
With this environment comes a cautionary note — the lower the rates go, the more the borrower will shop for the best possible rates. Originators hear this question on a daily basis: “What is your rate and your costs?”
Primarily, the question comes from the borrower but, increasingly, the real estate agent may be asking it in an attempt to be an advocate for getting their client the “best deal.” For many borrowers, all lenders are the same.
The notion of offering value to offset price is far more critical when a lender has an advantage in service and technology. With these features being comparable between lenders nowadays, price matters. Let’s break down some ideas to meet this challenge that — candidly — won’t be going away in the near future with the Federal Reserve in a rate-cutting mood.
The first challenge may appear to be the easiest to overcome but at times has the biggest impact: the price-conscious Realtor. Often, originators take for granted the Realtor relationship is based on turn times and intangibles called service. Most real estate agents place high value on these qualities, but many agents, especially those who are millennials, view themselves as a price advocate for their buyer.
These agents are looking beyond turn time and service at a comprehensive experience in which they locate the best deal for their client in addition to representing them on the real estate transaction. To effectively handle this level of Realtor involvement, a quality originator must first understand the agent’s motivations. Is the agent truly shopping for their buyer or just offering suggestions?
Likely, this type of real estate agent still understands what separates a quality lender from an average one — lenders who can get the sale closed and deliver on time while giving the buyer a fair price for the quality of service. If you demonstrate these qualities, you can win over this nontraditional real estate agent.
If their clients walk away with a good experience obtaining a loan and buying a property, they’ll refer their friends, relatives and coworkers to you and the Realtor. If you lower your service and the borrower has a bad experience, they won’t. Never sacrifice your service intangibles for price or the long-term relationship with your Realtor partner will be in jeopardy.
Now to the true challenge, the borrower. This is a battle waged every day on nearly every interaction with a borrower in an improving interest rate market. How do you win when you do not offer the lowest rate the borrower is considering?
The first path to victory is to remember what you did the last time you were in this same situation — another lender had a better rate and yet you still got the loan. In sales, muscle memory is critical to your chance of success even in an entirely new scenario.
This is where having experience in these situations pays off handsomely as you are less likely to panic and try to appease the borrower by searching for a price-based solution. In sales, the game is always to win more than you lose. This means that you will lose some battles in this ongoing struggle with the borrower. That is OK. The only originator who has a shot at winning every battle is the one with the guaranteed lowest rate every day. That originator doesn’t exist.
Think about this analogy — when you go to a restaurant, you know price may be a factor. The intangibles are the ambience of the restaurant, the promptness of the service, the server’s attention to detail and professional manner and, most importantly, the food. Based on a great experience, you decide what to tip and, at that point, price becomes secondary.
How does this relate to our business? Start with the mortgage broker or loan officer who promptly interacts with the borrower from the outset, provides quality and consistent communication throughout the shopping process, and guides the buyer to the right loan. Once the loan process starts, you and your operations staff have to be attentive to every concern and coach the borrower through to the closing, so it is as seamless as possible. The intangibles matter and if you have successfully achieved this previously with a borrower, repeat the process until it doesn’t work anymore.
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Sales professionals tend to feel that they can’t compete if they do not have the best price. The answer is in the person you look at in the mirror every morning — trust yourself. There is no one lender who will always have the lowest price. And with our industry realizing an outstanding year, do not forget that borrowers will end up with the people they trust and who can deliver at a good price, not always the best price.
To sustain excellence in the lending world, originators must accept they will not always offer the lowest rate or price. These originators will fail their referral partners or their borrowers by sacrificing the intangibles that go into a great customer experience. Once you grasp that you will not win every battle but fight to win the majority of opportunities that are presented to you every day, then you can achieve the success needed to make a quality living for yourself, your family and your company. Selling is fun. Enjoy the competition.