Build vs Depletion

For those that have followed this post for years, here is a reminder of something I have shared before. For those recent followers, here is an important concept that you need to be aware of and how to tie it into what is my ongoing reminder about tracking your numbers.

As we head forward into the spring buying season it becomes more and more important to track and follow your numbers. Just like we compared our first quarter numbers year over year, and how they measured up as a percentage of our total business, we also have the second quarter well under way!

If we are accurately measuring our contacts, credit pulls, pre-approvals, and gustation periods of our borrowers; we need to understand the “BUILD” in the number of pre-approvals in our pipeline. Spring is the time we are likely to see the biggest build in those numbers, and Easter weekend is generally the time that the real spring buying season begins in earnest!

As we are tracking our numbers we must pay strict attention to our pre-approved borrowers so we don’t “leak” any of those people away to other originators! Preventing leakage is just as important if not more important than generating the new contact in the first place! So keep those weekly tracking calls at the top of your Thursday priority list!

The other part of this model is to understand that the longer you continue to grow your pre-approval pipeline over the number of new contracts, the longer the wave of productivity in your buyer’s market will continue! Pushing that wave further and further into the summer will result in a longer buying season for you and your referral partners! Once the number of pre-approvals falls below the number of new contracts, you have begun your “DEPLETION CYCLE” which signals the end of your peak buying season.

Pushing that cycle as far as possible can result in a serious number of “extra” transactions for you to close! For example, if your average monthly number of loans is 3-5 units a month, and your “peak” number is 8-10 units, pushing that wave, even for just one more month is an extra 5 or more units! That is like getting an extra month of production  FREE!

Tracking your business and following your momentum is an important tool in improved production. Those extra few deals also bring a few extra sets of contacts and future referrals! It’s important that we look at our business like a business. Tracking your numbers and understanding your business flow and conversion rates are a part of making the most out of each and every opportunity!

Questions or comments: Mike@IMTcoaching.com

Part Three of the Six Efficiencies

I want to start out this week’s post by thanking all of you for the kind words and comments about the last couple of posts. It has been real fun for me to have the interaction with you and get to share some time with a few of you who are not clients, but followers of the posts. It’s always good to connect and share thoughts and ideas. This week we are going to talk about items four through six of the six efficiencies.

Item number four is your plan execution and service delivery. This is likely the place where it all comes down to really specific personalities, markets, and business make-up. This is where you have to drill down and understand your value to the client. What do you do? How do you do it? Do you connect through paper or in person? Is it email or text? Do you just pick up the phone and call? Will there be a face to face encounter? Having a great plan won’t yield the desired results if you can’t effectively communicate with your people!

Each step in your process has to incorporate the bigger picture of your overall connection plan. Database systems are nice, but a series of “canned” emails will not keep you connected to your client or referral partner as well as using all forms of communication will. In fact, email is the WORST way to stay connected. People are programmed to ignore email. People dump and block dozens, hundreds, maybe even thousands of emails a day, why run the risk that your ability to connect and communicate with your client and referral partners gets lost in that mix? What if you got into the habit of only using email to confirm or document some other form of communication? Use email as a support tool and not an engagement tool.

Item number five is so simple and effective it’s hard to believe I have to bring it up, but most originators don’t ever track results other than to see how many units they closed or their past dollar volume. This is the type of “rear view mirror” habit that helps support the “roller coaster” production that most originators fall victim to! Tracking your business by closed units and dollar volume after the fact only tells you where you have been and nothing to help you plan and project the future!

When you did your business plan, you set projections for referrals from all the potential sources of business. You list people and areas you were focusing your efforts on to attract the opportunities you needed to reach the performance targets you set for yourself and your referral partners. To not set aside time every month in the middle of the month to not only look at the prior months closings, but to look at new credit pulls, new referrals, size of your pre-approval pipeline, gestation period of those pre-approvals into closed loans, and the tracking of inbound referrals from all sources to be sure you are tracking the course you set is like leaving your map on the kitchen table when you head out on a trip! You need to schedule the time to track your results.

Number six follows all the others because you can’t make adjustments if you don’t do the first five things, and doing the first five things without making adjustments is a huge potential loss of time and money! Let’s be honest, sometimes we get things wrong! Sometimes things we thought would work don’t go as planned. Sometimes referral partners don’t refer as we thought. The other side to that coin is that sometimes things work BETTER than we thought, or that we find more opportunities and referrals than we ever thought possible!

The key is to look at the results and see what adjustments may need to take place. Sometimes the plan you have is fine and its outside forces like weather that get in the way. Sometimes things happen slower or faster than anticipated. And sometimes it all comes together! Being prepared to review the information and to make, or not to make, adjustments can really impact your bottom line. And remember, it isn’t always about the number of referrals, closings, or dollars closed that matters, it is also the balance of investments in time and money to be sure it is all worth the effort!

I hope you found this mini-series helpful. I look forward to your questions and comments: Mike@IMTcoaching.co

Are You Worth More Than $11.35 an Hour?

When you are involved with as many loan originators as I am, you hear all kinds of stories and concepts about how to generate loan opportunities. I think over the last few years, so many people have focused on lead generation that they haven’t spent too much time looking at conversion rates and profitability. A big issue was the issue of paying for leads. So I asked a number of originators to share some insights as to how they track their investment in buying leads and what the total return on that investment was, and how profitable it may or may not have been. The answers were pretty interesting.

  • The number one most interesting item was that mostof the originators don’t track their cost/hour investments in purchasing leads.
  • As a total percentage of their marketing budget in time and money, they don’t draw a comparison between purchasing leads and other opportunity generating investments.
  • Last but not least, they don’t work the math to show their effective income rate per hour of the work needed to generate each application that closes.

I believe that the mortgage business doesn’t do a very good job at working through the numbers. In one specific case, a loan originator with a significant investment in time, money, and effort; the math was very interesting to work through. It also opened the door to another whole area of discussion that we will follow-up in the future, what “power” do you give up when you are in pursuit of those leads?

After working through the math, this loan originator saw that the net income after expenses on all the other areas used to generate opportunities, her net hourly rate for just generating the lead that closes was almost four times the hourly rate that was found on the leads that were purchased. In fact, the net income per hour prospecting and working the purchased leads netted $11.35 per hour invested!

Now this is just one set of numbers, but I believe that they do share a story. The story is that the work needed to obtain the opportunity can vary widely across the board. The time it takes to work each lead and convert it into a transaction is something that becomes really important to measure.

As we all know, the math used to calculate how “well” someone is doing in our industry can vary widely. Units closed and dollar volumes can be just the tip of the real story if you don’t dig down to see the entire story. We all know people that have greatly inflated numbers or have huge teams of people funneling up that volume, or at what cost?

Purchasing leads isn’t a bad thing by itself. Large production teams are not a bad thing by itself. Marketing agreements, desk rentals, joint advertising, and other opportunity generating techniques are not bad things by themselves; it’s just vitally important that you know the true cost in time, effort, and assets and compare!

This loan originator discovered that making $11.35 an hour to work the leads to the point of a genuine loan opportunity wasn’t worth the effort. Others may feel differently, but you really need to drill down and know the math to be sure you are happy with the money you are netting for the work you are doing!

Questions or comments: Mike@IMTcoaching.com

First Quarter Review

It’s the middle of March and now is the time to do our first quarter review. Now is the time to pull out the business plan and compare projections with the results. It’s always important to calculate our results as percentage of business as compared to same percentages quarter to quarter. Since all four quarters of the year are never the same, we need to look back and see what the total percentage of closed business or opportunities as compared to the entire year and quarter to quarter. Most of my originators average between 9% and 18% of their total closed business in the first quarter. So get clear when comparing numbers that you check your actual math.

All the indications are that we are going to see a really robust spring market. I am seeing that my clients are carrying about 30% more pre-approvals than the same time last year. We are also seeing higher numbers of listings entering the market in many areas, so that bodes well for higher numbers of transactions. Just be certain to stay well connected to those you pre-approve, and monitor your conversion rates. We don’t want to leak away transactions we are already invested in. Those weekly calls are important!

Interest rates are also very friendly to us at the moment. Remember, last year at this time rates headed higher. Paying attention to an improved rate market can lead you to more total transactions, both purchases AND refinances!

This time of the year it’s a good business to work with some of our Realtor® referral partners on using the “Forever Home Strategy” to generate new listing opportunities.

Last but not least, we need to remember to prospect from the process. There are all kinds of prospecting opportunities from the loan process. Realtors®, Accountants, Financial Planners, Attorneys, Insurance professionals, and all kinds of other opportunities right inside each file you close.

Now is the time to update your numbers and look at the information carefully. We are heading into the spring with many favorable conditions for the housing market. So update, communicate, and don’t  PROCRASTINATE! Opportunities are plentiful to those that Just do the WORK!

Questions or comments: Mike@IMTcoaching.com

Common Misconceptions

When you coach a wide variety of people you can hear a great deal of perspectives. People believe what they believe because that is what they know, not always what is true. The world is full of people who have always believed what they believe and have never had cause or reason to challenge those beliefs. However, many people have never reasoned out their positions one way or the other and are often spending time questioning them or abandoning their beliefs for something that appears more popular.

In our profession we are subject to constant pressure of outside influences. Market conditions change so we must adjust to them, but often we never question the adjustments we are making. Are the adjustments we are making really the correct ones to make? In many cases what has worked before will work again. In other situations, we must explore new solutions to old problems. However, we often don’t think about old solutions to new problems!

With the world full now of algorithms to solve every problem, the quality of the customer experience is now left to an artificial and programed response instead of a person communicating with a person. Just like the incredibly frustrating phone trees when you call many companies that try to electronically answer your question in a number of ways until you either hang up, or have to wait for a live person to answer and they have to ask all the same questions all over again to figure out that THEY now have to transfer you to yet another person to help you and you have to answer all these questions all over again!

Technology and speed are not bad for customer service, but its the failed integration of technology and personal attention that causes a great deal of modern frustration. So let’s have a look at a few things that can help mitigate some of the customer service nightmares and provide guidance to our customers and referral partners on how to have a great customer service experience by integrating our technology and our personal connection to our customers.

The number one misconception in our industry is that we must be available 24/7/365. Since that isn’t even remotely possible, why do we even try? Clients and referral partners will understand and appreciate knowing exactly how you handle calls and messages; and when they can expect a response. When you use a combination of voicemail, email, text, video and old fashion phone calls, you can provide a great experience for most everyone in your market and have a life at the same time.

The next biggest challenge seems to be lead generation. Everyone seems fixated about generating or gathering leads. I actually have to laugh at this because there is an entire multibillion dollar industry thats sole purpose is to sell leads to people that won’t spend a few minutes a day to generate them themselves! The belief is that the more leads you generate, the more money you make. Um,NO! The more deals you CLOSE the more money you make! So why is it that so few people in our industry have even the slightest idea of what their actual conversion rates are, and how to improve them?

The last misconception of the day is the actual VALUE of each referral partner and the COST in time, money, and effort that each referral partner takes. So much of the time I see people investing 30%, 40%, 50%, or more of their time, money, and effort into a referral source or area of business that produces less closed revenue than the percentage of the revenue invested in it.WHY? There needs to be a direct connection between effort and outcome!

So what are your challenges? What do you want to talk about? What are the areas of business that you want to discuss? Please let us know!

Questions or comments: Mike@IMTcoaching.com

Why a “SHIFT” Can Be Scary!

So many stories, so much data, so much information; how do you dig through it all and know how it impacts you and your market? Well, some things are national in scope, like interest rates, some loan guidelines, some products and programs, and a large number of regulations. The key part remains, what does national news mean to you? In some cases it can really impact your business, while in others it may have no bearing at all. You have to know what to look for and how each of these things impacts your specific market.

More likely than not, national numbers have far less direct pressure on your local markets than you think. In a large part of the country, FNMA loan limits rising have zero to do with the market because most home sales are far below that limit. The change in a state or local bond program could be much more of local interest to these buyers. The results need to be weighed out against your specific location. Knowing the specific local numbers can really help your business, especially when your market runs contrary to the national average or isn’t connected to the information at all.

A good example is a tale of two originators. One in Georgia spent a great deal of time keeping deals together in January that were scheduled to close but couldn’t because they were USDA loans and the government shutdown put a halt on that process. While another in Arizona kept closing loans as if nothing was wrong at all. To some markets the shutdown really hurt business, while in others they really didn’t notice a thing.

The important piece here is to understand that your clients and referral partners often don’t see anything but national numbers. They see information on the internet and a story that is bias toward a specific group or opinion while the local reality is far different. I see this frequently when speaking to groups of real estate and mortgage professionals who believe that the housing market is shifting toward a collapse. That home prices are falling. That we are heading toward another housing bubble. The actual facts don’t support that interpretation. The reality is right now that mortgage purchase applications are UP more than 3% year over year. Housing going into contract in January actually increased and that interest rates are LOWER than they were six months ago and property appreciation is still projected to GROW by 4% or more this year!There are also more listings on the market, homes in default are declining, and foreclosures are still going down. Yes, these are also national numbers, but you can look locally at your own MSA and see how you compare.

For those professionals who are worried about the shift to online lenders and discount brokers, that shift only applies to those who can’t make a case for the VALUE they provide and the quality of the client experience. If you can’t justify your own value, then you have a problem. If you provide a quality client experience, exceptional value, and do it at a fair price, you could actually see your market share GROW as those cut rate providers go broke, get out of the market, or people discover that the “best rate” online came from the best “LIAR” on the internet!

Yes, the industry is changing and there certainly is a “SHIFT” in how and where people get their information. You as a professional are obligated to know the numbers and provide the information on how these things relate to your market. Are more people looking at our business as a transactional based business, yes they are, but it has become that way because professionals in the mortgage and real estate community have forgotten about the quality of the customer experience and the real value that local professionals can bring to the table.

As I have always stated, “The rate isn’t great if the closing is late” and “it’s not a great deal if the deal doesn’t close!”

Understand the fear, address the concerns, provide the local and specific information, and provide value and a great customer experience and you will find that there are always going to people who value an expert and want a professional relationship than want the best rate on the wrong product or a loan that doesn’t close!

Questions or comments: Mike@IMTcoaching.com

Happy Valentine’s Day

Today is special day for many people, some more than others. For me, it is also my wedding anniversary. 13 years ago, today my wife MJ and I were married at the Aladdin Hotel in Las Vegas at the same chapel that Elvis and Pricilla were married in. It was the last time anyone got married on Valentine’s Day in that chapel as the Aladdin was remodeled and became Planet Hollywood. Oddly enough, none of our children could make the wedding, some didn’t care, and some chose not to, others were caught up in a blizzard that buried the northeast. Of the people who did attend, neither MJ nor I speak to any of them any longer.

These were important people in our lives at the time. People we held very close and were important parts of our daily lives. As fate would have it, we became less important in their lives and so we became disposable. It is a fact of life, relationships change. Very rarely does the intensity of even the best relationships stand the test of time. Our lives revolve around that change. Seeking and exploring, collecting and rejecting, learning and growing, and taking with us all that we have learned from that interaction.

This holds true for our professional relationships as well. Some people will be with us our entire careers while other will come into and out of our lives. Sometimes those relationships are very intense, while others are far more casual. While some of our professional relationships will also generate a personal connection, not all will. While some personal relationships will lead to professional interaction, many won’t. The point is, you need to understand that things will most likely change, and it’s okay when it does.

Evolution is by very definition ongoing. While you may still have friendships and relationships from when you were a child, most of those people from the past are not as critical now as they were then. Some of those people you can’t remember and they don’t remember you! Others, you can still recall for any number of reasons as they you.

The point of this from a professional standpoint is that some of your best relationships today will be gone tomorrow. Some from the past will resurface and come back stronger, and others never will. The key is to understand the evolution. To always being open to finding those who share common values and you enjoy working with. Working with people you don’t like is not a great way to go through life. Also understand that nobody “owes” you a relationship and you have to nurture each relationship to keep showing value or that relationship will go away.

Life is full of personal and professional experiences. Valentine’s Day is a great opportunity to reflect on those people in your life and share that you care. Also think back at how those from five, ten, twenty or more years ago that may or may not be in that group, and all of those who are now, were not back then!

Happy Valentine’s Day!

Questions or comments: Mike@IMTcoaching.com