I’ve been there. The industry has been there. Changes in the market are certain. As rates rise, the game changes. The difference in survival for mortgage lending firms as we transition from a refinance to a purchase market depends on how quickly and adeptly the lender supports the shift. If you haven’t done so already, now is the time to invest in training your sales team and to understand the data behind the production numbers. Doing so now could help identify cost reductions in sales operations that could make the difference to the bottom line by year end.
Think about the differences in sales skill sets between a refinance market and a purchase one:
- Hunters vs Gatherers: In a refinance market, production can be driven with the help of effective media, marketing to a customer data base, and simply having employees there to answer the phone and process loans. At its peak during these past few years, some lenders operated profitably at 90+ percent refinance volumes. But the sales skill set is different to be successful in a purchase markets. A proactive sales force is essential for success. A team that recognizes the nature of the market and that can articulate the value proposition of your company to realtors and builders. A sales team who can close the rate shopping consumer by using your company’s attributes and individual personal selling skills in a way that is superior to all the other competitors. This is a skill – it’s not about just quoting rates – its sales. It’s selling, understanding the basic features and benefits of your products, overcoming objections, closing for commitment, and more. This is where investing in sales training as a cultural norm in this paradigm shift should be a priority. A top refinance team member may become an expensive burden to a firm if they cannot make the shift from reactive rate quoting and processing to proactive sourcing and closing.
- Relationship vs Transactional: In a refinance market, the process is far more transactional. Honestly, there was a time when my mortgage rep would simply shoot me an email and say, “Dave, its time”. That was it. The communication exchange would follow with some brief snippets about the all-in rate for a rate without closing costs, refinance terms, and then verifying what documents were needed to transact the deal. A purchase market is not necessarily a direct to consumer market. It is a “pull through” sale where the real estate agent still plays a very large role in referring their client to the lender. Pulling the client through the realtor requires a much more strategic relationship development plan with the agent. Many agents are just as concerned about rate as they are about the abilities of the loan originator and his/her company to get the job done and keep their buyer happy. Being a trusted referral requires building confidence with the agent. Additionally, frequency of contact matters. Being high on the list and in the agent’s presence of mind is important. While they may not have a new buyer when you make that first sales call, you do want to have that high presence in their mind when they do have that buyer – that is when the referral counts. Building a relationship based on credibility, confidence, and respect is much more important in a purchase market than a refinance one. It is important in both, but much more so for surviving a purchase market shift.
- Persistence and Rejection: During the height of the refinance booms that we have experienced, supply and demand favored the loan originator. Everyone was refinancing and if you were there to answer the phone, in many cases, you would be successful. Yes, there was rate shopping, but the supply of new leads offset much of the shopping risk. In a purchase market, the rejection rates will far exceed your expectations – especially at first as you work to build critical relationships with the market participants who actually can refer that customer to you. More challenging today, the closed real estate environment with in-house lenders, builders with on-site lending options and incentive packages, making rejection even more probable. I used to teach my loan officers to relish rejection. Every time a realtor says no, or says they will keep you in mind (a classic form of rejection), it gets you one step closer to getting that “yes”. If it takes 15-18 rejections to actually get an agent to refer a borrower, then you need to go get rejected every day. Keep in mind, it’s not personal. The realtor does not come to work each day looking forward to the series of loan originators from various firms, with various styles and personalities, all calling on them with the same goal. But, in the end, most LO’s do not handle rejection well and so it narrows the market down to the very few who are sales skilled, strong communicators, and who can relish rejection along the way to success.
- It’s a contact sport: A sales team that cannot augment their process with face to face contact with the realtor works at a disadvantage. Sure, this can be overcome with a strong company reputation and excellent marketing, but the difference generally is stark. Clearly some firms have introduced innovative new methods to allow technology to play much larger role and reduce the need for outside sales people. But that is less the norm, and the pull through sale and relationship development needs remain the dominant characteristic for a market like this. In a refinance market, the LO may go all year without ever meeting a borrower in person and not having to meet a realtor. In a purchase market, the ability to augment oral and marketing skills via email and more with face-to-face contact makes a huge difference. Use the windshield of your car and go get rejected in person as you work to build a relationship database of agents. It will get you to yes more frequently.
If I were a manager of a lender today, I would stack rank the production of my LO team over the last three years for total volume. I would then do the same but for purchase transactions alone. The high producer with low purchase mix either will need your investment with training, role play, collateral tools, and other resources to help augment the sales process, time management skills, and more – or they will be an expense to your company. Turnover percentages will rise without a shift in strategy.
Simply being a licensed MLO is not enough. That is just the entry requirement. Simply being a top producer is not enough unless it was purchase business. The shift from a refinance market to a purchase market is significant and requires a complete paradigm shift internally. And as I have said for years; sales is a learned skill. It can be taught and managed.
Just some food for thought.