While a record number of homeowners report their most recent home buying experience was excellent, their appetite for resources and guidance throughout the mortgage process is stronger than ever, according to recent research from TD Bank.

TD's Mortgage Service Index, a national survey of more than 1,800 consumers who purchased a home in the last 10 years, examines perceptions around the home buying and mortgage experience as well as the housing market.

Despite rate uncertainty and limited inventory, homebuyers are optimistic in the current environment. Of those surveyed, 83 percent said it's a good time to buy a home and 30 percent are very or extremely likely to buy a home in the next three years. This was particularly true for the New York City/Long Island market, where 48 percent said they are extremely likely to purchase a home in the next year or so.

Technology Enhances and Advances the Mortgage Process

The number of homeowners who applied for a mortgage online has increased from one in eight (13 percent) in 2014 to more than one in five (21 percent) this year, demonstrating a gradual shift to the online channel. What's more, 60 percent said the entire mortgage process lasted four weeks or less – an all-time high for the number of borrowers completing the process within the span of just a month.

"Digital platforms are speeding up mortgage processing on the front and back ends," said Rick Bechtel, Head of U.S. Residential Lending for TD Bank. "When borrowers leverage online platforms for providing documents and completing necessary forms, we have found it reduces information intake time by more than 60 percent on average."

The proportion of consumers who rated their home buying experience as excellent has doubled from 16 percent in 2014 to 32 percent this year. At the same time, 30 percent said the experience was very or extremely stressful, a figure which has remained stable since 2014.

Advice from Realtors, Bankers and Relatives Tops Buyers' Sources

Despite the proliferation of home buying resources online, fewer consumers today believe they have enough resources to educate themselves on the mortgage process than three years ago (82 percent in 2019 versus 90 percent in 2016). In fact, for the first time in six years, the top three sources of information used by homebuyers did not include online sources. This year's respondents instead turned to realtors (51 percent), in-person representatives at their local bank (42 percent) and family/friends (38 percent), signaling that prospective buyers are seeking personalized advice and guidance.

"Today, homebuyers can search online for the basics of the mortgage process, leading to remarkably more informed borrowers than we saw even a decade ago. But the reality is homebuying requires navigating financial options, legal obligations, local guidelines and complex processes that occur on tight timelines," said Bechtel. "It's up to mortgage bankers to provide borrowers with expert, personalized guidance to reduce stress and create clarity as they make one of the most significant financial decisions of their lives."

Aligned to TD's expectations, the survey uncovered substantial evidence that homebuyers need guidance on costs, loan options and affordability programs:

• Nearly a third (30 percent) of homeowners incurred $2,000 or more in unexpected charges during the home buying process.
• Nearly three quarters (74 percent) of homeowners took out a 30-year fixed rate or 15-year fixed rate mortgage, yet 52 percent plan to stay in their home for 10 years or less.
• Forty-two percent of homeowners are unaware of affordability programs, which is significant considering the increasing number of buyers contributing less than 20 percent to a down payment. In 2016, nearly half (48 percent) of homeowners said they put down 20 percent or more, as compared to just 36 percent in 2019.

 

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By Pat Sherlock, President of QRS Sales Solutions.

Last week at the NY Secondary Market conference, most of the sales executives I met with asked, "What is the most important issue going forward for the industry?" My response I think will be surprising to many. While improving the manufacturing part of the process is important and long overdue, I believe our real challenge is changing our selling approach on the origination side of the business.

As Laurie Goodman, Founder and Co-Director of the Housing Finance Policy Center, Urban Institute, discussed at the conference, lack of supply at the lower end of the market is only 24.5%, but rises to 44.8% at the high end. The supply issue is not going away and is compounded by homeowners now aging in place.

[caption id="attachment_9789" align="alignright" width="300"] Pat Sherlock[/caption]

What does this mean for lenders? The obvious answer is to reduce costs in a market that will continue to have profitability challenges since refinancing will not be available to bail lenders out, according to the MBA's Chief Economist Mike Fratantoni. For the industry, this means that lenders will be fighting over customers for the foreseeable future. Sales organizations will be tasked with revising reactive and transactional strategies to become proactive in creating loan demand and reaching out to prospects much earlier in the buying process.

Lenders and originators must put in the effort to be top of mind for prospects and referral sources. Sales organizations that fail to create brand awareness will be doomed to working deals that fall out from other lenders. This strategy is difficult to survive on because investors can change their buying guidelines on a dime. For originators, developing personal brand awareness pays off in terms of reaching consumers first. Industry research shows that nearly 70% of consumers complete their transaction with their initial lender/originator.

What I see in the field when conducting sales audits is that personal brand awareness is often a foreign concept for originators. While lenders believe that the originator must do whatever it takes to generate business, many originators think that their job is about getting exceptions to underwriting guidelines and not necessarily marketing to expand their sales funnel.

Traditional marketing and selling roles are collapsing in today's world of retail sales. While both have the goal of generating a sale, marketing has been defined as creating a favorable awareness for selling to take place. As one marketing executive said to me, "marketing is the turbo charger of what the originator is already doing." Marketing works best when the originator is performing prospecting activities. If originators aren't prospecting, no amount of marketing can save them.

To succeed in a more difficult financial landscape, originators must perform the roles of marketer and sales professional to effectively target prospects. To accomplish this, originators must build awareness of their services with consistent prospecting efforts that not only reach more consumers than before but with a greater frequency to capture people's attention. The silver lining here is that an individual salesperson has a better chance of making a positive impression than a company due to consumer's perceptions that companies do not have their best interests at heart.

While consumers seem to have little faith in corporations, they still believe in other people. Whether it is peer ratings or Facebook groups, individuals are interested in what other people have to say and recommend. People still love sharing their life, information and experiences with other people. All of this means that originators must market themselves and scale their personal brand using communication tools.

While many lenders are going down the path of reducing credit standards, hoping that will solve the production issue, forward-thinking sales executives must re-think what responsibilities should be performed by the sales force and make adjustments accordingly.

Management teams should ask themselves whether an originator who doesn't market themselves and their personal value proposition keep their position? When interviewing originators, hiring managers should look for sales candidates who not only possess sales talent but are actively marketing on Facebook, LinkedIn or YouTube. They need to demonstrate that they are adept at using today's communication tools to create personal brand awareness. If not, they don't match what you need in the selling position.

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Dear Brian,
I am having challenges getting buyers who I am pre qualifying to share accurate information with me. Any suggestions?

Tammy P
Detroit Michigan

[caption id="attachment_11630" align="alignright" width="185"] Brian Sacks[/caption]

Dear Tammy,
Thanks so much for writing in and asking your question. Of course, every originator including me have struggled with this question. I mean take a minute and think about our job when we are first meeting or speaking with client.

“ Hi How are you ? How’s your credit? How much do you make? How much money do you have in the bank?”

It’s awkward at best and very scary for most buyers. So let me share some ideas and suggestions with you. There are a number of areas to focus on.

HOW ARE THEY FINDING YOU?
When clients are referred to you from a professional they trust like an agent, attorney, financial planner or accountant they are often more likely to already have a degree of comfort with you.
This is the same with clients referred by their friends or family. But there is also another way to establish trust and creditability and that is by using the media.
Many of my clients find me from articles I have written or tv and radio appearances.

DO THEY UNDERSTAND YOUR ROLE AND WHY IT’S IMPORTANT TO GET PRE-APPROVED?

It’s important that the client understands that they are going thru this process so they know what programs are best for them and what their options are.  They will also need to know what their own comfort levels are for out of pocket cash and monthly payments and that all starts with your conversation getting pre-approved.

IS IT BY PHONE OR IN PERSON or VIDEO CALL?
I may be old school but I always prefer to meet with my clients in person. If they are out of state, or not able to come in, I like to arrange a skype or join.me call so we can actually see each other.
Talking to a faceless person on the phone is scary since they can not see your expressions or exactly what you are intending to get across. The benefit of in person meetings is often your ability to have them get to know you and this leads to referrals!

WOULD YOU GIVE ME A 1000 QUESTION ?
When all else fails I will ask them the 1000 dollar question. I ask them if they would give me 1000 dollars if I promised to never give it back. There is usually a pause on their part as they try to process this question.

I then go on to explain that if they go out and don’t get pre- approved they risk losing 1000 dollars. If they go to contract and their mortgage is not approved they will have spent 500 for an appraisal and another 500 on other inspections. This money will not be refunded since services were performed.

Aside from the fact that getting pre-approved allows the seller to know that they are able to move forward and will likely help them get their offer accepted. This is also important to explain to your prospects.

This usually breaks the ice and allows them to understand that this is an important starting point for purchasing a new home.

Tammy, I hope this helps and gives you some ideas you can implement right away.

If you have a question in an upcoming Dear Brian column please send them to me at  This email address is being protected from spambots. You need JavaScript enabled to view it.with the Subject line DEAR BRIAN ARTICLE

Brian Sacks is a branch manger and originator with HomeBridge Financial in Owings Mills Maryland. He is also the author of 48 Proven Ways To Immediately Close More Loans  and the founder of http://toporiginatorsecrets.com

 

 

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