Magazine article Mortgage Banking

Why Can't a Lender Be More like a Realtor?

Magazine article Mortgage Banking

Why Can't a Lender Be More like a Realtor?

Article excerpt

Lenders are anxious over threats to their traditional origination channels. The cost of branch originations is rising, and brokered loans are becoming more expensive. For most originations, it is only servicing that makes up for profitless origination. These trends are causing lenders to look at retaining borrowers, going direct to consumers and using new media like the Internet. Mostly, the squeeze created by exclusive lender-Realtor alliances is making lenders look enviously at Realtors - the original consumer-direct player. And for good reason.

What is the Realtor's secret? Realtors use their access and control of information to attract and keep customers. Realtors have long understood the power of information and have jealously guarded its access. Being the sole provider of hard-to-get information such as listings and comparative home price data, Realtors have been able to make themselves indispensable to buyers. Realtors oversee an interactive process of alerting homebuyers to problems and then providing information on neighborhoods, schools, favorite shops, commuting and counseling to solve any problems. In this sense information is a retention tool to keep the prospect on track. By providing that value-added service, Realtors ensure that they will be involved at every step of the homebuying process. And being involved means less chance for a client to slip away to a competitor.

If lenders hope to compete more effectively with Realtors, they must contact borrowers early and then continue to address their needs to keep borrowers. If a lender's only lure to attract homebuyers early in the cycle is prequalification, there won't be many bites since few buyers recognize prequalification as a real benefit. Despite lender efforts, buyers continue to shop around for a mortgage after they have chosen their new home. By then, the marketing space is crowded with competing lenders, and selling in a crowd of competitors is an unenviable position to be in.

Lenders can attract customers early by offering Realtor-type information instead of their usual fare of marketing freebies. Promotionally, Realtors offer little but advice and help on homebuying. Advice is cheaper (and more desirable to the customer) than many marketing giveaways. The good news for lenders is that the information industry is leveling the playing field as the Internet and new phone and database technologies make information more accessible to lenders and, therefore, easier to distribute to their borrowers.

These information services, previously available only to the real estate industry, can now be customized to the lender's call center or branch operations. The availability of online data, such as home sales prices, property tax data and neighborhood statistics, is now making it possible for lenders to hold prospects' interest throughout the buying cycle and then to convert them into customers.

Aside from "location, location, location" and advice, home prices are the stock in trade of Realtors. Buyers want price data at three points in their home search. First, before contacting a Realtor, buyers want basic home price data for a handful of towns. Second, they'll want access to price data by neighborhood to determine the market prices of homes, not the artificial listing price. Third and finally, they want historical closing prices on comparable area homes, plus the last sale price of the home they are bidding on.

Realtors readily pass this on to prospects - because information weds the customer to them. …

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