If you answered with a resounding "YES" to that question, you aren't alone. I can't think of many sane individuals who don't want the best deal possible, and when the word "free" is mentioned... people tend to flock in interest like the George Foreman family to a Bobby Flay BBQ. While it seems the path of least resistance, to jump at what appears to be the least (or no) amount of money for a service rendered or product delivered... it most times ends up the path of greatest disappointment.
Back in some of my more naive years, I used to think that when my parents offered up the timeless cliche "you get what you pay for" that the very slogan they were spouting was probably conjured up by some individual(s) who just wanted to soak up every bit of money they could from unsuspecting folks who needed their product and/or service. Then my naive nature awoke to a staunch reality. There may be something to that.
The Mortgage Business is an interesting one, for sure. We compete on many levels (service, lowest rate, lowest fees, name brand, delivery, reputation, marketing, etc) but it is no more interesting than most businesses who compete on similar levels. Let me digress:
- Have you ever purchased anything from an infomercial you saw on television? Come on, be honest. Okay then, I have. I'll put it this way, there won't be any testimonials airing anytime soon from yours truly on how I became a multi-millionaire while sitting and sipping cocoa in my underwear from the confines of my humble abode.
Perhaps that isn't the best example in the world, yet I think it drives home another age old point of view... "If it sounds too good to be true, it probably is." That written, here's a few Marketing Gems you've probably seen, or things you've said you wanted from the Mortgage Industry that may not be all they are cracked up to represent - or, you were just smart to ask for in the first place:
- No Closing Costs and/or No Fee Mortgage Loans! I've never offered this product. That certainly doesn't mean it is bad; I just am unable to offer it. What it means for you as a consumer is that you'll see a much higher interest rate than the ones the market is currently bearing. Does it make sense? That depends on your situation, frankly. For me, the longer I plan on staying in my home, the lower I want my interest rate to be. If I don't want to pay points of any kind, I should expect a higher rate. The profits are being made somewhere. On no closing cost, no point loans, those profits are on the back-end... in the form of a higher, sometimes much higher, interest rate.
- I want your lowest rate with no fees. Have you ever called a Mortgage Company or Bank and said that? If you have, you aren't getting the lowest rate. End of story.
- I'm going to log on to Zillow.Com or BankRate.Com and get the best quote possible! It's called low-ball offers, folks. The honest ones are typically disclosing at a more expensive pace. You'll probably (from the low-ballers) be getting quotes on 15-day locks (not done nearly as much as you would think, for a variety of reasons) instead of 30 or 60 day locks... which are more realistic, especially in this market. To boot, you may get a version of the bait and switch when you contact that sweet quote and hear that, "Rates change daily, the quote I gave you isn't available as I disclosed." The fact is rates DO change daily, no question about that. Yet, using that to draw in phone calls and emails isn't somebody I want to work with. That's just me. We all make money, as a consumer... I just want a fair shake.
- No Application Fee! First off, I don't believe in application fees at all unless they are applied to paying for the appraisal or refunded if your loan doesn't close. I have a very simple philosophy here, if your loan doesn't close... nobody should be making a dime off of you. If I had charged for every application I have taken in the past eight years, I'd be sipping martini's with Gene Hackman in the Cayman Islands. Sorry, just wanted to work in a reference to the film, "The Firm."
- Does your town or city get a Sunday paper? Mine does. There's a section where Mortgage Companies and Banks advertise rates. I'm not sure about areas outside of Allentown, Pennsylvania... but we used to advertise in there every week. Our advertisement was due by Wednesday and came out Sunday. Is there something wrong with that picture? Yup. Rates could have changed, sometimes significantly, on Thursday or Friday. So of course you get rates that may or may not even be relevant when you turn to that section on any given Sunday.
For what it is worth, my advice is as follows when shopping for a mortgage to buy or refinance a home:
- Reputation, Education, Price. While I wouldn't recommend taking the most expensive deal in town, I don't think it is a splendid idea to jump at the cheapest either. If you want a free loan, hit up Aunt Mary and stiff her while trying to live with yourself. You won't find it in lending institutions of any kind. As long as it takes money to buy things, profits and personal income need to be made to survive and thrive. And for God's Sake, make sure they are prone to calling and/or emailing you back in a very timely manner. If days go by, tell them buh-bye!
Jason Sardi is a human being involved in the Mortgage Industry. Other than being a former star on an undefeated Little League Team, hitting the winning shot "Chip Hilton" style in a high school basketball game to defeat the best team in the league, he has also made a prominent (in the day) high school wrestler who just competed in the Olympic Try-Outs tap out in less than two minutes. Come to think of it, maybe that's why that wrestler didn't make the team.
I can be reached via email at jsardi@ihmci.com or on my cell phone @ 610-653-0317.
Jason,
Brokers are at a distinct disadvantage! We have to show the third party fees, we can credit the buyer to cover the fees, but legally they must be disclosed.
I use to cover the closing cost and the down payment on Community Home Buyer loans and once lost a client to a local bank at a higher rate, but no fees showing.
It didn't close the buyers were $2,300 short at closing.
Covering the cost from YSP is one of the best thing that can happen to many a home buyer.
Bill
How did you get so wise at such a young age? You hit all the 'truths' about obtaining a mortgage - and stated them very well.
I'll never forget the buyer I had a few years ago - when the market was healthy - who had a score of 585, no money in the bank, 6 months on his job and child support payments deducted from his pay every 2 weeks. He insisted on a no fee, no points, low rate loan. It took me 6 weeks and his receiving dozens of loan denial letters to convince him that it wasn't going to happen. But he had heard on TV that he could have that so ...
What he got was an 80/20 package with 8.5% on the first and 14.675% on the second, and a payment that would choke a mule. He wouldn't listen when I told him to wait, so he wound up losing the home within 6 months.
BTW - he got that loan package from one of those 'internet' mortgage companies that did all their business via overnight mail. Try as I could ... he would not listen to me. I'm just the Realtor.
Everyone wants something for nothing, that's the name of the game. However, in a world where you get what you pay for, people should think long and hard about the word "free."
What about "I want your lowest rate without junk fees and with no points..."?
Can I ask that question?
Ben - Of course you can. Just know that rate through that individual and the company they work with will be higher than what is quoted from anybody on "Rate Watch". It comes down to what you really want to accomplish in the first place. There are no wrong questions.
JL - Frankly, I just want to educate folks on how us Mortgage Guys & Gals make money in the first place.
Carol - Some may point the finger at the environment, but I think I was born this way:) As far as the case study you just laid out, that seems an expensive proposition in this atmosphere. To me, either they really needed a roof over their head or they like the prospect of bankruptcy. You may be just a Realtor, but that doesn't mean you don't know your S-to the H-to the I-to the T.
Bill - Disclosure doesn't bother me. Inconsistent disclosure gives me a gripe, though. All in all, I think you know my thoughts on this... whether my thoughts are right, wrong, or indifferent.
Hi Jason, This is very well constructed and spells the truth about many of the offers out there and actually would if all consumers had it, help them to decide the trade offs that may be good or not as it applies to them. Well done!
Jason - After nearly eight years in the biz, it still amazes me the number of people who think they're getting a no cost loan just because the bank doesn't disclose it. I like to share one of my own sayings with those people.
"NO ONE WORKS FOR FREE, ESPECIALLY BANKS" Nowadays, there are so many examples of that when we can share how much profit such and such bank made in the headlines.
Jason: Congratulations on the AR email feature. This is a good partner to Jeff's post and can be applied to Realtors as welll as many other service professions. Our jobs and our industry is so very much more complex than most consumers think. They still have the mind set of a buyer or seller from years ago. We need to educate them like you did here so that they better understand the entire picture.
... sipping cocoa in my underwear
... nice visual ...
Very helpful post with great insight J-Sard ! ... nicely done...
Cheers !
Sheldon
Thanks William. Educate, educate, educate... that's as an important part of our job as anything.
Donne - A no cost loan is an oxymoron, plain and simple.
Diane - Wasn't sure what you meant until I checked my email. Thank you:)
Sheldon - In due time, you will realize that I'm a master of visuals;) Thank you kind sir, hope the little one is doing great!
Jason: Thanks for the post. Our business is perplexing sometimes. The ads. for no fee, low rate "teaser" loans will always be there. And everyone loves a deal. The problem now is our client needs to work with a loan officer who knows how to get a loan approved. No borrower is necessarily a slam-dunk these days. A knowledgeable loan officer is worth their weight in gold these days. After all, I don't think the borrower necessarily remembers the details of their loan. What they remember is that it got done and there were little if any hitches. Thanks again for the post!
... nice ! I'm a visualaholic !!!
...oh and thanks, the little one is doing great ! ...although being a newborn can be pretty tiring !
So...it was Jason C. who had to point out that a certain girl was "flirting" with you? Hmmm...keen eye for the obvious and actually I find that as endearing as it is funny!
Thanks Jason! The quality of service is remembered long after the cost has been forgotten. I believe it wise to seek out quality and be glad to pay for it. Like the time I accepted the highest bid for my new hearting and a/c system recently. Am very happy with the result.
In a service business like Real Estate and mortgages this "quality" thing is definitely a challenge to communicate. Direct honesty is always the best route.
Your clients obviously have chosen well.
This is a great, reality based post. It is more than unfortunate, it is generally to the detriment of anxious clients, that they oftentimes jump at the key words they choose to hear. Remember those commercials you had to turn down because some idiot kept screaming FREE? If everything is FREE how did they pay for that commercial, or that suit the screaming idiot is wearing, and where is the magic place where these FREE (insert product here) are being manufactured using only unicorn farts and rainbows? It is the type of mortgage "professional" or "expert" or "huckster" that Carol Smith referred to in her comment that has removed most sensibility and reason from the process (which usually does last longer than 15 days).
Good points and I have made them to my buyers before. I think people get tired of all the fees piled into a loan statement that are beyond comprehension to them. They thought of just having to think about the interest rate appeals to them, even though it might not make the most sense for them economically.
Buying a home/getting a home loan is more stressful to people than getting married. (I think many people do more research and shopping for the home than they do a spouse.) At the end of the day they cannot even deal with the thought of all those fees.
Hey Jason...I'm going to copy this word for word and publish it as if I wrote it!
Well, not really. Well done, amigo.
So well said as usual Sardi. If we could only get people to believe it before having the bad experience with the "low price lender".
Gerry Suarez, Jr.
Your FHA Loan Pro!
Jason - Great post. Love it.
JP Lowry --President--Preferred Financial Funding, Inc
J Sard,
My crytal ball is broken! How about yours??
You know, the word Free is part of the word, FREELOADER! I think buidling VALUE in what we do is the key! If we dont TELL & SHOW the customer what we are ACTUALLY doing for them, then we only have OURSELVES to blame!
Nice post...I have bookmarked this one! I may Re-blog you at some point too!
Thanks a ton!
D-Mo
Jason: Great points. Thanks for the post!
"Jason Sardi is a human being involved in the Mortgage Industry". I liked that ending phrase but it seems unfinished? As in Jason is now insane? Is Jason really human, tune in at 10?
Good points so go get a loan.
Darin - Heck, if I had crystal ball I'd be Sardradamus;) I agree that building value in what you do is key, regardless of your profession. Thanks man.
Carrie & Kathy - Thanks for stopping by!
Lyn - Jason isn't insane quite yet. The frontal lobes are still functional and the voices in my head aren't loud enough to steer my sanity. In due time, I'm sure:)
Even "free" loans from parents can get really expensive. And parents often don't disclose the terms - and they make any fees you include look like a bargain!
Patricia - Shoot, I am quite sure I owe my parents a bundle over the years. I keep telling them that an IOU from me is as good as cash;)
Thanks for the No Application Fee part. I'm always telling people not to pay application fees, and yet I always hear that they have. I was starting to think I was somehow off base, yet there it is.
I know I do mortgages and still have to pay the fees to refi or purchase. This isn't a car dealership where everything is negotiable