By Bob Williamson

In this article,  I explain how loan originators can establish mutually satisfying relationships with Realtors. After reviewing the reasons why agents typically have little respect for loan officers, I show you how to identify the right agents, and how to approach them with a joint marketing program Realtors will respond to.

I’m a sucker for those nature shows on TV. One of my favorites is the one where they show the bears gathering by the side of the river in anticipation of the arrival of many thousands of salmon, swimming upstream to reach the place where they will spawn the next generation before they die.

One imagines this is a bittersweet experience for the salmon, but for the bears, it’s a seemingly unending all-you-can-eat buffet. The river is so thick with fish that all Bruno has to do is find a spot on the bank, stick his paw in the water, and – voila – lunch!

I could not help but be reminded of this scene during the last few refi booms. It was salmon season, and every lender with a cell phone and a rate sheet was a happy, well-fed bear.

But when salmon season ends for the bears, they just waddle off to hibernate for the winter. Loan originators don’t have that luxury. If you were filling your pipeline with refis until a year or so ago, perhaps thankful that you didn’t have to go searching for the roots and berries of dealing with Realtors® and their purchase transactions, it’s time to face reality: Salmon season is over.

If you want to still be in this business a year from now, you will almost certainly have to generate business from the purchase market. And for most of you, that means working with Realtors®.

Why? For one thing, they’re involved in almost 90% of all residential real estate transactions. They will probably spend more time with your customer than you will, so they’re in a very good position to steer your borrower/client to a competitor if they don’t feel comfortable with you.

Also, most homebuyers still contact a Realtor® fairly early in their decision-making process, even if they don’t ultimately buy from that agent. So, having positive relationships with multiple Realtors® is a good way to identify the people who are thinking about buying homes. In short, the reason you should be working with Realtors® is a lot like the reason Willie Sutton gave for robbing banks: That’s where the money is.

I’ve been coaching mortgage lenders for 15 years. So I have heard all the complaints about Realtors® being arrogant, disloyal, unethical, etc. Mike Moffitt had a good article in Loan Officer Magazine a while back (“Forget the Donuts! Here’s a Program That EARNS Your Realtor®’s Business”) explaining why Realtors® don’t always put on their best face for lenders. Their income depends on how well they satisfy their customers (and how many of them they can satisfy in a given time frame), and it’s not an easy job. They get blamed for everything that might go wrong, and sometimes loan originators are convenient scapegoats for their frustration.

Realtors® live in a sales culture in which Production is King. Top Producers – the people who consistently prove that they’ve got what it takes to close -- get the respect, the money and the glory. (You’ve probably noticed it’s the same way in our business!) As a loan originator, if you get the feeling that the Realtors® you call on don’t respect you, maybe it’s because you’re always showing up in their office with your hand out, and you never bring any deals of your own to the table! In any organization, the person who can deliver the business ALWAYS gets respect. When you start adding to the Realtor®’s business, they will respect you. If you don’t, they’re going to see you as a vendor. And vendors don’t get much respect. Only Partners get respect.

Targeting the Right Agents
In Karen Deis’ article -- also in Loan Officer Magazine (How to Interview a Realtor®), she explains that there are 4 kinds of Realtors®:

• Listing Agents
• Buyers (or Selling) Agents
• New Construction
• Relocation

Your first task is to focus on one or two of these groups and develop a marketing plan for becoming indispensable to the type(s) of agent(s) you want to work with. Market conditions vary with your geographical location, but for purposes of this article we’re going to focus on listing agents and buyer’s agents because in most markets, they are responsible for the majority of transactions.
The Pareto Principle (also known as the 80-20 Rule), when applied to Realtors®, predicts that 80% of the transactions in a market will be handled by 20% of the agents. I have tested this rule in dozens of markets and found that it is invariably true. If there are 1,000 licensed Realtors® in your town, the top 200 will be doing about 80% of the business.

Once a business relationship has been established, it must be nurtured. This takes time. It will take almost as much time to maintain a relationship with a Realtor® who can send you 2 transactions a year as it will take to maintain a relationship with one who can send you two a month. So which is a better investment of your time?

If 200 Realtors® in our hypothetical marketplace do 80% of the business, the top 10 will be superstars in that market. They will be busier, harder to get to, and most likely to have long-established relationships with a favored lender. Whether you attempt to convert these “top 10” Realtors® to your side might depend in part on who you are. If you are a superstar yourself, the top 10 agents will know who you are and will be more receptive to your approach. If you’re not a superstar, you’ve still got 190 agents in the top 200 you can approach with a reasonable degree of confidence.

It is also true that the most successful Realtors® will receive proportionately more attention from your competitors. So it comes down to classic marketing strategy: if you are going to prevail with these successful agents, you will have to offer them more of what they want than your competitors do.

Your Offer: Why a Realtor® Should Do Business With You
The traditional approach lenders have taken with Realtors® incorporates one or more of the following talking points:

• The quality and/or variety of your loan programs
• Your experience and integrity
• Your exceptional service and reliability
• Your competitive rates/pricing

While each of these points may be important, or even essential to a Realtor®, you must understand that virtually all of your competitors will be making exactly the same claims. And by their very nature, all of these claims would be very difficult, if not impossible, to prove – especially to someone who has heard it all before.
You need more than that. You need to be able to make a persuasive case that, by forming an alliance with you, the Realtor® will be able to close more transactions than he or she would be able to close without you.

In short: If they work with you, they will make more money. There are two main arguments to substantiate that claim.

1. You will generate leads, and you will develop them and refer qualified, motivated prospects to the Realtor®.
2. You will meet with their prospects and turn them into qualified, motivated, decisive buyers (or sellers/buyers), thus reducing the time it takes the Realtor® to complete a transaction, thus creating time for the Realtor® to do more business.

Let’s look at each of these arguments in more detail.

Generating Leads & Developing Them Into Prospects You Can Refer to a Realtor®
In a traditional Lender-Realtor® relationship, the Realtor® refers a buyer to you. Let’s say there’s a problem with the appraisal, or with satisfying an underwriting condition – something that doesn’t get discovered until late in the process. The Realtor® blames you, and stops sending you business. Sound familiar?

But what if you are sending as much business to the Realtor® as he or she is sending to you? If the Realtor®’s average commission on a sale is $5,000, and you are referring one transaction per month, your relationship represents $60,000 a year in income to the Realtor®. Are you going to get dumped over one transaction gone bad?

You have to find a way to generate your own leads – leads you “control” and refer to Realtors® who reciprocate. If you want to be seen as a partner instead of as a vendor, you have to do your share of the heavy lifting.

Here are some of the ways you can generate your own leads:

• Mine your database – communicate regularly with your past clients and ask them if they or someone they know is thinking about buying (or selling) a home. A database of 500 past clients, properly mined, can generate 1000 leads per year.
• Market your services directly to home sellers – 80% of sellers will buy a home within a 10-mile radius of the home they’re selling, and less than half of them will use the same agent who listed their existing home.
• Target first-time homebuyers by mailing to apartment complexes where rents are comparable to what a mortgage payment would be on a decent starter home
• Farm for prospective sellers in neighborhoods where property values have appreciated and there is a high buyer demand for homes.
• Set up a call-capture system and offer it to Realtors® who advertise their listings – prospective buyers can call your 800 number and listen to a pre-recorded message telling them about the home – without having to talk to a Realtor®.
• Attract buyer leads by advertising a Free Report like my “Ten Things You Need to Know Before You Buy a Home”
• Prepare financing packages for Open Houses – include bio pages on the listing agent and yourself, information about the home, financing information, and testimonial statements from some of your past clients. Sponsor a drawing for an attractive prize so that visitors to the open house will register to win the prize.

Turning the Realtor®’s Leads into Qualified, Motivated, Decisive Buyers
In our business, time is money, and that is equally true for Realtors®. They may make more money on a single transaction then we do, but they also invest more time per transaction. Much of that time is spent showing the buyer homes and trying to find them the right home.

Many buyers look at homes for months before making a serious offer on a listing. The Realtor®’s enthusiasm for working with the buyers can diminish with the passage of time. This change of attitude is not lost on buyers.

The most common cause of a buyer’s indecision is the fear of making a mistake; the fear of buying the wrong home, or of paying too much for the right one, is enough to give anyone pause, even when it is not their first home purchase.

As a lender, you are in a position to alleviate and even remove this fear. You can help homebuyers clearly understand their budget and the costs that will be associated with a home purchase. You can also give them objective advice about the local housing market, and help them get the information they need to enter that market with confidence that they can protect their own interests. A confident buyer will be much more decisive, and the Realtor®’s timeline from start to closing will be shorter and smoother. (To find out how you can actually fill this role to the point that your homebuyer clients will become raving fans and refer their family and friends to you, go here.)

You can separate the lookers from the buyers by recommending they proceed with a full loan preapproval. Most people won’t commit the time and energy required unless they are serious about buying.

Once you’ve taken a loan application, you can refer the buyers back to the Realtor® – with a solid statement of your confidence in the Realtor®’s integrity and professional skill.

And after you’ve taken the application and referred them back to the Realtor®, you can (and should) call your buyers regularly (once a week would not be too much) to check on their progress and offer further encouragement and guidance.

If you take the time to explain this process to your Realtors®, they will be able to see that if they send all their prospects to you immediately, you can play a vital role in turning lookers into buyers, reducing their average time investment per buyer, and making them more profitable. Everybody wins.

If you'd like Bob Williamson to help you become the top purchase loan originator in your local market, find out how you can get a free, private, 1-hour coaching session.