“Successful mortgage originators learned early on that service is the key to capturing and controlling a Realtor’s referral business.”
Mortgage loan originators have been working with Realtors for decades. Yet only a fortunate few have figured out how to do it the right way. Most originators try to meet as many Realtors as they possibly can, knowing that in sheer numbers one or two may take a liking to them. From this strategy relationships are born. But these so-called “relationships” are built on a weak foundation-the luck of a personality match or chance timing. That’s why so many loan officer/Realtor relationships come and go so quickly, or never really get started in the first place.
Successful mortgage originators, who have built and sustained lasting bonds with real estate professionals, have done so because they view the idea of a relationship differently. They see working with real estate agents as a partnership, where each party supports and benefits the other. It is this attitude and approach that will work equally well for you.
The Realtor’s Influence
How much Realtor referral business is actually out there? A national mortgage company conducted a comprehensive study that revealed nearly 60 percent of all homebuyers select their mortgage lender based on the referral or recommendation of a real estate professional. Three years later, a similar follow-up study showed that figure had shrunk to just above 40 percent. The same type of research reported that the Realtor community now controls only 35 percent of all homebuyer decisions. Driving this decline is the growth of the Internet, a more mortgage-savvy consumer, lender pre-approvals, aggressive mortgage-portfolio campaigns to retain existing customers, and a number of other factors.
While today only 35 out of every 100 homebuyers choose their lender from a Realtor referral, it is still the largest piece of the pie that influences the lender decision and a market worth your consideration. Remember that working with Realtors is not mandatory, it is a choice. If, however, you choose to rely on Realtors as a source of referral business, you need to know what you are getting into.
Working the Numbers
How many Realtor relationships do you need? Should your client base include five Realtors, 10, or 30? Here is a simple formula for determining how many Realtors you need:
First, write down your annual production goal and divide by your average loan amount to determine the number of units you will produce (For example: $10,000,000 production goal divided by $100,000 average loan = 100 units). Next, divide by 12 months (Example: 100 divided by 12 = 8 to 9 loans a month). Now, determine how much you plan to rely on Realtor relationships and their referrals for your business. Do you want 20 percent of your business to come from Realtors, 40 percent, or 100 percent? You should know starting out. Apply this figure now to your equation (Example: 8 to 9 loans a month multiplied by 40 percent Realtor business = 3 to 4 Realtor referrals and loans each month).
There’s no steadfast rule as to how many “deals” a given Realtor will send you each month. Much depends on the quality of the Realtors you work with. Top-performing Realtors may be involved in five transactions every month, average producers have about one to three transactions, and lower performers may have an opportunity for you only every once in a while. A good benchmark to use, when judging the number of referrals you will generate from each successful Realtor contact, is one-half to one referral per Realtor relationship per month. To determine how many Realtors to have in your client base, figure one to two for every loan you want to receive.
Understanding What Realtors Want
To understand working with Realtors, you must understand what they want (and don’t want) in a mortgage loan officer relationship. A recent Realtor focus study report indicated that the top five things that drive Realtors crazy about most mortgage loan officers are:
Sadly, many originators are guilty of these offenses. Realtors have been burned many times before with broken promises of service. For a Realtor to like you and use you, you must do the opposite:
Start with these five “golden rules” as your hallmark for Realtor relationship business and you’ll go far.
Planning Your Approach
Your objective is to create a partnership with your Realtor clients, a mutually-beneficial relationship, where you both respect each other and work together for profit and enjoyment. Anything less is self-destructive. In preparing to meet with your Realtor prospects, take time to plan your approach. Ask yourself:
It is a good idea to construct a brief “power statement” of introduction. A power statement contains interesting, compelling, and unique information about your company, your products, your pricing, your services, and yourself. It allows the Realtor to get to know you. Knowledge and information build trust, and trust is an essential part of the Realtor’s decision process. Here is an example:
Let me take just a moment to introduce my company and myself. City Town Mortgage is one of the largest and most respected lenders in the area. We’ve been an active player here in Springfield for over 10 years. In addition to a wide product menu of 50 loan programs, we can do some things other lenders can’t, giving you competitive advantages for working with us. Our pricing and costs are in line with most other mortgage companies and in many cases better. I’ve been with City Town for two years now with a background in financial accounting and I’ve learned how to make tough deals work. Today, I’d like to find out how I may be able to help you maintain and grow your business.
Here are some ideas on great first impressions and initial sales visits with real estate agents:
Do your homework. Find out something about your prospect in advance. What market does he/she specialize in? How long has he/she been in business? You can discover this information in home magazine ads and on Internet websites.
Create a portfolio kit. Using a simple two-pocket folder, build a brief three to five-page introduction of your capabilities and have it neatly showcased and ready to present.
Make a list of great questions. Rather than “selling” the Realtor on your visit, use the time to learn about his or her business and specific needs. Open-ended questions can gather a lot of facts and concerns.
Make an impact. For example, fill your company logo coffee cup with 35 business cards. Present the cup as a gift to your prospect and say: “There are 35 cards in that cup, one for every FHA loan I financed last year. I know you work with a lot of first-time buyers. I’ve got the experience and I’m here to make it easy for you. Who knows, maybe we’ll do 35 transactions this year together!”
Get quality time. Expecting to conduct a meaningful discussion dropping by a busy real estate office without an appointment is a formula for disaster. Agree on a specific time and day, and if possible, ask to meet in the office conference room or a private office.
Creating a “Contract of Service”
Successful mortgage originators learned early on that service is the key to capturing and controlling a Realtor’s referral business. You must be able to communicate your service capabilities to your prospects and they must hear and understand what you are saying. So many less-than-successful loan officers tell Realtors: “I’ll give you great service!” But what does that mean? Frankly, to most Realtors it doesn’t mean a thing, just an empty promise with nothing concrete to back it up. So what will make you stand apart from the crowd, when trying to establish a Realtor’s business? One effective technique is called a “Contract of Service.” A contract of service is a written commitment of select service points you will deliver the Realtor and his or her clients on every transaction. Presented on a clean sheet of paper, a contract of service is a collection of six to 10 service points that make your customer experience unique and better than the competition. Examples of service points include:
The best way to build a contract of service is to start with a blank piece of paper and brainstorm all the service points you are willing to offer. Then, narrow the list to six to 10 of the best points from a Realtor’s point of view. Your finished document displays your “promise of partnership” to the Realtor. It is also a great tool for presenting to the Realtor what you will do in return for his or her ongoing referrals. The presentation of your contract of service should be a powerful one. The contract needs to be delivered with the sincerity and emphasis it deserves. During your first or second meeting with the Realtor prospect, say to him or her: “While many loan officers talk about service, I treat service as a contract between my clients and myself. When we work together in a referral relationship, these are some of the benefits you will experience.” Slowly walk the Realtor through your contract, presenting each key point. When you reach the bottom, say: “This is how I do business with my preferred Realtor clients. And as I expect referrals from you, it is what you can expect from me in return. What do you think?” You will be amazed at the positive reaction.
Once established, a Realtor relationship must be actively maintained. Remember that you are business partners. Some ideas include:
Ongoing contact and variety is the key to sustaining a lasting and enjoyable relationship that will weather a competitive invasion from a rival loan officer, who will surely target your partner with promises of his own. Keep the relationship alive by keeping it strong.
Do’s and Don’ts
Here are 10 do’s and don’ts for productive relationships with real estate agents:
Like anything — if it’s worth doing, it is worth doing right. Selling to Realtors successfully takes work, time, effort, and focus. But if you do it right the rewards are endless.
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