This magical world of real estate finance can ensure your success. Ask yourself which is more important to the people in your sphere of influence: the sales price or the mortgage? Until now, you and your prospects probably thought the sales price was most significant.

The mortgage is much more important. Think about it. 90% of Americans purchase property with a mortgage. When they buy a house, most of the necessary funds come from the lender. They’re not even buying the property with their own money. What they bring to the table is a promise to pay for the mortgage, a relatively small amount of cash (5, 10, 20 percent?), and a reasonable history of managing their finances. The bank pays the sales price. They pay off the note.

Consider also that they only pay the sales price once when they buy the house. In comparison, they are paying off the debt on the mortgage every month. Remember how you felt when you first saw a Truth-In-Lending statement for your first loan. You may have been borrowing $100,000, but if you paid off the note over thirty years you would have paid the bank at least $250,000.

Why’s this important to you? The more you can demonstrate your expertise in a way that distinguishes you from the competition, the greater the likelihood that your prospects will work with you instead of with the other agents in your area. Help them understand the significance of their mortgage.

Money-Making Tip: Rearrange the sequence of tasks for your buyers to better serve their needs. Counsel buyers to always apply for their loan before they find the house to buy.

When do most buyers in your area apply for a loan? Is it just after they have negotiated their purchase with the seller? Do it differently, do it better.

Not only is the mortgage more important than the sales price, but the worst possible time to pick a lender and a loan is when most buyers do it! After negotiating the sale with the seller, they are faced with multiple challenges: several inspection contingencies usually need to be satisfied (each of which is its own separate negotiation); moving vans have to be hired; utilities have to be put in their name; the title report assessed; attorneys dealt with in some states. And, of course, many consumers are dealing simultaneously with buyers’ remorse.

Now that we know how important the mortgage is and when to apply for it, how do we help them always get the best loan? Presuming they know which loan they are interested in, e.g. a 30-year fixed-rate loan, a one-year adjustable, a 5/25, 7/23, FHA, VA, etc., how do they get the best deal?

Money-Making Tip: Put the following questions on the back of your business card. No one who gets your card will fail to notice that you know real estate finance.

To shop for the best terms, I recommend buyers always raise three issues with a prospective lender:

1. What rate and points will you offer?
2. What is the annual percentage rate (APR)?
3. Tell me all the fees I will see from you between now and settlement. I will not pay anything you do not tell me about right now. Please send it to me in writing.

The first question is obvious and buyers usually know to ask about the interest rate and points. A point is one percent of the loan amount.

The second question is important for several reasons. Buyers and sellers are learning on the Internet how to select a lender. One of the questions they are advised to ask is this question concerning the APR. Our advice will be more credible because it is consistent with advice they are getting elsewhere.

In the event different lenders are calculating the APR in the same manner, the APR can help buyers compare apples to apples when considering different loans. For example, presume the buyer is interested in a 30-year fixed-rate loan. Are they better off with a loan at 7.125 percent, two and one-half points, and fees of $1500 or 7.25 percent, one and three-quarters points, and fees of $1275?

The APR is a federally-mandated calculation that turns all the fees, points, and interest rates into one number: the annual percentage rate.

The third question is perhaps the most important question. I think of it as the “no surprises question”. This is what will ensure that buyers do not become victims of the bait and switch tactic. With the bait and switch, the buyer is lured to bite on a loan that seems terrific due to the proposed interest rate and points. The switch takes place, if you will, when the buyer arrives at settlement and finds that there are multiple hidden fees that they never knew about ahead of time.

In my experience, serious lenders can often be negotiated down to similar rates and points, which means that the fees charged may determine which loan is least expensive. The fees can also be the area where lenders’ flexibility can help a buyer most.

Watch how your business takes off when word gets out that working with you means a buyer (or a seller refinancing) will get the best possible loan. Let them know that you can help in ways that matter to them today.

Published: June 11, 2002

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Mike Merin, CRB, CRS, ITI is the author of ATTACK THE MARKET! Specialize in Negotiating, Finance, Pricing or Technology which details how an agent can guarantee his or her success by learning and marketing skills that consumers value today. With graduate degrees from Columbia University, Mike was a negotiator for the U.S. Government in Washington, Moscow, and the capitals of our most significant trading partners. Beginning in 1985, he purchased with partners his first of several investment properties. He left the international arena to support his wife’s career and joined Prudential Fox & Roach REALTORS® as a successful agent in the Philadelphia area. An award-winning author, you can read or purchase Mike’s publications at www.mikemerin.com.