It’s time for everyone to catch their breath and examine the reality. The mortgage industry seems to thrive on drama, and there is no shortage of paper tigers out there for the drama lovers to be in fear of.
First we are having everyone throwing themselves around “margin compression”. Yes, the people who are grossing five points a deal, or originators who think they are worth two points a deal or more, are likely going to face challenges, but the rest of the industry will follow the lead of those already leaning out their teams to be more efficient and effective. Technology has made it very simple to do a great job and close eight to ten units a month without any help.
Next we are dealing with the nonsense that rising rates will hurt the housing market. The facts simply don’t bear that out. Now maybe those originators that have thrived in the refinance area will struggle, but those who always kept focus on the purchase market will continue to have plenty of opportunities. The truth is, the last six times interest rates went up 1% or more in a year, the housing market still rose from 3% to 13%. As Steve Harney at KCM has discussed, home affordability is actually better now than before if you do the math!
Last but not least is the whole issue with Gary Keller and his plans for Keller Mortgage. Gary is a smart businessman and is certainly welcome to his opinion. If he wants a mortgage company, it’s his money! But before you all panic, let’s go and look at some numbers.
According to NAR, there were 5.5 million home re-sales in 2017 with more than 600K new homes being sold. A portion of that, just over a million involved Keller Williams. But before you freak out, remember that each transaction contains “TWO real estate sides” or more than twelve million sides (Listing/buyer).
If we just keep it simple and say half the business is listing sides, then they were only involved in about 500K or so buy sides. Since even the best in the business fail to secure 40% of their buy side transactions, but even if they got everyone of those 40% it would come down to about 200,000 transactions. The issue becomes, what will they get? Will their top people toe the company line? Statistically speaking, they won’t. Top producing agents often shy away from in-house lenders. Many Keller offices already have in-house people; will they really secure all of those relationships? I think not, but if they did it would be about 4% of the total market! In perspective, FSBO transactions totaled almost 500,000 units! Anyone focused on the FSBO market?
But here are the two points I am trying to make:
- Keller Mortgage will have to compete for the business and show it can provide an exceptional experience and on-time closings, while mastering the ability to the job with a low paid team. Maybe they will reduce commission splits or services to their agents? Maybe their agents will happily give up their current relationships and support because they drink the Keller Kool-aide? Maybe Keller customers won’t care about the experience or the rates or getting the right loan and closing on time?
- 65% to 70% of all purchase leads DON’T come from realtors! In fact, managing your database through value and working with all the other referral sources is cheaper and takes less time! If you are doing your job properly, you will have more opportunities to refer to realtors than they refer to you!
I welcome Gary Keller and Keller Mortgage into the mix of mortgage professionals. Once they navigate all the compliance issues and train all their agents with RESPA and the MAP ACT; figure out the retention rates of their business and their current agents they will then get to see if they can attract the mortgage personnel needed to do the job and satisfy their people. It will be interesting to watch.
For those of you who are worried; pay attention to what you need to do to grow your database and supply it with ongoing value. Compete with a quality customer experience and the knowledge and speed that others can’t provide. Also, work the relationships of all the other agents who compete against those who want to be a one stop shop. There is much more opportunity than you think, just focus on what makes you better, not what you think you might be losing!
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Questions or comments: Mike@IMTcoaching.com