Secrets of courting the move-up buyerDoug Hugginsmarketing, house upgrades
As an originator, company owner and mortgage marketer, my
specialty has always been the first-time homebuyer market. I love
this market for many reasons. Now, as more of my time is spent
coaching and teaching other mortgage professionals around the
country, my message and methods for courting the first-time
homebuyer are being very well received.
However, once in awhile I get some polite grumbling from my
audience because in their market area, there is no such thing as a
first-time homebuyer. With the dramatic increases in home prices
that large areas of the country have seen over the past few years,
prices in some communities have increased so quickly that there are
no homes available for the first-time homebuyer. This is
particularly true in many regions of California, New York, New
Jersey, Arizona and southern Florida. With low-end homes starting
at $300,000, there's no market for the traditional first-time
homebuyer.
Recognizing this, I worked with one of my students, Laurie
Anderson in New Jersey, to develop a simple system for locating and
going after move-up buyers. But not just any move-up buyers - we
are encouraging people who are already in a nice home to upgrade to
a luxury home. In many cases, we are working with homeowners who
had never really considered moving up until they saw our marketing
and talked to Laurie.
When marketing to first-time homebuyers, it is important to keep
the message simple and direct. The two primary problems that
first-time homebuyers face are not having enough cash for a down
payment, and having less than perfect credit. These issues are
exactly what should be addressed in the marketing materials.
The interesting thing I see as I speak with originators all
across the country is that many borrowers in all price ranges face
the same problems as first-time homebuyers - no cash and some
credit issues. The problem with much of the mortgage marketing to
higher-end groups is that these two issues are almost never
addressed.
What Laurie and I have done is create a system of identifying
homeowners who have lived in areas that have had rapidly rising
home prices. They've been in their home long enough to have
substantial equity (at least $100,000) and are probably reasonably
comfortable with their situation.
Seeing this type of homeowner, the typical mortgage marketer
would immediately offer some sort of refinance - rate and term, or
cash to pull out of their equity. This group of homeowners has been
bombarded with advertisements, all promoting some sort of
refinance. If they haven't already refinanced, then they are immune
to the promotions to refi now. Not us! We take an entirely new and
dramatically different approach.
We approach these homeowners and tell them, "Move up to a truly
luxury home of your dreams with no money down" - but here's the
real kicker that makes the phone ring - "and pocket all of your
current equity."
What we believe is that many people do not want to pull cash out
of their home. They like the comfort of having equity or, even
better, having cash in the bank. Many have thought about moving up
to a more luxurious home, but don't want to sink all of their
current equity into a new home.
The desire to own a home with little or no money down is not
exclusively for first-time homebuyers. Many buyers in all price
ranges, even up to and above $1 million, would love to own a home
with little or no cash out of pocket. We simply recognized this
fact and have taken full advantage of it. Our approach is to sell
this niche group of homeowners on the dream of moving up to a much
more luxurious home and still having all or most of their current
equity in the bank. The allure of luxury living and cash in the
bank is overwhelming.
Although we don't really stress this in the marketing, it is
mentioned that we can help homeowners reach their dream of luxury
living, even if they have less-than-perfect credit. And believe me,
imperfect credit is not a problem exclusively limited to first-time
homebuyers and the low-end market. We've discovered that doctors
and attorneys are perfect candidates for this program. Their egos
are such that moving up to a more luxurious or prestigious home is
very important to them; a large number of them are cash poor and
many don't have the best credit, so banking their cash equity is
also important.
Has marketing to this niche worked?
If you looked at Laurie's response rate to her marketing, you'd
immediately think it was a royal flop. She routinely only receives
less than a half percent response to her direct mail pieces. She is
usually only able to convert about 21-23 percent of those that do
respond. Seems low, doesnt it?
Well, Laurie only closes an average of 11 deals per month.
However, her average loan size is $683,400. You do the math. With
origination and fees around 1.9 percent, she's doing pretty
well.
Actually, there's really nothing brilliant here. We just took a
marketing message ("own a home with little or no money down, even
with less than perfect credit") that has worked extremely well for
first-time homebuyers. Then, with some minor modifications and a
different twist, we applied it to a different market niche.
Actually, in this case we created our own niche, which, by the way,
is an excellent thing to think about. But creating your own market
niche is a subject for another article. Remember, nobody wants a
mortgage! Nobody! Let's face it, nobody, given the choice, would
want to go into debt with the notion of it taking them 30 years to
pay it back. Nobody wants your mortgage program. What they want is
what your mortgage loan will do for them. Regardless of the
mortgage product, you are in the dream fulfillment business, not
the mortgage business.
That refi candidate doesn't really want the pain and hassle of
refinancing. If it's a cash-out, they want what the cash will do
for them. If it's rate and term, there's something they want to do
with the money they won't be paying each month for their mortgage.
The purchaser and move-up buyer want their dreams fulfilled. So
regardless of the niche market you decide to work with, remember to
focus on what that market wants to accomplish, not what you want to
sell them.
Working with the move-up buyers, Laurie tells me that although
these are otherwise fairly sophisticated borrowers, and they've
certainly been through the process at least once or twice before,
most never question fees and are most often concerned with the
monthly payment, but not the rate and terms of the loan. Why?
Laurie and my other students around the country who are working
with this market niche concentrate on selling the dream of luxury
living with cash in the bank. They don't focus on offering "the
lowest rates in the galaxy" or "no closing cost" or "137 loan
programs to choose from." They focus on selling the dream. And
selling the dream will work for you in all markets, anywhere and
everywhere across the country.
Except, of course, where you live!
Doug Huggins is president of The Millionaire
Originator GEM Inside Circle, a coaching and mentoring program
for mortgage professionals. He may be reached at (866) 950-3696 or
e-mail
[email protected].
