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In today’s difficult market, builders are leaving few stones unturned in their effort to generate sales, yet many may be overlooking a resource that plays a major role in housing sales — lending.
That’s easy to understand because in the past, when buyers and lender programs were abundant, builders were quick to establish joint ventures with a particular lender so that they could capture a piece of the action and not worry too much about the details. The lender in the partnership usually had a pretty high approval rate and provided better services and a nice cash flow to the builder.
But all that has changed, and rather quickly, as programs and criteria have tightened.
Now, many salespeople who haven’t kept up with lending changes since the downturn simply hand their deals to an available lender in the hopes that it will be approved. This is not the way to generate home sales in a tough market, especially when the working relationship between the builder and lender is constrained by limited resources, inexperienced loan officers and inadequate programs.
What builders need nowadays are educated salespeople who know what programs are available and who can recognize a sale when it presents itself.
In addition, builders should steer away from inexperienced in-house loan officers in an effort to try to save money and instead work with several experienced and reputable lenders who will not only strive to complete deals, but who also have enough programs available to make the deals happen.
The following are examples of several deals missed and made — and why:
Time Lapses On
An in-house lender turned down a potential buyer because the buyer had applied for a loan a year after a VA short sale. The lender’s program required a two-year waiting period, so the buyer bought from another builder and a major lender that was able to close the deal because it had a program that required only one year following a short sale to qualify. The builder with the in-house lender missed the sale.
It’s All in the Ratios
While coaching a sales agent, the builder’s in-house lender was putting together a deal that required the home buyer to reduce his debt by $20,000 so the lending ratios would work. The agent knew the deal wouldn’t go through because the buyer couldn’t reduce his debt that much, so I asked the agent to pull the credit so we could review it together. We identified about $5,000 of debt that the buyer could pay off that also would achieve the lender ratio required. After contacting the lender, the deal was made — ratios are ratios — but had I not been there, the builder would have lost the sale because the in-house lender hadn’t taken the time to figure out which debt made more sense for the buyer to pay off.
Great Credit, Money in the Bank — But Self-employed
My niece has great credit and money in the bank, but she could not get a loan from her builder’s lender because she was self-employed. She was referred to two small investor banks, which required 30% and 40% downpayments, respectively. Not great options.
Smaller banks finally are starting to come out with programs for self-employed buyers, but for builders to take advantage of these opportunities, they must be able to build relationships with them or be able to broker to them. Everything tightens up dramatically in a recession or down market before new programs begin to pop up as the economy recovers. But builders must be on their game to realize this and take advantage.
Education, Education, Education
At my local building industry association, we host a lender forum that features various lenders who discuss their products and help educate sales agents on what’s available in our market.
I cannot stress enough the value of this education.
A sales agent’s knowledge should not be limited to one lender’s programs. Agents need to know what programs are available so they have a healthy variety of options to choose from in order to make the sale.
Shirleen Von Hoffmann is president and sales coach of Home Builder’s AdvantEdge, which specializes in sales agent secret shopping, sales training, seminars, one-on-one onsite training, sales coaching and builder consultation. A published author, keynote speaker, sales trainer and former top producer, she has closed more than $1 billion in new-home sales during her career. For more information or to contact Von Hoffmann, visit www.homebuildersadvantedge.com or www.thequeenofsales.com.
“Think Sold! Creating Home Sales in Any Market,” available at NAHB BuilderBooks, is a practical, how-to guide for developing the self-awareness, knowledge and skills needed to succeed in the competitive field of new home sales.
The book covers everything from the home buying process and new home financing to strategies for making better sales presentations and sizing up the competition. It teaches readers how to overcome customers’ concerns and provides specific examples of how to explain the benefits of new home features in customer-friendly language.
“Think Sold” provides insights on how to approach sales and life from a position of optimism that will create successful outcomes; how to improve upon potential customer prospecting and follow-up skills; and how to communicate effectively with various types of buyers and learn how to adjust communication strategies to increase rapport and alignment with buyers’ motives.
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