A breakneck home sellers market is forcing brokers and builders across the country to do a delicate dance. You need to prepare customers for stiff competition and the likelihood of new costs that would not come into play in a more normal market. Brokers and originators sometimes have to be the bearers of bad news while clients have confidence that they can buy this home.
This is exactly what John Sarkisian has been doing since the market launch. Fortress Home Mortgage Broker / Owner shared some of the steps MPA is taking to help their clients be successful. He explained the range of significant costs his borrowers could face and highlighted what he is doing to prepare them. He also emphasized how he deals with customer relationships when he has to deliver bad news.
“People make offers with valuation guarantees,” Sarkisian said when asked about some of the more substantial costs borrowers face today. “In a multi-offer scenario, of which there are many on the market today, buyers must guarantee the valuation up to a certain dollar amount. When these homes are sold in a bidding war, the sellers realize that their home is not rated for what is offered to them. Therefore, when they accept offers, they ask for valuation guarantees. This means that the buyer pays out of pocket the amount that his offer is above the estimated value. “
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Sarkisian explained that in certain situations these expenses can run into the thousands or tens of thousands. So common is this scenario that he is now explaining to each of his borrowers that his lenders are only loaning at appraisal and that they need the cash reserves to cover the additional costs.
While that additional amount may not be a problem for high net worth or more liquid borrowers, many first time buyers may have the income to buy a mortgage but not enough assets to cover these closing costs on top of the down payment. In some of these cases, Sarkisian is converting its borrowers from a traditional loan that charges 5% less to a loan FHA Program that only requires 3.5%. Even if this route can have its disadvantages, Sarkisian believes it can unlock much-needed liquidity in certain scenarios. As a broker, Sarkisian can also obtain a closing expense loan for its borrowers from certain lenders, which can help alleviate some liquidity pressures.
Conversely, Sarkisian believes one of the biggest mistakes a mortgage professional can make in this market is not to pre-check the client’s cash reserves. Once the client has overcome the employment and credit hurdles, their broker must ensure they have the cash reserves to handle additional expenses and closing costs that may seem hidden.
While Sarkisian submits himself to the real estate agents as the most important advisor to his clients in the market, he serves them as a source of sober second thought. It is his job to remind them to be careful and not to outdo themselves with something they cannot afford. While he can bring bad news at times, Sarkisian sees any disappointment as an opportunity for improvement. He positions the news as something of a school grade – even with hard work, you sometimes get a lower grade, and that just means adjusting plans and working harder. He designs disappointing financial news as an opportunity for the client to improve their position, grow, and pursue their goal from a stronger position.
How Mortgage professionals If you want to navigate these rough waters, Sarkisian believes that nothing can prepare you as well as immersing yourself in your work and learning firsthand.
“You have to learn to walk,” said Sarkisian. “You can’t learn something like that in a pile of books. You need to get a foothold and go through the fire and learn from the experience you get when you screwed up and realize what you should have done. I would advise other creators to be consistent with applying and studying because there will always be a scenario that you haven’t been through and the more business you do, the more likely it is that you will get experience with it you can get through make the application of a borrower. ”