Building a builder relationshipKamran Khosravihomebuilders, mortgage relations
Whether you are already an active broker looking to make a
successful broker-to-banker transition or a one-person shop seeking
to be a multi-million dollar brokerage, you need to build
relationships outside the traditional realm of borrower
influencers. You need to look at leveraging the homebuilder
market.
Homebuilders as partners
Building unconventional relationships within the mortgage arena is
not a revolutionary idea, but many mortgage professionals have yet
to embrace this concept. One promising place to look is in the
homebuilder market. Builders are in business to build, not find the
right mortgage lender for borrowers. They are not competition and
should never be viewed in this light. Even in cases where
homebuilders own their own mortgage companies, they usually
outsource loans to provide the highest quality of service to their
customers. In short, they need partners.
The 2004 National Association of
Realtors Profile of Homebuyers and Sellers states that 37
percent of homebuyers use builders as a resource in their search
for a home. In addition to this, builders are the second most
popular avenues of purchase for homeowners following
agents/brokers. This is a significant market segment, and ambitious
brokers should explore any opportunity that has the potential to
increase business by almost one-third. A small brokerage can bring
in 10-15 additional loans a month with a homebuilder partner.
However, creating any partnership requires work, persistence and
maintenance. Homebuilders want alliances, but they don't typically
pursue brokers. For success with this relationship, brokers must
pursue homebuilders.
Starting point
If you are sincerely interested in gaining additional business from
homebuilders, you must know where to start. It takes more than a
cold call sales approach. You have to understand and appreciate the
homebuilder market before making a move. Mortgage professionals
especially brokers, real estate agents and homebuilders work in a
close-knit environment where connections come relatively easy.
However, sometimes these connections are more difficult to make,
especially if you're the new broker on the block.
Aside from leveraging existing relationships, there are several
ways to get involved with the homebuilder community, but remember
that education is always first. Like any other group, there are
homebuilder associations that don't require you to be a homebuilder
in order to join. The National
Association of Home Builders (NAHB) has an estimated 220,000
members and is affiliated with more than 800 state and local
associations. Visiting their Web site, www.nahb.org, is a great place to
start before jumping right into cold calling and stopping by their
offices. After brokers have gained enough knowledge to be slightly
dangerous in the field, they can begin networking. Again, a
steppingstone can be found in both the local and national
associations. Homebuilder associations not only have meetings, but
they also hold trade shows and conferences where brokers can
network and meet homebuilders in their community. NAHB also
develops homebuilder directories where brokers can locate and build
a wish list of potential partners with whom to work.
Court them
As mentioned earlier, building these relationships will take both
effort and patience. Remember, homebuilders typically do not
approach brokers, so you must be proactive in pursuing them
instead. The broker who has figured out this approach will score
the business. If a broker is going to dedicate the time and effort
to develop a partnership, it must be worthwhile. Seek a loyal
partner that will deliver additional business consistently. In
turn, produce high-quality results for them. As a result, both
parties will be happy and there will be a flourishing
relationship.
Find the right fit
Before rushing into this partnership, brokers should assess their
size compared to the sought-after homebuilder. The right
partnership depends on the structure and size of the broker. Small
brokerages should not go after the Goliath homebuilders in their
community. Instead, they should build a partner structure that
aligns with their business models to secure a successful
partnership.
Brokers should start small, but not just with the physical size
of the homebuilder. They will have the most success by selecting
one potential partner and developing a plan around this
homebuilder. Once the business model for building this one
partnership is modified and perfected, it can then be used to
target additional homebuilders. However, you should always be
cautious about the number of targeted homebuilders. Be careful not
to take on more than you can handle. Doing so will backfire and
create an uncomfortable situation for all parties involved. Start
slowly and small and work up to larger numbers.
Know who to go to and what to do
It is important to know whom to contact within the company.
Typically, the best people to approach are the decision-makers
presidents, escrow coordinators, project managers and sometimes
marketing directors. This harkens back to the value of research.
Understand the market, but moreover, know the specific target
company and who makes the decisions. It saves time and potential
embarrassment if you know who to ask for before walking in the door
or picking up the phone.
Also, brokers have to be prepared and on message. The potential
homebuilder partner normally knows why a broker requests a meeting
so there is no need to dance around the objective. It is about what
the partnership can do for them. Get right to the point and make a
solid case for why partnering with your business will benefit
them.
Give them options
Homebuilders' main source of income comes from building homes. Many
own mortgage companies, but they only focus on first mortgages.
However, the first mortgage borrowers will need second mortgages
and home equity loans or lines of credit. The homebuilder may not
have the capability to provide certain loan options, but still
needs to keep the original customer happy. Brokers are their source
of alternative solutions. Therefore, give the homebuilders what
they need more options for their borrowers. If the target partner
needs home equity lines of credit for borrowers, make sure you can
give it to them. Offer them options they do not have readily
available, such as non-prime and alt-A loans, as well as
non-conforming A-paper loans. Make it easy for homebuilders to
access loans not usually within their reach.
Find out what the homebuilder needs with regard to mortgages and
make sure your brokerage can produce results. Explore the
challenges they face which you can help them surmount. Answers and
solutions should be prepared and ready for the initial meeting. If
this is impossible, have the willingness to go out and find the
answers or solutions. This should happen before you first make
contact.
Moving forward after the preliminary meeting, a strategy is set
in place. Make an effort to schedule weekly meetings with the
homebuilder, providing updates on each loan in the pipeline. Assist
the homebuilder's sales team with any inquiries and educate them.
Create a form with all single item reports so that the homebuilder
and anyone else with access can have a clear understanding of the
actions driving the loan and its progress. The objective is to
combine these tactics, building a foundation for a solid
partnership.
The relationship matters
If the appropriate groundwork is in place, then the foundation is
created. Thus, brokers must develop a plan and approach
homebuilders as valued customers. Know what they want and give it
to them. When brokers and homebuilders create a sense of security
for one another, they form a long-lasting relationship and develop
quality referrals for new business. This is especially true in our
cyclical mortgage environment. Remember, we work within a small
circle and the more references you can build, the more business you
can bring in. Even extremely successful brokers would like to bring
in more business. If you are not consistently seeking new ways to
increase business, it will eventually slow and the brokerage will
feel the impact. Building relationships with builders provides an
alternative to everyday cold calling, marketing flyers and
promotional mailers. Moreover, the partnerships will remain and the
business will prosper.
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
[email protected].
