Do you want to know why? 

Someone asked me the other day, “Tom how many originators do you think won’t make the same amount of money in 2011 as they did in 2010?”  I thought about it for a minute and said MOST WON’T. But the reason isn’t because of the buzz in the market place regarding LO compensation changes on April 1^st with the Dodd Frank Bill; it’s because they don’t know how to build a list. Let me explain further of what I mean.

If we look back at 2010, nationwide, most companies had a very unhealthy refi to purchase ratio, some as high as 90% refi. As I’ve said countless times over the years one of 2 things will happen in any refinance market, “either we will refinance the world at 4%” or rates will move up that it won’t make any sense to refinance. We have seen the latter come true over the last few months. I want to point out here that this is way different than any other aftermath of a refi boom. This time we just can’t turn on the faucet go call on Realtors and focus our attention towards purchases….why…because that market is struggling.

There are a tremendous amount of consumers on the side lines. Some for the right reasons but some still have this feeling of uncertainty.  When I asked myself why is this rearing its ugly head today? Here’s what I found, I don’t think any originator ever HAD to go build a list (some refer to this as prospecting) in over 17 years! Let’s think about it.  In 1994 rates were at 9% on a 30 year fixed rate. 1995 rates dropped to 7.5%. The days of the fashionable ARM’s and balloons 7/23 and 5/25’s. The early 2000’s had a drop to 6%. The mad rush with everyone buying houses in the early 2000’s the boom years for purchases, and now the recent drop to the 4% range for 30 year fixed last year. Over all 17 years there was either a steady supply of refinances, a conversion of adjustable to fixed, or a boom time for all purchases.  Today it’s a whole new ball game. The single largest reason the originator is not going to make their goal will be their lack of ability to build a list. What we call in our path2buy coaching program, step 1 in the 3 step process. What we teach is a step by step approach from list building to sale.

Let’s look deeper into list building. Let’s take our common theme of a renter who has never owned before. What are we going to do to generate this type of prospect? We teach the 3 ways of doing this, consumer direct, database, and lead sources. Let me give you a few examples of each. Consumer Direct – here is where we take the consumer video of the 7 and a half reasons of why the real estate market is stagnant, and build a campaign around requesting that video. Whether that is a mailer, a seminar, cold calls, lunch & learns, or just good old fashioned advertising, the call to action is always the same, request the video. The database is going to be used here for more of what we call “who do you know”. Reaching out to your existing clients and seeing if they know of any what we call P4’s, the renter who has never owned before. Then the third way to build your list is through lead sources. Some might refer to this as just Realtors or what the internet marketers call affiliates. In their world this is where you cross over into another’s list and gain some monetary benefit through an affiliate commission. In our world that would be a RESPA violation. Lead sources allowing you access to their list is being done because whether they have a vested interest in their consumer purchasing a home like a Realtor or might just be a value add. The originator, who doesn’t know how to build a list have done nothing wrong, there just wasn’t enough time or maybe better said, wasn’t needed to prosper. In retrospect if they had it all to do again they might have done it exactly the way they did over the years. In 2011 it is crucial for success to learn this lost art of prospecting. Thanks again.

To watch some of the path2buy videos go to pathtobuy.com

Many of our clients have been asking that I link all three Path 2 Buy videos into one.  Here you go.

Included are the 7 1/2 reasons of why the real estate market is stagnant, what the originator and the Realtor can do about it, and a brief description of what the Path 2 Buy Program includes.

After watching please post your comments.

Happy New Year and together we can make 2011 the best year ever!

Why is it that some folks feel as though they have earned the right not to go out and engage with their customer? This seems ludicrous. Whether your excuse is “been there done that”,” “I hire people to do that”, “I’m way beyond that”, or your just scared to get back in the field and re-engage. You need to rethink those thoughts.

The business world is changing every day, faster than ever, and you as the leader of your organization need to get a “real time” pulse on what’s happening with your customer. I’ve also found over the years that the leader who is not engaged becomes a manager who manages from a defensive position. Getting sold a bill of goods as to why things aren’t working right, why sales are down, why we can’t convert, the software is too slow, and on and on. When the manager gets real time information they can react offensively and get the whole company either on track or on a different track altogether.

I want to site two situations that are great case studies for this.

The first is a company called Mariano’s Market Fresh a grocery chain with three stores in Chicagoland. A new store is coming to my area in May 2011 and I thought I would drive about 30 minutes to see what the experience would look like. I was blown away. My wife and I could not believe the quality of the store and the selection that it offered. We spent almost an hour IN A GROCERY STORE! I can’t think of a time that has ever happened to me in the past. As we proceeded to check out I engaged with the cashier and said “What a pleasant experience it has been, this is our first time here” and she replied “you should tell the owner, he’s bagging groceries on the next register over.”  WOW, did he need to be doing that? Based on the size and the success of the store, I know he didn’t NEED to be doing that. His engagement made that a better store.

The second is my friend Jimmy John. Jimmy has over1400 franchises now and I knew him when he had less than 50. I recently saw one of his newsletters and he talked about sales dollars per student per week on his college campus stores, similar to the Good To Great reference of Walgreens. What Jimmy found is that some of his franchises wanted to expand their markets wide instead of deep.  What Jimmy advised was in order to increase the dollar per student per week ratio they needed to expand at that campus instead of going outside the territory, solid advice from Jimmy.  Jimmy and I talked recently and he mentioned that he personally visited over 60 stores nationwide over a 4 week period.  Another hands on experience by the majority shareholder of a billion dollar company.

The moral of the story is this. Make sure you know what your customer is experiencing first hand. Get out in the street where the rubber meets the road even if you are the owner. You will find out some things about your company both good and bad. Savor the good and get rid of the bad…..offensively!

I’ve been getting several calls and inquiries asking, “What’s going on with your blog? You used to post weekly, why haven’t you posted?” Let me tell you what’s going on here at Majestic Consulting. Over the past couple of months I’ve been working on a project that is near and dear to most of you. Why is the renter not moving in today’s perfect environment for ownership? Not only have I found out why I but have committed to creating a product for the mortgage and real estate industry that will revolutionize the mindset of how to handle this renter. I have a huge concern that mortgage companies, and their salespeople, are relying heavily on the refinance business and we all know that this will come to an end….again. We don’t know when but it will happen. As I say, one of two things will happen; we will either refinance the world by getting everyone a safe 4%, or rates will move up and it won’t make sense for the consumer to refinance.

Our program should launch early December so stay tuned for the details. Now if you could do us a favor and read the 7½ reasons and post a comment, especially if we are right on target in your market.

The following post is what I call: 7½ reasons of why the renter is on the sidelines.

read more…

The media is at it again. More Mis-information. Instead of talking about it, I’ve decided for you to see for yourself!

People who don’t understand the path to purchase for a homebuyer are missing a big opportunity. And by opportunity, I mean “sales”.

The first step is “Should I buy a house?” There is no particular property in mind at this point. The individual is mulling options: rent or own. I think we can all agree that owning a home is a far better, long-term investment, but we need to get people to look past the current housing situation. Let’s look out 30 years, home values should go up and even if they don’t the numbers still point to ownership.

The next stop on the path to purchase is “When should I buy a house?” Just as home values will increase, prices and mortgage rates will follow suit. So, buying a home now is a fantastic investment! read more…

A long time ago, when you wanted to ensure that a company you might do business with had a good reputation, you contacted the Better Business Bureau (BBB). And if you wanted some satisfaction when dealing with a business that wasn’t playing fair, you threatened to report them to the BBB.

That’s ancient history now, because the BBB lost touch with its customer. They focused their energies on recruiting businesses to become a member instead of reinforcing the organization’s value to the consumer. They forgot the basic push-pull strategy. If you don’t push consumer demand, there is no pull from the company that sells your product or services to buy from you. Because BBB didn’t court its consumer, the organization lacked appeal to the businesses they sought to induce as members. read more…

I recently came across some training material I used about 20 years ago. The focus was to help real estate agents convert renters to homebuyers. I read what I had prepared back then and realized the basic reasons for buying versus renting have not changed:

1. Appreciation. The value of a home, in the long term, will increase, providing you take care of it. Sure, in today’s economy, that doesn’t seem likely, but the economy will rebound and when it does, your home will appreciate.

2. Equity. The money you pay towards a mortgage is like an investment account. As the value of your home increases and your mortgage balance decreases, your equity grows incrementally if you take a 30-year fixed rate.

3. Tax Advantage. Rent is not deductible; it’s just an expense. Property tax and mortgage interest provide valuable deductions at income tax time.

4. 30-Year Perspective. At the end of 30 years, how much would you have paid in rent? Assuming an annual increase of 4%, $1,000 a month in rent right now becomes $3,119 in 30 years. Do you even want to add up your rent payments? Meanwhile, a 30-year fixed rate mortgage payment doesn’t increase except for the minor real estate tax increases. Presumably, your income does so your debt-to-income ratio is far better as a homeowner than a renter. read more…

Homebuyers can take advantage of record low interest rates and home values. Interest deductibility hasn’t changed and, if anything, the tax rate will go up, which makes the present buying situation extremely palatable for the first-time buyer and yet another compelling reason to purchase.

So why aren’t more people buying homes now? Sure, job insecurity and concern over property appreciation are factors here, but there are still plenty of prospects who would qualify for a mortgage—except they are paralyzed by indecision and misinformation.

The bottleneck that I am seeing is that mortgage lenders are not effectively communicating the value of owning versus renting, regardless of the economy. We need to paint a better picture of what the future will look like for people who continue to rent. They’re not seeing immediate pain. Instead, they’re sitting back, feeling thankful that they don’t have an investment that is losing equity or a mortgage they can’t afford. read more…

My daughter, a high school senior, returned last week from a Young Life Expedition in Saranac Lake, NY. She spent a week with 300 other teens in an adventure that gave them new perspective.

At check-in, every attendee had to leave their cell phones and all electronic communication devices with the camp’s administrators. They had to forego their ability to call, text, and tweet their friends. They gave up all access to Facebook. Sounds like a torturous experience for a young person, doesn’t it? But my daughter said it was the best week of her life! And this comment came after we had taken an Alaskan cruise the week before.

During this cell-free week, kids from New York, Virginia, Pennsylvania, Chicago, and other areas became entrenched in an environment where they had no choice but to interact in person. They learned how to live for the moment without the distraction of electronics.

Would the experience have been the same for them if the kids had been allowed to keep their cell phones? Absolutely not. Texting and Facebooking have become an addiction. Kids are not gaining the interpersonal skills that prior generations developed. The place for electronic communication should be to build on relationships that are established in person. It’s a continuum but not a means to engage and sustain a relationship. You can’t replace the human connection. My daughter discovered that reality, much to my delight.