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Before They Get It, Make Sure They Get It.

For many buyers’ agents, there are two distinct stages in a real estate transaction.  I know, it may seem like there are many, but in the broadest sense there are only two.  You might call them the Age of Enlightenment and the Dark Ages.

The first stage is when you do most of the work with your client.  From the marketing that first attracts them to the countless showings and all the way to writing an offer and negotiating that last counter before acceptance.  This can be called the Age of Enlightenment.

The second stage, the Dark Ages, often begins just about the time you recommend a lender or two and begin the loan process.  I have heard agents describe this as akin to pushing the contract, the client, the paperwork AND their commission check into a gaping black hole… of silence… then waiting, hoping and praying a deal will come out the other end.

There are a number of reasons for this, most of them beyond the lender’s control, same as yours.  Underwriting guidelines are changing on an almost daily basis.  The actual loan options have decreased just a tad.  Sort of like Basking Robbins 31 Flavors suddenly going down to two flavors… and raising the price while they were at it.  But there is one aspect you have a lot of control over when recommending a lender: the lender themselves.

When it comes to choosing which lenders to keep on your short list, referrals are certainly important and past performance is great, but I also highly recommend you ask a single, all-important question.  Whether interviewing a lender for the first time or seeing your regular lender, stand straight and tall, look them in the eyes and ask this question:  “Mr/Ms Lender, by recommending you to my client I am also commending my commission to you.  In other words, I am handing you $5000, $10,000, $20,000 of my money in hopes of getting it back in a couple of weeks.  Why should I do that?”

If they cannot convey to you that they get it… if they cannot immediately give you a valid, even outstanding answer as to why you should trust them with your money… walk away and find someone that can.  Enjoy the Age of Enlightenment.

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  • 26 comments

    26 Comments so far

    1. Tom Vanderwell July 30th, 2008 2:08 pm

      Sean,

      That’s excellent! As a lender who used to be a Realtor, I could never understand how many people in the lending side of things don’t get the Realtor’s viewpoint on things. You’ve summed it up very well and given me a topic for a post on my own site as wel.

      I’ve told many people on the lending side that they need to realize that Realtors are essentially walking around with a gun to their head every day. It might be their spouse saying, “When is that deal going to close, I need to buy groceries” Or a seller saying, “If that deal doesn’t close by next week, I’m going to ahve to make another payment!” Or the buyer saying, “If we can’t close by Friday, I’m going to have to come back from my honeymoon and live with my folks for 2 weeks!” (Real story – I’ll tell you about that one some time). There are a lot of financial and emotional pressures that you guys work under and having a lender who understands that and works to alleviate that makes a big difference, especially when you combine that with the honesty, integrity and sense of fair play that we all strive for.

      Well said.

      Tom

    2. James Boyer July 30th, 2008 2:13 pm

      I totally agree with you. I have had great mortgage people, average ones, and really bad ones, and even the average ones make you appreciate the good ones so much more. I have my short list of 2 that I prefer to use, but these days it seems that 75% of my buyers are coming to me pre-approved and they seem to be committed to their mortgage person, so I have to live with what I get.

      nice blog post though.

    3. Sean Purcell July 30th, 2008 3:04 pm

      Tom,

      Thanks. Knowing your work and your writing that is high praise indeed.

      As a lender who used to be a Realtor…

      Maybe that’s the key… all potential originators have to intern for a quarter with an agent just to see what they have to go through. You should work that up into a post!

    4. Sean Purcell July 30th, 2008 3:10 pm

      James,

      even the average ones make you appreciate the good ones so much more

      Amazing, huh? I used to tell my trainees that if “they would simply strive for mediocrity, they will be among the top 5%”. I stopped because I realized truth, in this case, was no defense. Strive to be the best.

      seems that 75% of my buyers are coming to me pre-approved and they seem to be committed to their mortgage person, so I have to live with what I get.

      True, but it pays to know what you are dealing with up front. That way you know whether or not to have one of your “closers” warming up in the bull pen. :)

    5. Tom Vanderwell July 30th, 2008 3:17 pm

      all potential originators have to intern for a quarter with an agent just to see what they have to go through. You should work that up into a post!

      Wheels are already turning on that idea…..

      I like it Sean!

      Tom

    6. Dan July 30th, 2008 4:39 pm

      I had a lender call me today and wanted to take me to lunch and discuss the possibility of new business. He said he could tell from my website that I dealt with some high end properties. I told him I am happy with my established relationships and would not likely risk a valuable closing with a untried source. Then I went on to say that my regular FHA source had retired and if he had FHA products or rehab loans for the investors buying and flipping, we might be able to start there and depending on how that went we may go further. He said he would email me his contact info and some guidelines for the rehab products.

      8 hours later, no email. Things that make you go WTF’n hmmmmm

    7. Sean Purcell July 30th, 2008 6:37 pm

      Dan,

      WTF’n hmmmmm

      I’m guessing real estate agents around the country read that comment, mouthed the phrase as a chorus and nodded in unison. All together now: 2nd verse, same as the first…

    8. Your right! I try to get all my clients pre-approved first. It is only smart for the client to know what he/she can afford.

    9. Sean Purcell July 30th, 2008 7:13 pm

      Gabriel,

      I couldn’t agree more. Just make sure the person doing the pre-approval gets it.

    10. Tom Vanderwell July 30th, 2008 7:19 pm

      You know, while part of me cringes to hear stories of lenders who do those type of things, another part of me says, “Wow, those type of guys are easy competition!”

    11. Tom Vanderwell July 30th, 2008 7:34 pm

      Sean,

      A topic for another good post. “How to tell when your client has a solid preapproval vs. a “I think so” prequalification.”

      Good stuff!

      Tom

    12. Jonathan Blackwell July 30th, 2008 7:45 pm

      Lenders and Realtors are a team whether or not they started that way or not. As lenders we should make sure we update regularly, INCLUDING the listing agent who most lenders neglect, and set the proper expectations from the get-go. If you need two or three weeks to update credit card balances on the Tri-Merge so the DTI fits let the Realtor know you need 45 days on the contract. Again setting expectations is key.

      So lenders, set up automated emails through Encompass or whatever LOS you use and keep the Realtors informed when the loan hits certain milestones. Set aside 2 hours on EVERY Friday to update ALL the Realtors on ALL the transactions you have in process. I know that our business is tough right now, you are going to have to make a few of those calls with bad news. Pay that no mind, do it anyway

      Realtors, before you submit the offer CALL THE LENDER for Pete’s sake and get the scoop. Learn how to submit an FHA deal with the proper docs as well. Learn that we can’t close a FHA 203K loan with Architectural drawings, contractor bids and an after repair value appraisal in 30 days!

      Teamwork folks, teamwork.

    13. John Sabia July 31st, 2008 6:44 am

      Excellent points here. It is a team effort and when everyone trust the other to do their job, the wheel turns forward.

    14. [...] commend commissions into our hands all the time.  And they are implicitly responsible for all that we do as lenders.  It [...]

    15. Dan Melson August 3rd, 2008 10:34 am

      Sean,

      I completely understand where you are coming from. It’s frustrating as hell, and one of the reasons I try very hard to get my buyer clients to at least put in a loan app with me so I can be working on it on my own – thereby guaranteeing there will be a loan ready to go when needed.

      On the other hand, take a slightly different look at what you’re saying. Suppose the loan officer takes a look at the transaction and honestly concludes that the borrower/buyer cannot afford this property? Not that they can’t get a loan done – but that the buyer cannot afford it, and according to standard criteria, it’s a good bet there’s going to be a foreclosure down the line?

      What’s your take then?

      It was precisely the sort of thinking that went, “Get this deal DONE at all costs” that put us and the country as an aggregate into this mess.

      Suppose the loan officer comes to tell you right off, shows you the numbers, and you say, “If you won’t get it done, I’ll go to someone who will, and you’ll never get any more business from me!”

      Here the guy is trying to save you and your client from a bad situation, and you’re telling him point blank that all you care about is the commission check.

      This was a situation that good loan officers faced repeatedly during the last ten years. I’m not saying you did it, only that the attitude evidenced here is part of the problem.

      And your average agent is wondering why the average loan officer is an unethical, incompetent clown, now that loans take planning, and foresight, and the ability to anticipate underwriter objections?

      This is called digging your own professional grave.

      Once again, I quite understand that you want to get paid. But having seen the results of way too many transactions that should never have flown in the first place, seeded by precisely this attitude, you need to ALSO make it clear that you will accept, “Here’s why this transaction is not a good idea” if it comes accompanied by numerical proof.

      You’ll end up with better loan officers.

    16. Sean Purcell August 3rd, 2008 10:56 am

      Dan,

      I agree with you completely… although I am not completely sure of the relevance.

      I am trying to impress upon agents how important it is to their own sanity to make sure the loan originators they work with understand the responsibility that is being placed on them.

      As an agent I would never go forward if an originator told me the buyer could not afford the home and as an originator I would never knowingly work with an agent that held their commissions above the client’s interests (an obvious abuse of the fiduciary obligation).

      you need to ALSO make it clear that you will accept, “Here’s why this transaction is not a good idea” if it comes accompanied by numerical proof. You’ll end up with better loan officers.

      Dead on!

    17. Sean Purcell August 3rd, 2008 10:57 am

      PS

      Speaking of “dead”… I am off to the Padres game! :)

    18. Dan Melson August 3rd, 2008 11:19 am

      >although I am not completely sure of the relevance.

      Here’s the relevance:

      >When it comes to choosing which lenders to keep on >your short list, referrals are certainly important and >past performance is great, but I also highly recommend >you ask a single, all-important question. Whether >interviewing a lender for the first time or seeing >your regular lender, stand straight and tall, look >them in the eyes and ask this question: “Mr/Ms >Lender, by recommending you to my client I am also >commending my commission to you. In other words, I am >handing you $5000, $10,000, $20,000 of my money in >hopes of getting it back in a couple of weeks. Why >should I do that?”

      I faced that question dozens of times. I answered it well enough to get the business quite a few – until it came down to the fact that this agent had sold this client a property that they could not, in fact, afford – but the agents weren’t going to back off the transaction over such a trivial matter as a foreclosure that was certain as gravity.

      That’s why I stopped prospecting agents, and learned the rest of what I needed to know to represent buyers and sellers. I may not do as much business as I used to, but to date I’ve had ZERO clients hit with NOD.

      That’s also why we’ve had the crash San Diego’s pretty much worked it’s way through now, and the rest of the country is in various stages behind us. We’re supposed to care about the client interest first, but when the rubber hits the road, comparatively few do.

    19. Sean Purcell August 3rd, 2008 8:04 pm

      Well said Dan.

    20. Jonathan Blackwell August 3rd, 2008 8:36 pm

      Good points Dan.

      Also finding the house BEFORE talking to an LO is a bastardization of the process. Good agents usually know better. If you talk to the lender first and THEN go find a property the buyer can afford you will close that deal.

    21. Sue August 8th, 2008 3:21 pm

      I’m in agreement that its key for buyers to be pre-approved before looking at homes. They do resist for some reason, but I find that once they get talking and have some numbers to work with, they are much more comfortable and so am I! The lender is so important, I have had a few deals fall apart due to a poor lender. I have also had situations where I found out a couple years later some of the areas where the lender didn’t follow up, etc…from my clients who, thank goodness called me again anyway. I knock myself out for my clients and need to know that a lender will be doing the same.

      “8 hours later, no email. Things that make you go WTF’n hmmmmm”

      That says alot. Following up in a timely manner is pretty basic.

    22. Sean Purcell August 8th, 2008 7:35 pm

      Sue,

      I knock myself out for my clients and need to know that a lender will be doing the same

      You just nailed it.

    23. [...] Or, as Sean said, “Before They Get It, Make Sure They Get IT.” [...]

    24. [...] Or, as Sean said, “Before They Get It, Make Sure They Get IT.” [...]

    25. [...] Or, as Sean said, “Before They Get It, Make Sure They Get IT.” [...]

    26. [...] Make Like Charlemagne… Lead Realtors Out of the Dark Ages! Posted on August 20, 2008 by ksandridge When is the last time you, as a loan originator, stopped to realize how much trust a Realtor who refers their trusting client to you is placing in you? First, they’re in a precarious position. In many cases – their client has yet to gain pre-approval for a loan, so there’s the “Are they going to qualify?” question in play. Second, they are, in many cases, giving a good bit of control over to you as they wait for the loan to make it through to closing. I got to thinking about this after reading a blog post by Sean Purcell on the Bloodhoundblog entitled Before They Get It, Make Sure They Get It. [...]