First Quarter Recap!

We close out March and end the first quarter of 2014. Yes, we are already a quarter of the way through 2014 and I am sure many are not happy with how this year looks so far. I want to recap this first quarter, or at least help you look at in and use the information to help you adjust your sights on the balance of the year.

Yes, refinances continue to dwindle, but there are still plenty of refinances being done. Don’t stop having those conversations; just make sure you have balanced yourself by prospecting the increasing number of purchase transactions that are making their way through the system. While not a strong wave of business, the numbers continue to rise. Total applications are down year over year; but let’s look at the reality of those numbers just a moment. The first two quarters of 2013 were about as good as it gets for loan origination. Interest rates were in the low to mid three percent range, plenty of housing inventory to choose from with short sales and foreclosures at very high levels, plus the regular transactions available made it a very attractive buyer’s market. So for any of you looking to compare the first quarter of 2014 with the first quarter of 2013, you might want to use an asterisk because it certainly wasn’t a level playing field.

It has been my experience that most of my clients close between 15% and 20% of their total business in the first quarter of the year. Last year my clients closed an above average 28.8% of their total annual production in the first quarter of the year, and a total of 58.2% by the end of June. These numbers sound HUGE, but you have to take into account where the housing and rate markets were in the first six months of last year. Clearly, any attempt to compare the first quarter and first half of 2014 with those of 2013 would be a huge mistake. The total number of refinances is down significantly year over year and that would be enough to make it a challenge, but throw in the abnormal winter conditions this winter that no doubt impaired home sales. So take a breath and don’t panic because there is some good news in the numbers.

In tracking both credit pulls and preapproval activity, both sets of numbers are UP right about 40% year over year! Yes, UP over last year. This could be a good indication that the second and third quarters of 2014 may be a much stronger purchase market than some people think. In fact, every originator that I work with that did a majority of purchase business last year seems to believe that this is shaping up to be an exceptional year for purchase transactions should these early trends continue. Think about it, interest in purchasing a home is more intense than last year at this time. For whatever the reason, the interest is there. We just really need to nurture that interest and help those people who are interested make it happen. Here are a few things to be sure you are doing to maximize your own potential:

1) Share positive information about the benefits of buying NOW!
2) Share why waiting could be costly!
3) Talk about the “Forever Home Strategy®”
4) Talk about the “First time Home Seller Strategy®”
5) Get people preapproved and keep connected every week to be sure they are viewing properties.
6) Share success stories in person and through social media.

I know it isn’t easy to promote a positive agenda with some people. Don’t worry about them. Just share the positive message and see who responds. Work with those people who want to make positive things happen and don’t argue with those who wish to be negative. Nothing great has ever been accomplished by anyone who said “I can’t”. Just move on and talk to the next person. Always remember, Some Will, Some Won’t, So What, Someone’s Waiting!

Predictions of the market being off by 40% or more are certainly discouraging. The question is, why does your business have to be off? Why can’t you grow your business in a declining market like many have before you? Total business may very well be less than last year, but what about those who don’t survive the new reality? Where does that business go? Well, it goes to the person who steps up and takes it. Some people will get out of the industry in 2014. Some will see their numbers fall off. Fewer will find a way to keep their numbers solid, while a select few will have their best year ever in 2014.

So which will it be for you? Are you moving up? Will you hold your own? Is it time to find a different path? Only you can answer these questions. The first quarter of 2014 has come to an end. What do your numbers look like? What are your plans to prosper?

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The Million Dollar Challenge

So here we are at the beginning of the spring “buying season” and the number one issue I am hearing about is the lack of inventory. Every place I go, each area of the country, all seem to be pounding away about the lack of inventory. I find that very interesting because as I fly in to these cities I didn’t notice vast areas of land bulldozed flat. No piles of rubble or debris. Nope, just house after house after house. So I agree there may be a shortage of homes listed for sale, but there is certainly no shortage of inventory. The reason more homes aren’t listed for sale is that nobody asked the current owners to sell! If you don’t ask for a listing, you don’t get a listing!

I have a client in Virginia who had been having discussions with a real estate group about the challenges and issues they were facing, and inventory came up. Some of their ideas about what to do were quite interesting. They could focus on new construction. As builders built new homes they could always take their buyers to the site and talk to them about that option. They also sought to do home renovations. People could buy homes in need of renovation and live there. While possible solutions, both are very narrow in scope because neither one will resolve the issue entirely. The only way to generate more listings is to physically go out and make the case to the public WHY it is a good idea to sell their home and buy another one.

So as I talked more with my client, I suggested he issue “The Million Dollar Challenge” to that office using the very same mathematical formula base as we do every year to build our own business plan, just convert the equation into the real estate specific transaction. So here is what we came up with, you can substitute your own market and numbers and even the total dollar amount if you like down to half a million or quarter of a million, but just follow the math.

In order to make a million dollars selling real estate, how many homes would you have to list and sell? Well, we would have to take the total commission earned for each deal into a million and you will have the number of transactions you would need. In this case, the average commission is $12,000 per sold home. Again, you use your own numbers. In order to make a million dollars, you would have to sell 84 homes to make the million. Great! We are on the way. Now, how many listings would you need in order to sell 84 homes? Well, let’s say we did a good job and sold 80% of our listings by the end of the year. That would mean you would have to list 105 houses to sell the 84 you need to make the million dollar goal. Okay, we are well on the way here. So the next question becomes; how many listing appointments would you need to make in order to list 105 houses? Do you secure half or a third, or 80%? Remember, each agent has a different closing rate, but let’s just say they get half of the listing appointments to use them to list their house? That would mean we would need 210 listing appointments to list 105 homes, to sell 84 by the end of the year. Okay, fine. So what is the process you use to secure appointments? Wait for it…wait for it…guess what, no plan in place to reach the goal!

So what if we just went to the neighborhoods you were looking to list properties in, armed with a plan on WHY someone should move, and shared with them the options open on what they could possibly move into; how many people would you have to talk to in order to get one listing appointment? Remember, it can’t just be asking them to just sell their home. You have to have a PLAN as to WHY it may be a good idea to do so BEFORE prices and interest rates went UP any higher. Armed with such a plan, how many people would you have to talk too in order to get that appointment; one, two, three? Even if it were four or five, it would still only amount to having 1,050 conversations with homeowners in order to reach your goal of earning a MILIION DOLLARS in commissions. Just about FIVE PEOPLE A DAY!

It may be more or it may be less, the point is, without running the numbers, how do you even know? If you don’t come up with a plan, how will you ever know? If you don’t go out and try, how will you ever know? If you don’t use the four key strategies: Help Us Pick Your New Neighbor®, Neighbor’s Only Open House®, The Forever Home Strategy®, and the First Time Home Seller’s Strategy®, how would you ever know what is possible? And yes, for those agents that “Don’t knock on doors” or “Go out and ask for business”, just ask them, how well is that working for you right now?

Maybe nobody makes a million dollars listing homes. Maybe nobody goes out and knocks on doors and asks for business anymore. Maybe all the new and modern strategies are all anyone needs to generate all the business they ever need. Maybe so, but if so, why are so many people complaining about the lack of inventory and doing nothing different to change the outcome? Is not that the definition of insanity?

If you don’t ask, you don’t get. If you don’t have a plan, it is not likely you will succeed. If you try, there is always a chance you succeed.

They did not bulldoze down all the houses, the people who currently live in them just don’t know they have better options if you don’t show them! If talking to just five people a day could possibly earn you a million dollars, what would the harm be to try?

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Attitude determines Altitude!

First let me say that this post is inspired by my sister Carolyn whose birthday is today! Happy Birthday “Knee Knaw”, may you have many more! My sister Carolyn was a highly successful real estate broker, and she spent years managing, growing, and training some of the finest Realtors® in New York. Her thoughtful wisdom about real estate and managing people still resonates with many professionals today. While my sister was forced to retire due to MS, there are still many people who seek her counsel and apply her wisdom, myself included.

One of the many things she had shared over the years was her absolute conviction about not becoming emotionally attached to the outcome of a transaction. If there ever was one simple statement with more power than that when it comes to the real estate and mortgage industry, I am not sure what it could be. Getting emotionally attached to a deal is not good for you, or your client. Getting emotionally attached to a deal when everyone else is not can be not only painful, but also difficult to survive. You can’t want a deal to happen more than the other people involved, especially your clients! Emotion can affect your approach, and your approach will affect your outcome.

In much the same way as emotion can skew your approach to things, the attitude you bring to the transaction is just as powerful. I like to put it this way, nothing great was ever accomplished by someone who said “I can’t”. Many times in my career I have seen great people fail and weaker people prevail because of the attitude they brought to the table. Sometimes just subtle differences make all the difference. The old “glass half empty or glass half full” shows a major difference in attitude that can often change outcomes.

I had a conversation with a loan originator recently and he was working hard to keep his business going despite low activity levels in his area. We talked about it and came up with a few ideas on what to do and how to generate some much needed positive energy in his market, and to get his people motivated to get up and get out and work. After a few meetings and creating some plans, he put together a series of workshops designed to help motivate his agents to talk with selected potential homeowners in an effort to secure listings by showing them the possibilities of trading up to a bigger or better home for a minimal change in their housing payment.

The meeting was well attended and a few of the agents in the room seemed really interested in working the plan. Some of the agents were very negative about the plan because it required going out and knocking on doors and speaking to actual homeowners. They were all in the business for some time and thought knocking on doors was well beneath them. The discussion went back and forth and it appeared that the negative group was going to prevail, and my client was very disappointed that his plan was dismissed by such a small group that managed to convince the others that making the attempt was futile. At the end of the meeting, one agent asked him if he would consider working with her on the project because she did not have much else to do, and what real harm could it do to try?

So together they picked an area of mostly entry-level homes. With a little research, they a good feeling of current market values as well as a few current properties listed for sale that would be a likely trade-up style homes. Armed with the information and having run some numbers, they went out to knock on some doors and speak to the neighborhood. While most of the attempts went unanswered, they did get an opportunity to speak to some of the people. One of the people was very abrupt, but by and large those that answered seemed pleasant and interested in the information. After about two hours or knocking on doors in the cold, they called it a day. That evening, something truly remarkable happened, one of the people they reached out and called the agent to ask for more information. That conversation led to a call to my originator to ask about loan products and qualification.

As of this writing the agent has inspected the home, prepared a CMA for that property for them to review, and showed them two houses in the area that they could easily move up and into. My loan originator has that client well prepared to move forward should they choose too. While nothing is set in stone, it is an opportunity for each of them to engage in a process they would never have had a chance to if they did not try. The agent is excited about the possibility and they are both already prepared to do it again in a similar neighborhood. They have committed to each other to work the streets at least one afternoon a week and more once the weather gets better.

While not a success story just yet, it shows what can happen if you try. If you let negative energy and thoughts control your actions, you will likely find negative results. If you think the work you need to do to survive is beneath you, you likely won’t survive. Be the one that controls your attitude so that only you will control your own altitude!

Happy Birthday Carolyn, a great sister and inspiration and mentor to many!
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Riding the Wave

I know this will sound crazy, but spring IS really on the way. March is one of those pivoting months when the seasons change for much of the country, and March is the first transition month from winter to spring, and by all accounts, we are looking forward to the weather warming up big time!

As we head into the spring market you are likely to really begin to notice the number of pre-approvals in your queue. In a more purchase-focused business this is quite normal. In fact, it is likely your pre-approvals have out-paced your closings by quite a bit. Many originators are just more aware of this than before because of two main reasons:

1) The shift from refinance to more purchase oriented business.
2) The shift from a “buyers” market to a “sellers” market.

When you put the two of these together, you create quite a different feel to how your business flows. You have to remember; in the refinance business it was just about identifying the target and sharing with them the options of how to save money. Once they saw the value in refinancing, it was just a matter of closing the loan. You didn’t really have to maintain that relationship for more than a few weeks to close the loan.

In a purchase environment the time spent with the client before they get into full application (find a property and getting under contract) is much longer. First you pre-approve the client, and then you have to work with them during the process of finding a home, then into full application and closing. There are also more relationships to manage; Realtors®, sellers, inspectors, and all the other possible people that can be brought into the transaction. It can all take time to manage. And what if your client is selling a home and their buyers are delayed in getting to the table?

Add to that list, the fact that there is less listed inventory in many markets and that many homes are in a multiple offer situation and many of those sell for more than the listing price! When you add it all up, the shift from a “buyers’ market” to a “sellers’ market” means it may take much longer for your client to find a home and strike a deal!
All of this extra time and effort expands the time we are connected to the transaction. For those that have been around for more than a few years it is something we have all seen before, but to those who haven’t, or those that don’t remember, this is really pretty “normal”. It causes you to lengthen the time you spend with a client BEFORE you have the opportunity to put them into the actual processing system. That fact means you are likely pre-approving more people each week and month than you are closing. This causes an expansion of you pre-approved pipeline and the follow-up activities you must do to be sure those people, once pre-approved, close their loan with YOU!

I call it riding the wave. You pre-approval pipeline grows and grows at a number far higher than the number of loans closing. It feels like you are working harder and harder, (because you are), and that there seems to be no reward for all the work. Well, it’s just like a wave on an incoming tide, growing in height before it hits the beach and runs up the shoreline. The longer the tide rolls in, the higher each wave reaches up the beach. Just like the wave, your pre-approvals grow until a point in time when your closings will outpace them. As the spring and summer reflect higher purchase closings, it will be how far into the season your “wave” takes to hit the beach that will determine how good a year you are likely to have. The longer you take to crest, the further you run up the beach, the longer you push to keep the “tide” coming, will all determine how great a year you will have.

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