The Buyer-Agent Playbook is a new iteration of RISMedia’s biweekly Playbook segment, specifically centering on buyer agency and how agents are navigating the changes and trends in a post-NAR-settlement environment. The series will provide brokers and agents with insights and information to ensure they not only survive but thrive in these challenging times. Industry professionals explain the strategies they’re employing and unique ideas they’ve formulated. Tune in every Thursday for another addition to the series.
When someone is in need of a professional person’s skills and abilities, they’re always thankful to get a recommendation from someone if it works out. A dentist, a plumber, an accountant, whoever. Those in need of a proven pro ask for help from people they trust.
It’s the same for you as a residential real estate agent, except you won’t be doing the asking, you’ll be doing the telling. With buyer agents facing new challenges to showcase their value proposition post-Burnett, explaining mortgage options and connecting a client with a top-notch mortgage pro at a company or banking institution can go a long way toward solidifying your relationship, hopefully justifying to them that you’re earning a commission through work and knowledge over and above simply showing them properties on the market.
The best REALTORS® are able to school first-time homebuyers on the pros, cons, specifics and nuances of mortgage option basics over and above the 15- and 30-year fixed ones. Truth be told, most hopeful buyers are too busy trying to find the right house to have delved deeply into what mortgage works best for them.
The options range from well-known ones to the fairly obscure. If asked, could you explain exactly how a 10-year, interest-only mortgage works? You never know…one day a client might say they heard about it and ask for details.
Currently, there’s a good chance buyers may consider alternatives to the 15- and 30-year fixed rates, as the latest jobs report showed that the labor market in the U.S. remains exceptionally, and perhaps surprisingly, strong. What does it mean for the Fed and the housing market? That the chances of long-sought-after rate cuts this year may be getting slimmer.
Overall, it “gives the Fed more reason to keep rates higher for longer, and will reduce the odds of a rate cut in June,” says Melissa Cohn, regional vice president of William Raveis Mortgage. “If the economy continues to remain defiantly strong, it is quite possible that the first rate cut will not be until the end of the year.”
In short, though a strong jobs market isn’t a bad thing, Cohn says that it’s “disappointing news for the spring and summer real estate season.” So being prepared to suggest short-term mortgage options can not only save buyers money, but could even encourage them to buy now instead of waiting and hoping for rates to drop.
It’s not a given that all buyers will want to talk about mortgages with you. But if they do, be prepared. And along with the finance discussion, being able to make lender referrals is also a major plus. Agents should establish bonds with mortgage professionals from the jump, hopefully through continual real estate transactions. They can then be confident in providing names and numbers.
“I have great lender partnerships,” notes Anam Hargey, team lead of @properties Christie’s International Real Estate’s Hargey Group in Illinois. “They have a lot of different presentations, so once someone is buying, we usually do a Zoom call with the lender, discuss different options and walk them through homebuying. This has helped answer a lot of questions and eased anxieties.”
Pam Rosser Thistle is a longtime REALTOR® with Berkshire Hathaway HomeServices Fox & Roach, REALTORS® in Philadelphia. She gets the importance of having mortgage knowledge and reliable referrals.
“Because mortgage options are tailored to buyers’ personal situations, like if they are self-employed or a first-time buyer, I encourage them to speak with lenders,” she says. “While the 30-year conventional loan is most popular, it makes sense to investigate other options. I share three or four lenders, since some are stronger with different types of loans. I have clients talk with them, run closing cost estimates and also make sure they feel comfortable with them. In my Center City Philadelphia market, it is very important to use a local lender. Philadelphia is quirky and specific. I don’t want to hear that a lender didn’t know to order a condo questionnaire or said yes to a loan in a building that’s non-warrantable.”
Melissa Hoff, broker associate and team leader of The Hoff Group at Compass, in Florida, seconds that point of view.
“I always connect my clients with a lender to educate them on their options,” she says. “Mortgage rates and programs are constantly changing, so there is no one-size-fits-all option. I think it’s best to let the mortgage professionals educate the buyers on their options as that is their primary expertise. Real estate is a relationship business, and I have made great connections over the years with various lenders who specialize in programs for buyers with certain careers. For example, if I have a client who is a doctor, I can refer them to a lender who specializes in doctor programs. I try to make sure I am referring the client to a lender that is the best fit for them.”
Want an interesting devil’s advocate? Here’s one from REALTOR® Jeffrey Decatur, a longtime broker associate with RE/MAX Capital, in Latham, New York. Now this is not to say he disagrees with all the above. It’s more that he knows who he is, and what he does.
“I tell my buyers that I sell houses, not mortgages, and mortgage people don’t sell houses,” he says. “This particular line is also great to use anytime a mortgage person veers out of their lane. I will then half-jokingly say I don’t sell mortgages, that selling homes is my area of expertise.”
Decatur makes sure to have lending professionals available to clients.
“In my initial consultation with buyers, I have a list of the six or seven professionals, from hard-money lenders to portfolio and non-portfolio lenders,” he says. “There is something for everybody. During the consultation, I will delve into financing. I like to tell them that I know just enough information to be dangerous. My advice is to consult the professionals. Rates and programs change regularly. I don’t want to misquote anything, or for them to potentially miss out on a program I don’t know about. It is always best to go to the source.”
So it’s not one-size-fits-all. But while you won’t be arranging a mortgage for a client, if you have the knowledge of the many options available, you can certainly pass it along. A Mortgages 101 class would include, along with the fixed-rate options, an ARM (adjustable rate mortgage), which adjusts over time based on the market.
“I tell clients to ask their lender about considering an ARM, and educate them on how they work,” says Lisa Reinecke, with RE/MAX Realty Pros, in Brookfield, Wisconsin. “Most current buyers haven’t heard of them or don’t understand them because 30-year fixed rates were so low for so long that ARMs went away as a possibility. I also remind them that their interest rate doesn’t have to be permanent for the entire time they own the house. They can always refinance later if rates improve.”
Kevin Gonzalez, vice president and residential managing broker at Floridian First Realty, in Coral Gables, Florida, notes that “most of the time clients have been approved for a mortgage before they contact us. However, there are some that need guidance for a mortgage qualification, and in these cases, we refer them to one of our in-house lenders.
“My advice to these clients is to contact the bank they are already banking with, which will be their best alternative based on closing costs and/or interest rates. We as brokers or agents will give advice on mortgages. As a homeowner myself, I always suggest going with a 30- or 15-year mortgage, depending on the client’s future needs. The 30-year conventional mortgages don’t normally have a prepayment penalty. My advice is to take the 30-year and make additional payments to the principal loan balance. That way they are not tied to the higher mortgage payment on the 15-year loan.”
Blake Blahut, broker associate and REALTOR® at Realty ONE Group Inspiration in Orlando, Florida, admits that he doesn’t often spend time talking mortgages with clients.
“I tend to defer to a trusted mortgage professional, but will sometimes make comments about how fixed and ARMS differ, the benefits of one over the other,” he says. “In my experience, first-time homebuyers are typically unaware of anything beyond a 30-year fixed. They believe a 30-year fixed with 20% down is the standard, but that’s the furthest thing from the truth. Many are unaware of 3.5% down FHA, 3% down 30-year ARMS or even the 15-year conventional options if they have a little funding to put down. In my 10 years of servicing first-time homebuyers, many end up with a 3% down conventional with a 30-year fixed.”
For agents, there’s clearly a lot to digest and be able to discuss. Oh, and that 10-year, interest-only mortgage? It’s one in which a homebuyer pays the interest monthly, but none of the principal if they prefer to use their funds for other investments. There’s a fixed term for the interest, and they have the option of paying down the principal, or switching to a fixed-rate mortgage at any point. Now you know!
