It has been a challenging year for many mortgage brokers.
While the best in the industry have established their processes and built successful businesses, there is a gap in the mortgage broker service model that is costing specialists a fortune in lost earnings, says property negotiators and analysts Hello Haus.
The company has revealed how brokers can increase conversions, improve cash flow and profitability without having to acquire new customers.
Hello Haus CEO Drew Innes (pictured above) said his business worked with a large number of brokerage firms – which meant he was able to examine income gaps and inefficiencies in conditionally approved loans.
“Brokers don’t generate any income from new leads until converting pre-approved loans via the usual procedure and until the client buys and settles on a property,” Innes said.
Innes said the research revealed metrics that should concern any broker looking to maximise their income.
“We’ve discovered that pre-approved property buyers who don’t rely on assistance when purchasing will on average take seven months to transact after gaining a pre-approval,” he said.
“This means there are some transacting in days, while others are taking 12 months or more to secure a property and waste at least 90 hours researching upwards of 300 properties physically and online and miss their first five target properties.”
Innes said as a result, many property buyers were taking their time purchasing property or settling for a property that does not meet their needs simply out of frustration.
“Buyers will also pay an emotional premium for their real estate because they’re outplayed and out-negotiated by the selling agent,” he said.
“Buyers are becoming overwhelmed by the buying process and make bad decisions simply to escape the property buying process. Some even suffer buyer fatigue and don’t transact at all. There is also a trend of many property buyers experiencing a sense of buyer remorse, which dampens their enthusiasm to borrow and buy again, hence the reason most buyers only transact every 13 years or so.”
Why should brokers care about buyers taking too long to act?
Innes said on the surface, the lack of buyer action might not concern larger brokerages as they simply write off the lost time and effort as the cost of doing business.
“But our research shows these unconverted borrowers are costing the industry wasted time, resources and millions of dollars in lost revenue,” he said.
“For instance, the broker reports it costs approximately $2,500 to acquire a customer, package a loan and obtain a conditional approval. A client may take seven to 14 months to transact, during this period, they’ll come back to the broker time and again requesting multiple reworking of conditional loans and asking their broker questions about the buying process and how to deal with the selling agent – many of which brokers are simply not qualified to handle, nor get paid for addressing.”
Brokers should oversee clients’ property purchases
Innes said brokers managing the buying process was the key to settling more loans faster, improving conversions, translating to better cash flow and increased profitability for their brokerage.
“It also gives clients a far better experience than the overwhelming feeling of going it alone and feeling unsupported,” he said.
“We’ve found the best way to tackle this gap is to get clients finance and buyer ready early in the sales conversion and conditional approval process. Those clients are more confident, have greater buying skills, spend less days on market and transact faster because they can outperform their buying competition. As the broker, you get paid sooner with far less additional work.”
Four steps to improving conversions, cash flow
Innes said there was an effective system based on four key steps which helped achieve these outcomes:
Education
“Your buyer clients need help to learn about the property buying process before they start their real estate hunt,” Innes said. “Being forearmed with knowledge and forewarned about the challenges allows them to proceed with confidence.”
Support
“Your client must have the correct type of support from the broker or an allied expert who can address their concerns. We find when a client is educated and supported by an expert in the buying process, they are more confident and take the right action faster.”
Alignment
“The broker should align themselves with other professionals who understand and participate in the buying process. These aligned specialists will be on hand to assist the broker and help the borrower to find, analyse, negotiate and transact property.”
System
“Applying a systematic approach to help clients get “buyer ready” is key. A system that has the necessary components can see buyers settle on a property four times faster than purchasers who choose to go it alone.”
Innes said to improve revenue, it was not necessary to secure more leads.
“Instead, it’s a matter of taking the customer base you already have and helping those borrowers become buyers more quickly.”
Meanwhile, while the trend of buyers taking a long time to purchase property is increasing, lenders and practitioners have improved when it comes to on-time property settlements, hitting a new high of 88.2% in the September 2022 quarter.
