Refi-mania has been over for over a year, and you’ve seen your former “go-to” loan agent looking to get chummy again and be bright-eyed and bushy-tailed for your purchase deal referrals.
In all fairness, refi’s are easier to process than purchase transactions.
Completing purchase transactions separates the “paper pusher” MLOs from the battle-tested purchase MLOs. It doesn’t matter how many of a buyer’s offers are written; if none are accepted.
Here’s why refis are so much easier:
1) Faster Closings – Leaders can close most refis in 30 days (even with a 3-day right of rescission for refis).
Purchase Deals Involve Time-Consuming “Hand Holding”
To close a purchase deal in 30 days requires a very proactive approach by the MLO with the buyers, starting with the first phone call.
Often it is telling a buyer they don’t qualify, describing the issues that need to be addressed, and when they CAN buy, and then cluing the agent in.
If a deal is going to die, better to die at the start than at the last moment.
Many buyers just need time to get “squared away” and given a “road map and signposts” on how to be ready months from now.
Agents and MLOs will both need paychecks then as well.
Many purchase deals (their agents) are considered a one-off” by an MLO’s sales manager, as the chance for getting distant and future referrals is often considered nebulous.
For lenders’ sales managers, it’s all about their monthly funding goals, not an agent’s commission (or their referrals), and thus they prioritize quicker, easier refi closings. If you had a cushy manager’s job, you might as well.
2) Refis have fewer phone calls to a lending staff – A refi involves only the borrower, the lender, an escrow officer, and an appraiser + the interest rate market’s up’s downs.
Purchases, in contrast, involve a 1) seller and listing agent, 2) a buyer and buying agent, 3) numerous inspectors (termite-seismic and the typical home inspection), and 4) a more detailed title search for the property and the buyer.
More parties = more phone calls = greater processing time, which interferes with the MLO’s time on the golf course, at the bar, or on vacay. LOL!
Purchases are labor-intensive, and good MLOs can fund three refis in the time it takes to fund one purchase deal! In addition, the average close rate (start to finish) is 60+% for refis and less than 40% for purchase deals.
Most Purchase Deal Killers are Due to the Lender’s Lack of Due Diligence. Or the MLO has NOT Communicated a Master Plan.
Purchase deals often die due to income and credit issues which need to be pre-emptively addressed. Or the MLO’s focus is unclear. Or buyers’ zig instead of zag (impulsively buys a new car).
If an MLOs aren’t proactive when the loan app began; (in the prequal phone call) and does not manage expectations and timelines. no one will be “singing from the same hymn book.” as the offer is being made.
Altogether Now—
Beatles
With a purchase offer, a “first offer’ acceptance is a gift from the heavens and means more future biz for both a buyer’s agent and their MLO.
There is one action an MLO can take to
vastly increase the buyer’s offer’s chance of being accepted.
After a DU (formal) approval, while the buyer’s offer is being submitted, an MLO should initiate a call to the listing agent to introduce themself and discuss the buyer’s loan qualifications.
Avoiding talking to the listing agent is a deal killer!
In contrast, as buyers lose out on offers, the more their frustration will grow (as will their agents and the MLOs). Too many declined offers often lead to buyers making a “pitching” (agent) change, which is all the more reason why agents need an MLO that communicates the buyer’s frustration before they boil over.
Credit Issues for Both Buyers and Seller
“The Last Minute Landmine”
MLOs usually know of a buyer’s credit issues – but rarely does anyone know about a seller’s past credit issues are – which can derail a COE at the very last moment.
How Undisclosed Tax Liens – Kill Deals
When a purchase escrow opens, BOTH buyers and sellers must fill out a “statement of information” form that goes back through all their addresses, name changes (i.e., divorces, lawsuits, etc.), and public records for the previous ten years!
That’s a lot of time for both parties to easily “forget” and NOT own up to their past issues. Unfortunately, it isn’t until the last step before COE – that any of these deal-crushing issues are revealed.
Sellers often have equity and can pay off the (undisclosed) lien(s) from the proceeds from the home sale. On the other hand, buyers often purchase with the least down possible, and hidden liens often derail a buyer’s COE..
And with a lifetime of future referrals and repeat biz on the line, when a deal blows up, it’s literally a “sleigh ride to hell,” complete with reindeer, elves, and a large man in a red suit, but he’s NOT yelling Ho Ho Happy COE.
Sourcing of Gift Funds
Gift $$ to Buy a Home
Another reason purchase deals are so much more difficult than a refi is the issues(s) of ‘gift money and/or co-signers”.
In addition to the siblings’ rivalries’, gift money is usually the most delicate issue. Parents can think of many reasons why the kids don’t need a house (right NOW!) and give them $100k+.
Also (to avoid fraud), lenders are forced to verify the source of every dollar that goes into every purchase and that can be tedious as buyers deposit cash in their ATM.
Purchase Deals are a “Paper-Chase”
All gift funds need to be sourced OR”seasoned” (in the account for between 59-89 days – depending on the bank statements cut-off date), and all deposits ($200+) need to be explained.
In addition, another sibling rivalry issue that rears its head is: PARENTS’ CO-SIGNING.
Parents can also think of many reasons why their kids don’t need a house (right NOW!) and why they shouldn’t put their life plans on hold by co-signing a child’s mortgage.
In Conclusion
For all of us on commission, every time a deal dies at the last second, so does the agent’s life plans, referrals, and plan for a better lifestyle.