One of my favorite agents that I work with is Harry. Harry is a 20 year real estate veteran.
Now I don't think Harry has ever done a lot of volume but you can tell he is a guy who is very serious about his business.
You know a Harry. Harry knows every line in every disclosure and contract. Harry stays up on all of the legislation. Harry wears his name tag all day, every day. Harry is in a lot of groups and associations. Harry can tell you details from every transaction he has ever done. Real estate is not just a job for Harry.
What makes Harry so great, aside from the fact that he is one of the best agents I have ever worked with, is how brutally honest he can be.
When I first met Harry, about four years ago, he was the listing agent on a transaction where I was the buyer's lender. As I have always done, I emailed the listing agent all of my contact information and then I followed that up with a phone call to introduce myself.
"Harry, I am Aaron Gordon, the lender for Mr. and Mrs. Martin, on their transaction. I just wanted to call and introduce myself and make sure you got my email. By the way, I hope I can earn your referral business as well," I said.
They call that "referral language." If you have ever paid one dollar for professional coaching, that's their top tip. "Ask for referrals every chance you get," they tell you.
What they don't tell you is that when you run into a vet with a lifetime of experience like Harry he can make you feel like the world's biggest schmuck for saying those words at the wrong time.
"You haven't even closed one transaction and you are already asking for MY business?" he scolded. "Close this one first before you ask that question!!" Then he hung up.
Needless to say, I ran into the office of the processor who was on my team at the time and said, "If you ever close one loan on time in your life, make it this one!" She came through. I didn't call Harry.
About a year later, we were on opposite sides of a transaction again. When I saw his name on the contract as the listing agent, I wanted to crawl under my desk. About three days later I built up the nerve to send the email again. It took about four more days to work up the courage to make that follow-up call.
He and I had a very nice conversation. We talked about the market, we talked about Hawaii, which he loves. and we talked about investing in small apartment buildings, which I was looking to do with a group of friends at the time.
I learned a lot from Harry in that short conversation, not only about hot spots on all the islands, but also about real estate investing. NOW, I was in referral language position.
"Harry, so who is your preferred lender?" I asked.
"What kind of lender are you? Broker or banker?" he asked me.
"I am a direct lender. A mortgage banker."
"Are you correspondent or retail?" he asked. "Correspondent," I said.
"I use three lenders. I am looking for a new correspondent though," he said. So we set up a meeting.
In this meeting, I was all geared up to crush those other two lenders. I was prepared to tell Harry why now that he had me, he didn't need those other guys. But once again, Harry taught me something valuable. And, today, more than ever, I think this is valuable information for us all.
He told me he has always had three lenders in his referral chain. One retail lender. One correspondant lender. And one broker.
Three years ago I thought that was silly. Most of us offered the same products, and I was even more bummed when he told me that although I would be the new correspondant on his team, I would be in second position. His initial recommendation was, and is today, the lender at the big, brand-name bank. He trusted them most. His clients knew the company. I understood that.
In today's stricter lending climate, I believe its more important than ever that your buyers have lending options. Your commission depends on it.
Therefore its important that you understand that there are three primary types of lenders out there today. The three that make up Harry's team so that you can understand the difference.
THE MORTGAGE BROKER
They broker loans as a middleman between you and the bank. They have the ability to shop your loan to a multitude of wholesale banks like Countrywide, Wells Fargo, WAMU, Citibank, Chase, etc. However, they cannot approve you loan in-house. After they process it. they have to send it to an underwriter at the bank that they want to approve and fund your loan. The advantage is that the harder your loan to place, the more options they may have, but the disadvantage is they have the least control over your loans closing of the three. Once they send the file to the bank, its out of their hands.
THE CORRESPONDENT LENDER, MORTGAGE BANKER OR DIRECT LENDER
They have relationships with different divisions of the wholesale banks. Banks like Countrywide, Wells, WAMU, Citi, etc. They have what's called a correspondent relationship with them. They process, underwrite and fund their own loans. Then they have a contract that allows them to sell these loans, after funding, to the bigger banks. I have spent most of my career in this area. The advantage is that you get the most of the options of the broker, but you also get the control of the decision maker being in-house. The disadvantage today is that this is the chain hit hardest by the recent credit crunch. Many of these have gone out of business or have limited the loans they will allow to be funded in-house.
THE RETAIL DIRECT MORTGAGE BANKER
This is Countrywide, WAMU, Wells Fargo, Bank of America. Consumer-direct. They process, underwrite and fund in-house and offer the most control. Plus, you get the security of the brand name. The disadvantage is you may not get the same selection of more challenging loan products at the retail level. However, in recent months there is nowhere near the difference there was even six months ago.
It used to be that a Bank of America product was the same no matter which channel you got it through; broker, correspondent or retail direct.
And that's why I didn't agree with Harry's three-man team at the time. We could all sell the same products so, to me, who you chose came down to experience and confidence in getting the deal done. You could get away with one or two referral partners.
Today, thats not always the case. The banks have reduced the guidelines in many cases to encourage you to go direct. Some senior executives at these banks believe that a lot of today's challenges were created by the loss of control in the loan process. As a result there may be different and stricter guidelines and loans at the different channels.
I have recently changed affiliations and am now at a retail bank. I made this change because of the recent constriction of loan products. In my opinion, based on my client base, I felt it was important to be at a big, name-brand, retail bank.
However, that was a personal decision for me, not a statement on the industry. By the way, as a result of my decision, I have lost Harry, as a client, for now. Although he praised my decision and thinks it was the right move for me, he already has his guy at the bank where I moved and they have been together for more than 10 years.
But that's the point. And the one Harry made years before its time. In today's market, you cannot afford to lose a single prospect that could have qualified for a loan if you had the right referral team.
So today, I believe its important you do what Harry does and seek out three lenders across these lending channels for your team of lending advisors.
You want the experienced retail guy at the big, brand name because I believe that's important for buyer confidence, product variety, quick turnaround times and the best of loan control.
You want the experienced correspondent who you can call on if the retail guy waffles on his ability to close this loan or the buyer seems too challenged. The correspondent may have a few more options and similar control.
You want the experienced broker when you know you face a major challenge, you need as many options as possible, and are willing to give up some loan control in order to make sure the deal gets in front of as many banks as possible.
In fact, I don't think it hurts to show the loan to all three to see what they all say.
If none of those guys can come through, at least you know, you did everything possible to save the transaction and your commission and, in today's market, I can think of nothing more important.
Comments(16)