What do you think do people look for in a mortgage lender? New brokers are usually not aware of the reasons people choose to approach a mortgage lender and I am sure the answer will surprise you, but before I tell you the answer ponder a while. Well, I posed the question to a few students in my class, the other day and here are the top three responses I got -
1. Lowest rate
2. Lowest fee
3. Referrals/Referred Advertising
What reasons would you rate as your top three?
In April 2003, The National Association of Realtors mailed out an eight-page questionnaire to 35,000 recent homebuyers. The survey produced 2,703 usable responses with an adjusted response rate of 7.7 percent. Customer names and addresses were obtained from Experian, a firm that maintains an extensive database of recent homebuyers based on county records. The survey revealed the following details about buyers and their buying decisions-
· 75% bought their house through realtors while 14% bought directly from a builder.
· 76% had approached only one agent to help them find a home - buyers are showing a lot of loyalty to agents.
· 69% received recommendations from their agent regarding mortgage lenders. The majority of first time buyers asked the agent for help in finding a lender.
· 36% cited their agent's recommendation as the most important reason to choose a lender. Bear in mind the fact that most realtors are not trained properly in referring lenders.
· 41% of buyers got their information about mortgage lenders from their agent.
· 14% of buyers chose the lender on price.
· 16% of buyers chose the lender on reputation.
· 14% of buyers chose to retain the lender that they had used before.
· 13% chose the lender they were recommended to by a friend or relative.
So we can see that 49% of buyers chose their mortgage lender on recommendations from agents, friends or family members. There, as you can see, lies a huge market waiting to be tapped. We can help you crack the referral market that offers the easiest and the most lucrative loans you can book. You can also see that only 14% of buyers choose to buy on price. Also you can be quite sure that the lenders that were referred did not offer the cheapest price.
One more stat you need to know is this- 48% of all homebuyers got a quote from only ONE Mortgage company when getting their loan. And 28% got quotes from two companies. Since 49% of buyers were referrals and 48% didn't shop the loan at all, it is not an unreasonable to expect that people who are referred probably do not even bother to shop the rate they are quoted. They have such confidence in the lender, because someone (a third party) told them that the lender was good. Based on that information alone they put total faith in the lender.
Would you not like to be in a situation, where people are just sent to you by others? And you can then charge them whatever you feel like charging (as long as it is competitive and reasonable? If yes, then you need to put this system into place right away.
If you are not getting referrals, then you do not even have a chance at getting a loan from almost half of all borrowers. On the other hand, if you do get referrals, you essentially have no competition whatsoever.
You should also think about getting some Realtors to be partners with you. By setting up business partnerships with realtors, by helping them grow and get more business, you will have the most important piece of the referral puzzle on your team. From the numbers it is quite evident that realtors control at least 36% of the people buying homes. If you are not working with realtors, a lot of homebuyers are probably going elsewhere, when they could be coming to you. So how do you get real estate agents and realtors on your side? I will tell you how in our future blogs. Believe me, it is easy and fun too!