In May and June, fixed mortgage interest rates rose by over 100 basis points and refinance loan application volume dropped by as much as 70%. As we come to the beginning of the end of another refi boom, loan originators are once again gravitating back to purchase loan business and to the primary source of that business: real estate agents.
To work effectively with real estate agents as referral partners—whether you are new to this business or a seasoned veteran—it’s important to understand where the real opportunities exist and how to pursue them. It’s said that perception is reality, but not in this case. Some loan originator’s perception of real estate agents differs vastly from today’s reality. It’s time to dispel some of the myths many loan originators have about approaching and working with Realtors.
The perception: After the housing bubble burst, most agents retired or left the business. There are not a lot of agents out there anymore. Besides, I know most of them in my market already.
The reality: Membership in the National Association of Realtors just returned to over one million for the first time in five years, up 40,000 members from 2012. Around 3,000 to 5,000 new agents get their licenses and enter the industry each month. Your market contains dozens, hundreds, perhaps thousands of agents, most of whom you have never met.
The perception: Every real estate company today has its own in-house lender that they refer.
The reality: According to a 2012 nationwide survey, only one in three real estate offices retain a lender on-site. Two out of three do not. Originators who work in these “controlled business arrangements” admit they are lucky to capture only 20% to 25% of the loans. Outside lender referrals are still being made by agents every day. Many top producing loan originators receive a steady stream of referrals from real estate agents who work in an office with their own lender.
The perception: Most quality agents already have a loan officer they like and refer. They don’t want to meet another lender.
The reality: Some agents do have a favorite lender, some do not. Scores of real estate agents have been “abandoned” during the past two years of heavy refinance activity, as many loan originators have not been out to see their agents in a very long time. Mortgage loan originators who actively pursue agents are landing appointments and starting new relationships. (Case in point: One sales training program I deliver for lenders called “The 90-Day Blitz” shows them how to contact, get appointments with and begin referral relationships with new real estate agents. The last group of 14 originators to participate in the program started 82 new agent relationships and registered 65 purchase loan applications from those agents…in just 90 days.)
The perception: Today’s homebuyer market is mostly cash and as a result, buyers working with an agent don’t need to talk to a lender.
The reality: Nationwide, 30% of all home sales are cash—in some markets more, in some markets less. Seven in 10 buyers still need financing. Based on an estimated 4.9 million home sales forecasted this year, 285,000 buyers close on a purchase-money mortgage every month.
The perception: For buyers that need a mortgage, by the time they get to a real estate agent they have already selected their lender and been pre-approved. Realtors can’t refer much anymore.
The reality: While pre-approvals are on the rise and definitely the right way to shop for a house, a recent study revealed that 34% of all home buyers eventually selected their mortgage lender based on the recommendation of their agent. Realtors continue to strongly influence their buyer’s selection of a lender.
The perception: Real estate agents are hard to find and reach; they are never in the office anymore.
The reality: With smart phones, Facebook, LinkedIn, instant messaging, websites and other contact tools and communications media, agents are easier to find and communicate with than ever before.
The perception: Real estate agents are demanding to work with.
The reality: I recently polled 10 successful real estate agents asking what they wanted in a lender relationship. Their top five answers were 1) To be kept informed during the process; 2) To be told the honest truth of a buyer’s chances up front; 3) To have their phone calls returned in a timely manner; 4) To work with a lender who treats their buyers with integrity and respect; and 5) To meet the contract closing date. (Can we really call that “demanding?”)
If now is the time for you to focus your attention on purchase loan business and grow your relationships with real estate agents, now is the time to get moving. The refinance boom is over and we are once again in a purchase loan market looking for buyers, and more than any other source, real estate agents know where they are.