How to survive in a down marketKamran Khosravireal estate market, house prices, down market, industry needs
We have heard from the Federal Reserve, industry
insiders and anecdotal reports stating that the sale of existing
homes in 2006 fell at the fastest rate that we have seen in nearly
20 years. When the real estate market changes, it is always front
page news. Interest rates go up and down, house prices go up and
down, and supply and demand goes up and down. We work in a cyclical
industry. What does that mean for you and your business? What will
it mean to your future?
It is during this down market when brokers are tested as to why
they are in the industry and if they are in it for the right
reasons. The ones who are in it for quick money will not survive.
If you are one of those brokers, just pack up your things now and
move on to the next new business trend. For those of you committed
to the mortgage industry and serious about wanting to make it
through this challenging period that I like to call a choke, there
are steps you can take to not only survive, but excel.
Research industry needs
Most important, you not only need to know that the market is
changing, but you need to be able position your company, and
yourself, so that you can thrive in the new environment. Since you
are reading this article and most likely other articles in The
Mortgage Press, you have started this process. Reading
industry trade magazines and reading and listening to general news
media is one way to keep your hand on the pulse of the market.
Talk with real estate agents. They are on the front lines. They
know who is selling, buying, refinancing or contemplating any of
the above. Real estate agents also know the reasons why consumers
are considering any of these scenarios now, or why they are
thinking about waiting. If you ask enough of the right questions
and ask enough real estate agents, this should give you a good idea
of possible borrower scenarios. Make sure you are marketing the
products that will fit in with those scenarios. It is crucial to
anticipate a borrowers needs versus reacting to them.
Network with other loan originators. This is not something
generally done because of fear that someone will copy their
strategy and take their business. There is enough business to go
around. In fact, you can help each other build stronger businesses
by learning from each other what does and doesn't work. When you
find someone willing to share experiences in order to learn from
another willing to share, ask how he feels about the market, what
changes he anticipates, strategies he has employed that worked and
strategies that haven't worked.
Speak with lenders. Lenders are usually the first to obtain
industry news and can share that information with you so you can
react. They also know what works for their brokers. Another
advantage to developing a relationship with lenders is that they
can send you business when they have borrowers approach them
directly. Lenders can be your best ally; however, you must be able
to foster a relationship with your lender for the long haul. This
symbiotic relationship will not only allow you to survive the
downturns, but you will be able to garner more market-share,
knowing that you have your lender in your corner. This is
invaluable in a time where the industry is rife with fraud and
early payment defaults. You and your lender can position yourselves
for the next wave.
An excellent place to network with all of those players in the
industry in a short amount of time is at trade shows. Contact the
National Association of Mortgage
Brokers to get contact information for their state affiliates.
Each of the affiliates schedule trade shows throughout the year,
but that is only the beginning. As mentioned above, real estate
agents and lenders are your best allies; frequent their trade
shows. After all, you are the facilitator between the real estate
agent and the lender.
Diversify your products
Be diversified. If you are limiting the products you sell, then
you are placing limitations on your business growth opportunities,
as well as not preparing for seasonal changes. It is always
comfortable working with what you already know, but set time aside
for homework, which includes researching other products available
and training yourself on those products. Research other available
products. Make an appointment to talk with a few lenders to see
what products they have available. You can do this by asking them
to visit you in your office, or you can talk over the phone. Find
out what products have been selling in your area.
Train yourself. When I say train yourself, at first you may
think I mean continue education in the technical aspects of your
job. What I actually mean is you will be most successful in
training yourself in product knowledge, communication skills,
listening skills, managing breakdowns and self-actualization. The
more well rounded you are and in tune with why you are in this
industry and what you want to get out of your business, the more
successful you will be.
Sell what you are good at. Find your niche and do what you can
to enhance that niche. Every individual is different. What do
people like about you? Are you the life of the party? Are you a
good listener? Are you empathetic? Are you analytical? Let those
qualities shine through in your work and how you market your
business. You will be more likely to draw borrowers that are
attracted to those qualities and, therefore, increase the chances
of them having a positive experience.
Most of all, understand your audience. All the knowledge in the
world will not enhance your bottom line without the ability to
communicate and capture the group that feeds your pipeline. In that
regard, you must have a close relationship with your lender and
real estate agent alike. Be able to speak their language and have
them understand what you can provide: product and service.
Select a few lenders
Select a few lenders to do business with that will best meet your
typical borrower scenarios. Of course you know lenders that
specialize in prime and non-prime loans or both, but think beyond
this. Sometimes you may need fast turn-around times, flexibility,
exceptional service or any combination of these.
Find a reliable lender that you can count on to do business with
integrity and do everything possible to get your loan closed. You
want a lender who is flexible. One that believes in a
solutions-oriented process and is willing to search for other
alternatives to get the loans closed, but not a lender that will
step over lines for the sake of closing a loan that should not be
funded. It is crossing those fine lines that will end in tragedy
for the borrower, lender and you, the broker. The integrity of your
lender must be in line with your own level of honor and
Find a lender with exceptional customer service. Service is
about relationship building with your lenders and their
relationship with you; you both need each other to be successful.
Look for a lender that communicates with you throughout the loan
pipeline and not just when returning your calls. Look for a lender
that speaks upfront about concerns and follows up after the loan
has closed to analyze his customer service. This shows he cares and
wants to make sure he is offering you the best customer service
Once you have found the lenders that will service you in the
ways you want and will meet your expectations, take some time to
learn their loan programs, guidelines and processes. This will help
you service your borrowers better by offering them the best loan
programs to meet their needs and giving them advanced notice of
conditions that may be required. The more you know about your
lender's expectations, the better you can communicate with your
borrower and, therefore, enhance your relationship with the
You can be successful in a down market. You may not grow your
business as quickly as you planned, but as I stated in the
beginning of this article, we work in a cyclical industry. If you
have all these steps in place when business picks up, you will be
in for a good ride.
Kamran Khosravi is president of American Guardian Home Loans,
a California-based wholesale mortgage lender serving broker and
homebuilder originations for Alt-A and non-prime products. He can
be reached at (877) 960-5363 or e-mail firstname.lastname@example.org.