Total Cost Selling:
The Key to Creating Instant Credibility and Consistently Building Clients for Life
by Dave Savage
The phone is ringing off the hook. You have more business than you can handle. You haven't seen the bottom of your desk in over a month. And you know what that means…
It's a refi boom!!
The good news - lots of business. The bad news - it's temporary. But does it have to be? The most productive and successful loan officers throughout the country don't have wild fluctuations in their business. They have little fluctuations. Why? Because they do things the average originator doesn't do.
The current low interest period could set you up for the rest of your life as an originator. Or it could leave you with a few more bucks in your pocket and wondering what to do once the rates rise again. What makes the difference? How you handle your customers.
I called three mortgage companies here in Denver to test my theory that most originators don't do what the superstars do. I was right. Here is what the conversations went like:
Boni: Hello, my name is Boni Lonnsburry and I would like to know what your current interest rates are.
LO: OK. What is the loan amount?
Boni: About $200,000
LO: And would it be a refinance or a purchase?
Boni: A purchase.
LO: And do you want a 15-year or a 30-year loan?
Boni: 30
LO: Well, we expect the rates might go down this afternoon, so you may want to call back then, but right now the rate would be 7 1/8th with 0 points, 6 ¾ with 1 point.
Boni: Thank you.
LO: You're welcome. Give me a call back when you are ready to apply.
Boni: All right, I will.
And we hung up. Out of the three calls, no one asked for any contact information - not even my email address. No one differentiated himself or herself in any way. And no one impressed me enough for me to remember who I'd called.
Now to their defense… it's a busy time. And they may not have perceived me as a serious customer, however none of them differentiated themselves in any way.
What to do differently to make sure to capture the caller's business? I asked Dave Savage, a true expert on "WOWing-the-client".
I asked Dave how the LO's I spoke to went wrong?
Dave explained to me, "First, it's important to understand you have three basic types of loan officers:"
1. The APP Takers - You have the total APP takers they just answer your questions and close the call with "hey just give me call if you need me." They don't always ask for e-mail address, and didn't even request follow up information for database.
2. The Professional Loan Officer - Then you have what I consider to be your professional loan officer, but he or she just has found the right strategies or tools to be come a Trusted Advisor. They're good, they're knowledgeable, they're likable, hard working and they using make good money.
3. Trusted Advisor - a true mortgage consultant - This originator recognizes they are a "financial expert in home financing". They do more than take APPs and treat their customers well. They educate, inform and enlighten. And they leave their customers in a better place. Perhaps they have more knowledge, more peace of mind that a wise decision has been made, or perhaps they are in a better place financially. They leave their customers saying, "WOW! Am I glad I met that loan officer."
After hearing Dave's categories of loan officers I thought to myself The Trusted Advisor loan officer certainly the professional I want handling my mortgage.
My next question to Dave is how can loan officers WOW their clients?
Dave Savage: Let's role play. Ring. Ring. Hello… Make-A-Difference Mortgage. This is Dave Savage speaking. How can I help you?
Boni: Hi Dave. My name is Boni and I am just calling to check out what your rates are today.
Dave: Okay Boni. I would love to tell you exactly what our rates are. However, before I can really quote something for your situation, I need to find out a little bit more about what it is you are looking for. Is this a purchase or a refinance?
Boni: It is a purchase.
Dave: Okay. So you are buying a new house?
Boni: Yes.
Dave: Again I just need to find out a little bit more so I can quote you a rate that matches the type of loan you are looking for. What is the purchase price, an estimate about what you are trying to buy?
Boni: It will be around $250-$300,000 and it will depend on how much I can afford.
Dave: And that probably depends on the down payment and the monthly payment and stuff like that.
Boni: Yes.
Dave: And how much did you plan on putting down?
Boni: Well I am not sure Dave. I don't have a lot to put down right now, but I am thinking between 0 and 5 percent.
Note from Dave: Okay. Now a lot of loan officers don't ask some of the questions I do, but this next question is the first step to positioning yourself as a Trust Advisor, because it is a question that other loan officers don't typically ask so you immediately create a GAP between yourself and other loan officers.
Dave: How old would you like to be when your home is paid off?
Boni: Boy, I would like to be about 50.
Dave: And based on your current mortgage how old are you going to be?
Boni: I will be about 71.
Dave: Okay, based on your current mortgage it looks like you are 21 to 26 years beyond the dream of having your home paid off.
Boni: Yes.
Dave: I ask that question because, contrary to popular belief, you don't have to choose either a 30 or a 15-year loan. What you can do is pick a loan that is best for your situation. You can get a loan that gives you the lowest monthly payment possible so you can have the flexibility to make a little extra payment or invest the difference between one payment and another. A small change in one debt structure vs. another can make a life changing difference.
(Note: Some clients won't let you go through this many questions. Many times you need to gauge their tone and how interested they are about what you're discussing. Sometimes I will give them a rate quote that ranges from the high to the low end. I typically say to them, "As soon as I have a little more information, I will tell you exactly what your quote will be.")
Dave: How long do you think you want to be in this home?
Boni: That is a good question but I probably won't be there until I pay it off, let's put it that way. Probably 7 years. Tops.
Dave: Boni, it is important to know, that if you talk to other lenders to compare rates make sure you compare the Total Cost of the loan over time - because, the single most critical element of your mortgage is the Total Cost of your loan over 7 years.
I've been running some numbers while we have been talking on the phone and based on a $300,000 house, today's rates for the type of program you are referring to is 7.75%, and over 7 years that will make your total payments, with interest, points and everything else $146,722. I have a special software program that most loan officers don't have access to that helps me calculate Total Cost.
Again I want to make sure you understand why this is such a big number; this is your Total Cost over 7 years. Most lenders don't give you these numbers, but my feel that my role is to make sure you make a fully informed educated decision. I will always recommend the loan that gives you the lowest cost over time so that you can invest your monthly savings either back in your mortgage or some type of asset accumulation account.
Another thing to think about, is even though you may be in your home for seven years, it isn't likely you will be in the loan for that period of time, because interest rates fluctuate. I have many clients that have refinanced their homes over three times in a seven year period, but it is still important to know the cost over time.
Now, I just want to make sure we are on the same sheet of music. Do you understand importance of knowing the Total Cost over time?
Boni: Yes, Dave this is some great information - I am surprised other loan officers haven't mentioned this before
Dave: Another point I really want to remind you of is rates do fluctuate not only day-by-day but also they can sometimes change during the middle of the day. The interest rate I am quoting today for this particular program might not be the same thing tomorrow.
Now I would like to discuss some options that may help you pay off your home by age 50. Would you like to know of few of the options available to you?
Boni: Yes, definately.
Dave: Most people that I talk to don't realize that just by making an extra $200 payment every month, your house would actually be paid off in xyz number of years or if you invest the that $200 in an asset accumulation account at 8% you could make enough to pay off your home by your target age of 50 or maybe sooner. Our special software not only helps us calculate the Total Cost over time, but it also shows the power of an extra $200. Have any other loan officers mentioned these numbers before?
Boni: No, I wish.
(Note from Dave: The number I give them, whether it is $100 or $200 or $500, will depend on how payment sensitive I think this client is. If I can tell that this is a person buying their first home and barely getting into it, I may say $50 to $150. If I can tell that this is someone that it is putting 20% down or more on a $400,000+ house, I may not even mention $100. I may go to $200- $500 or even more so that I can present them with some serious impact with life changing possibility. This is a key point: I don't sell loans or interest rates like most loan officers - I give life changing advise that if followed by the client can help them retired years before they thought possible)
Dave: Then depending on how the rapport is going at this point, if we are hitting it off and they are really interested (some people are extremely into what I am saying, they respond with, "WOW no one has ever told me that before"), then I will help them to imagine having their house paid off at age 53 versus 65.
However, I am also a big believer in too much information is just as dangerous as too little information and so you need to be reading the client, you need to ask good questions and then listen to their answers so that you can understand their priorities. For the client that isn't patient and necessarily interested in anything but the bottom-line lowest interest rate AKA Mr. Rate Shopper. For that guy I'm going to say, "Look I ran a bunch of numbers. Let me get your e-mail address because I am going to e-mail you a complete proposal on the program I recommend."
Boni: What else sets a Trusted Advisor loan officer apart?
Dave: Well, I am not afraid of rate comparisons. So, if I can tell this client is a Rate Shopper I will be direct, by saying, "Now I may not have been the first person you talked to, what interest rates have you been hearing out there?"
So I have given him:
1. An interest rate
2. A quote, and
3. Now I am going to ask them what are they hearing out there so I can see where I stack up as far as where my interest rate is, and if he tells me he has a better rate, I can find out what the program is, what the points are, and I plug in the numbers in the Mortgage Coach so I can show him how my solution makes more sense or let them know I will match that rate.
4. If I can match that rate and still show him how to pay off his house years earlier, I plug in the numbers, e-mail it to him while we are on the phone or I e-mail him and give them a call back.
Boni: so the e-mail address is the first piece of contact information you would get in this case?
(Note from Dave: This next section on gathering contact information only applies to cold leads from ads, direct mail, voice broadcasting, etc. If the prospect is a referral, they will give you all their contact information without using the strategies below. But, if you are receiving inbound calls from cold prospects; asking the right questions in a strategic order can be the difference between a 30% to a 80% Call to APP conversion rate.)
Dave: I typically ask for email address first and then I will ask for phone number. It won't be the first thing I ask for. I think personally that is a mistake. By asking for a phone number right off the bat, whether they give it to you or, you are increasing the likelihood that you will get resistance. Some questions are less threatening than others. You don't ask for person's social security number right off the bat. First, you build some rapport and create value. While building the rapport you ask questions that represent value to the client. The key is to ask good questions at the right time within the conversation. If you are unable to build some rapport, what good is their phone number any way? So, why ask for it at the beginning of the conversation.
I typically ask for the e-mail address before the phone number for a few reasons
1. I want to train my clients to communicate via e-mail and I also want to get that email address
2. Most clients are less resistant to giving an email address. Once they have answered one question, the chances of answering more, the deeper the question gets and the more personal the question gets, its more likely that someone is going to give you an e-mail address than a phone number. But once you've got that e-mail address, it is that much easier to get the phone number.
Boni: So you are gradually opening the door to a relationship.
Dave: Exactly.
And you are differentiating yourself in the market place. You are becoming more than an APP Taker and much more than an average loan professional. You are becoming a Trusted Advisor - a true mortgage consultant. And that change your image, your attitude, and the way you conduct yourself with clients.
To make it easy to provide Total Cost Analysis for your clients, consider an investment in the future of your business. www.mortgagecoach.com. Call 800.951.2696 for more information.
To contact Dave Savage directly email: dsavage@mortgagecoach.com.
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