Preparing for tomorrowJohn Svirskyreal estate cycle, downward cycle, sales tips , motivation
If I had listened to the supposed experts in the beginning of
2005, I probably would have gotten out of the mortgage business.
Higher rates, the real estate bubble, market crashes ... the press
loves fear and tries to sell it to anyone who will buy it. Since
most of us live so precariously in our faith, just the mention of
higher interest rates and declining real estate values causes us to
break out in a cold sweat. Mind you, I am not tempting the Fates in
writing this article. I do believe that in many markets the value
for real estate has gone beyond any semblance of value, but there
is one truth that is undeniable: There are more and more people who
need housing and there is not enough housing to fill the demand.
Also, have you noticed how many people have money out there? If you
doubt me, just look at the preponderance of building in most of the
major cities. Ritz Carlton and Four Seasons cannot build their
multi-million dollar residences fast enough; same thing with Toll
Brothers and their luxury home division. Of the houses I financed a
year or two ago, some have doubled in value and none are less than
50 percent more than the buyer paid for them.
It reminds me of when I bought my house in 1987 at the top of a
real estate cycle. I paid top dollar for the house and by 1990, it
was worth less than I paid for it. Then came the cycle of recovery,
and of course the house is worth so much more today. My point, to
all those people who live in fear of bubbles bursting, is that I
have found that most downward cycles last for 18 months at
mostworst case, 24 monthsbefore the market bottoms out, levels off
and turns around for an upswing.
So, what's a poor mortgage broker to do? How can we make plans
to maintain and increase our business if the press tells us that
our world is coming to an end? Here's what I'm doing. First, I'm
not listening. Second, I am switching as many of my clients as
possible to five, seven and 10-year fixed interest rate mortgages.
If at the time you are reading this article the spread between
30-year fixed and the adjustable rate is small, I will recommend
30-year fixed mortgages only to make customers happy
psychologically. I can't tell you how many times I have had to zip
my lip when the client who insisted on a 30-year fixed comes back
to me to refinance yet again.
According to the pundits, one of the causes of the impending
bubble-burst is the very risky, interest-only programs that are
being offered. I ask myself how these loans can be risky when in
reality, very little interest is paid in the first years of a
mortgage anyway. This is just one example of how the press can use
fear to make a point and the rest of the world says, "Oh they must
be right." Before you know it, a self-fulfilling prophecy is
born.
Another thing I am doing is going over my database. Im calling
five people a day just to say hello. I have not spoken to many of
these people in a while, so it is nice to catch up. At the same
time I am updating my database by including e-mail addresses and
cell phone numbers that werent available for some of my clients
when I first did their loans. Yes, I know this is Marketing 101,
but a personal phone call equals many marketing letters. I am
targeting my campaigns to two different markets right nowthe credit
challenged and the wealthy with a story. Because I cannot compete
with the large shops that are offering rates below my cost rate,
their volume must enable them to get super premiums not available
to us "little guys" (that includes all of us who do less that $100
million). I like to attract and go after clients who are happy with
their loan and the loan process. They got what I promised them and
at the end of the transaction, will thank me for a job well done.
There is something so satisfying about a happy client and being
paid well for my services at the same time.
A radical technique I use when business slows down is to give
one or two "free" mortgages to people in need, when not charging
them will make a difference. It is a wonderful thing to do and I
have been doing it for years. You cannot give to get, but if you
give freely it always comes back to you. Something happens on a
universal level, which generates business. Try it and let me know
your results. Sometimes the only thing that comes back is the inner
satisfaction of knowing I did something nice, and that can be
enough.
Since I'm one to hedge my bets, if I am wrong and all the
pundits are right (I hope not), I have also developed new
relationships with bankruptcy and divorce attorneys. I know that
may seem cold and mercenary, but if there is going to be a bubble,
a lot of people are going to go bankrupt and I want the referrals
from the lawyer's clients. Money is the biggest cause of family
fighting and divorce. So, if we do have a downward real estate
cycle, then there are going to be a lot of divorces, with one mate
yelling, "You should have listened to me and never bought this big
expensive house, which I didn't want anyway (but loved living in
when times were good)!" Besides bankruptcy and divorce attorneys
fit my present marketing strategy and they are a great source of
referrals in all economic times.
Lastly, I am saving money right now, because if the pundits are
right even for a little while, there will be some pretty good
bargains out there and I will pick them up for investment purposes.
I will look for the unique, the unusual and the different,
something that will always attract a buyer as compared to the
cookie cutter house. I was recently in Atlanta, which is still a
booming market. In one neighborhood there were eight "For Sale"
signs. I'm thinking to myself, "Oh my God, the bubble is here, they
were right!" And then the person I was with said that I shouldn't
worry, these people have lived in these homes for a long time and
are cashing out into the market. The people who are buying their
homes are updating them to modern standards, sometimes even tearing
them down and building something new. The neighborhood is just
going upscale.
We are in the process of change. Yes, we are always in the
process of change and it makes us uncomfortable. It's human nature
to want to stay comfortable, to just keep on doing what works and
ride the wave. Well, for the balance of 2005 we will have to be on
our toes, be nimble, observe the markets and react quickly and
accordingly. So, while I will not join those who talk of economic
gloom and doom, I am aware that a lot of people are listening and
waiting. So, I am writing as many mortgages as I can today, while I
prepare new strategies for tomorrow. The wonderful thing about
being in this business for 25 years is that you learn to respect
the ebbs and flows of life and know that money can be made in bad
times as well as good. So much depends on our attitude, the
preparatory work we do and the actions we take.
Enjoy the rest of the summer. As always, I invite you to e-mail
me to share your views on this article. Or, if there is any
technology-related product you would like to see reviewed, let me
know.
John D. Svirsky has been a mortgage broker for 24 years,
doing both commercial and residential mortgages. He is also a
volunteer firefighter, avid cigar enthusiast and cook. He may be
reached by phone at (845) 424-3388 or e-mail
[email protected]
