Hey everyone.

Just wanted to let everyone know that my blog has moved to http://www.ryanlucia.com.  My full archives are there and all new updates will be there as well.  So continue to get your sales, marketing and management fix over at http://www.ryanlucia.com.

Ryan

Last month I talked about expectation setting and I touched on how motivation is based on proper and realistic expectations.  I want to talk a bit more about motivation, and how important setting those proper and realistic expectations are to an employee’s motivation.  Before I continue though, what are the two primary forms of motivation that you employ, or have been used with you?  I’m willing to bet your answers were:

1. Money
2. Losing your job

While these two things can be motivational, they are only going to work to a point.  When it comes to money people will only work hard enough to make what they want or need, and when it comes to the threat of losing their job they will only work hard enough to not lose that job.  With that said, I want to look at real motivation, and how expectations can affect those motivations.

Money
When it comes to money, what about it motivates you?  Is it just having money that’s the motivation for your work, making more sales or pushing your team to sell and close more business?  Before you answer, think about that for a moment.  It isn’t money that motivates you, it’s what you can buy and do with that money that motivates you.  I’ve talked about this in the past, but it bears repeating because most managers don’t get down to the core of what motivates people.  We also delude ourselves into believing that we’re just working hard to make money.  It just isn’t true.

When I think about why I want to make money there are a couple of primary motivations.  I want to be able to max out my 401k each year and invest some more money because when I retire I want to do it comfortably.  I also want a nice home, and the ability to travel when I want to do so.  Of course there are little things here and there that money can help me get, but the primary motivation is my comfort and being able to retire comfortably.  Do you want to take a guess as to how many managers (sales or otherwise) have asked me about what motivates me?  Zero!  That’s right.  I’ve never had a manager ask me why I want to make good money.  How are you supposed to set expectations and help me set goals if you don’t know what motivates me?

Losing Your Job

Have you ever had your job threatened, or had to threaten an employee with their job?  My bet is that you’ve been in at least one of these situations.  What was the response?  I’ve been in both and I can tell you that a person will do the minimum to not lose their job, including me.  The problem isn’t the job, or lack thereof, that is causing the lack of motivation.  It’s that the manager has not set proper expectations for a person to achieve, and they haven’t helped the employee set SMART goals to achieve the expectations and personal goals.

Expectations = Motivation
If you’re in a situation where you find your people lacking motivation, or they aren’t meeting your expectations I have a challenge for you.  Take a step back and ask yourself the following questions:

• Do I have clear expectations set for my people as a team, and as individuals?
• Do these expectations make my people feel like they are a part of something more than just a company that sells a good or service?
• Have I made these expectations clear?
• Have I asked them individually what motivates them at a core level?  When they answered, “Making money,” did I challenge that and ask, “What do you want to buy/do with that money?”
• Have I helped them set SMART goals to meet the expectations and their personal goals?

If the answer to any of those questions is “No” then you haven’t done your job as their manager and leader.  Don’t fall into the trap that many managers fall into because they are strapped for time, or frustrated with results.  When you are too busy to manage your people, you need to reassess your priorities.  Your job is setting expectations and goals, and helping people meet them by holding them accountable.  If you’re frustrated with results, you can’t simply fall back to the “Fix it now or it’s your job” line.  You need to talk seriously about their future, but set forth clear expectations and help them set SMART goals to meet those expectations.  Failure to do so is failure as a manager and leader.

What types of questions do you ask your people to understand their core motivations?  How do you set expectations, and help your people set SMART goals to meet those expectations?

Ryan Lucia
recruitment@voyagemtg.com

What is persistence?  We all have an idea of what it is to each of us.  Is it sticking to it?  Is it staying focused, and following through?  Is it when your kids stay laser beam focused on something they want, and keep talking about it?  Is it that annoying person you know that keeps talking to you about the Multi-Level Marketing “opportunity” they have for you?

Regardless, of your immediate thought of persistence you have an idea, but what does persistence gain you?

I have 2 recent examples to share:

First, I had a potential branch for Voyage comment that he appreciated my follow-up the other day.  He had requested more information about Voyage 2 weeks ago via our website.  He and I played phone tag for a few days, but then he stopped calling back.  I continued to be persistent and call him every other day and sent a couple of messages.  He finally called me back the other day with the compliment.

I could have just written him off and stopped calling.  I probably never would have heard back from him, but I kept at it.  The reason for the lack of response?  He hurt his knee and wasn’t working for a few days.  Now that he’s working again he called me back.  Persistence on my part not only impressed him and showed him the level of follow-up and type of person he’ll be dealing with working with Voyage, but it also probably kept him as a viable contact.  It isn’t his job to follow-up with me.  It’s my job to follow-up with him.  Had I stopped calling we probably wouldn’t have ever spoken again.

Second, I had been pinging and mentioning Governor Arnold Schwarzenegger on Twitter in an attempt to get him to come to the SacTweetup last night.  Casual mentions over the past 2 weeks culminated with a barrage of tweets yesterday with reference to his films and how SacTweetup is better or more fun. While I didn’t expect a response, nor did I expect Arnold to appear at the Tweetup I remained persistent.  Funny enough, others caught on and started participating in the fun.

It all culminated last night with the 2 following Tweets from Arnold.

“I was stuck in meetings, sorry I missed all of you at #sactweetup.“

and, the big one for me:

“And @lucia316, don’t knock Jingle. I’m using it as a weapon. If there is no budget by August the legislature has to watch it 13 times.“

This was in response to my Tweet which was referring to 2 movies that bombed for Arnold:

“@Schwarzenegger The road to forgiveness for “Jingle All the Way” and “Junior” starts at #sactweetup See you there! “

The Governor’s response to my Tweet even made news on the local Fox affiliate’s website, with the headline, “Schwarzenegger Makes ‘Bomb’ Threat to Lawmakers.”  While in this second case it was all in fun, it just goes to show you how much being persistent can affect a situation.  Of course you can be persistent to the point of annoyance, but in the end if that “annoyance” gets you to a point to improve your situation it probably isn’t a bad thing.

Am I off?  Is the line between persistence and annoyance a fine line?  What cool stories of persistence do you have?

Ryan Lucia
recruitment@voyagemtg.com

What is closing?  Let’s define “closing.”  Closing is the act of asking for business once you believe you’ve shown them the appropriate value.  Closing is not the act of “assuming the sale,” asking an if/then question, or other techniques for asking for business.  A technique can be used, but closing should be as simple as asking, “Will you do business with me and/or my company?”

Sales is interesting in the sense that if you’ve done your job properly from the start, the close should be the easiest part of the sales process.  In fact, you shouldn’t really even need to close if you’ve done your job properly as it should be a “gimme” in many cases.  In the end, the close will always be necessary.  People have an expectation that you ask for their business, so you must do so.  The other reason closing is such a necessary exercise is because if you don’t close, you don’t know if you truly have buy-in from the client.

Why do many salesguys fear closing?

Here are a few reasons:

1. They lack confidence
2. They haven’t properly worked the sales process
3. They fear the dreaded answer of “No”
4. They fear success and the additional work or expectations it may bring
5. They don’t know when to close

I believe you could make take these 5 reasons, plus just about any other foreseeable reason, down to 2 primary reasons:

1. Fear (for whatever the reason)
2. Motivation (Not doing your job or learning your craft)

Why it’s silly to Fear the word “No”
If you have a fear of success, I can’t help you there other than to suggest finding a new job.  If you fear the word “No,” ask yourself, “Why?”  Why are you afraid of the word?  Are you getting desperate and need business to keep your job?  Do feel as if a “No” will impact your self-confidence?  I’ve heard some people use the logic that each “No” gets you one step closer to a “Yes.” I’d argue that while one may operate in a universe where a numbers game may exist, in reality we convince ourselves that a numbers game exists to justify people telling us “No.”

I use the logic that anytime I hear the word “No” it means I haven’t done my job properly, or asked the right questions. This means that either I didn’t qualify this person properly, I didn’t find any core needs or value to present to, or I didn’t present the features and advantages of doing business with me as it applied to a specific benefit (basically, FAB failure).  A “No” means I have more work to do as I haven’t yet found what it is going to take to get the client to buy-in to doing business with me.  A “No” may, in a way, get me closer to a “Yes,” but only after I ask some more questions, find out what I’ve missed, or find the root of why the client is hesitant to do business with me.

It’s silly to fear the word “No” because it doesn’t mean, “I’m not interested in doing business with you.”  “No” means, “I’m not convinced that doing business with you is the correct decision yet, and you (the salesguy) still have some more work to do.”  By closing for the business you push the client to give you an answer, Yes, No, or I’m not sure.  Anything other than “Yes” means you need to take a few steps back in the process.

Your Motivation and Skills are Lacking
Perhaps you’re not closing because you’re not motivated for any number of reasons.  This is going to be an issue that no one can help you address, and I’d suggest you start looking for another career.  Without Closing you’re never going to grow your business.  If you’re struggling to find a reason for why you don’t want to ask for the business, you may need to take a serious look at your career choice.  Look within.

Worse it may be because your skills are lacking.  If you’re not closing because you’re unsure of when to close, or ask for the business, it’s time to ask for more training.

Some simple tips for knowing when to ask for the business:

1)      If you are “mini-closing” through the FAB process you are going to find out earlier in the process whether or not you’ve truly found benefit for the client.  Mini-closing is asking a question like, “Does this (the FAB) seem like something that would improve your situation,” or “Am I showing you things that you’d want and need in order to do business with me?”  Be blunt!

2)      Did you find “Areas of Interest” to go through the FAB process with the client?  If not, you’re far from ready to ask for the business.

3)      If you don’t have any features that can yield advantages and benefits for the client, you’re not ready to ask for the business.

4)      Once you’ve presented your FABs, confirmed that the benefits will improve their situation, it’s probably a good time to ask for the business.  Remember to say nothing more once you’ve asked for the business until they give you an answer.  GOLDEN SILENCE is your best friend!

Closing and asking for business doesn’t need to be a technique.  Assuming the sale is fine, but using some of the “tricks” that many sales programs train isn’t necessary if you’ve really done your job as a salesman.  If you’ve done your job, you should be able to simply ask the client for their business with no fear.  If they say “no” you’ll need to ask more questions to find what they need in order to say “yes.”

Even if you have to use one of the closing techniques in which many people have been trained in order to feel comfortable, make sure you use them.  I’ve seen many sales people who know how to “assume the sale,” or close with an “if/then” scenario, fail to close at all after their FAB presentation.  What has kept you from closing in the past?  How have you overcome fear or training issues to more effectively ask for the client’s business?

Ryan Lucia
recruitment@voyagemtg.com

It was interesting watching the Apple press conference today.  I thought for perhaps the first time we would see Steve Jobs showing a bit of humility when it came to the signal attenuation, hardware design flaw of the new iPhone 4.  If Consumer Reports can’t even recommend your device you have to know it’s bad.  Rating of the individual components aside, if you have the shiniest and prettiest device around, but it has clear issues in its primary functionality you essentially have a shiny turd to polish.

So why does Steve Jobs ego and lack of humility have any interest to a sales, marketing, branding or management blogger?  Simple, humility is endearing, and at some point all four disciplines require humility as mistakes are inevitable.  Someone asked me the other day why I have such disdain for Steve Jobs.  It’s mostly because of that lack of humility.  Steve Jobs referred to the situation about the design flaw as “Antennagate.”

I would contend that Antennagate would not have existed had Jobs showed even a modicum of humility with regard to the situation.  His initial response was, “There’s nothing wrong, you’re holding the phone wrong.”  Excuse me, I’m holding the phone wrong.  Last I checked all of your models in your advertisements are holding the phone wrong too then.  The next response was, well every phone has this issue (he stuck with this line of thinking today).  While true, all phones signals will attenuate if the area around the antenna is touched or blocked, the iPhone 4′s antennae are exposed leaving a gap that when bridged causes a massive loss (20 dBa+ for those keeping track and in the know).  This was far greater than any of the other comparisons done by Consumer Reports and Mashable showing nearly 10x greater signal loss than the iPhone 3GS, and 33% more than the Nexus One.  Then there was blaming it on the software and saying it had been there since the first iPhone (Please refer to the 3GS to 4 comparison above).

So what’s the big deal?  Regardless of your feelings about the iPhone, Apple, or Steve Jobs, we could learn something by watching Jobs.  In the end, instead of just admitting there is a design flaw, and saying, “We made an error, sorry,” while also giving people free cases to alleviate the issue, Jobs said, “All phones have this problem and there is nothing wrong with the iPhone 4, but we’ll give you a free case anyway.”

Sadly, even after the press conference a good amount of people were left unsatisfied.  CNET did a survey on their live feed after the presentation.  It showed that approximately 54% were happy with the free bumper or case decision.  The remaining 46% were left unsatisfied.  Not a ringing endorsement by any means.  So why are people left unsatisfied by the result?

I think that most people wanted to hear an apology for launching a flawed device, that according to Bloomberg (Jobs called the story a “crock.”  Big surprise) Apple knew about this issue months ahead of time.  Perhaps an apology for telling their customers, “You’re doing it wrong,” or for making excuses about it being a software issue.  Anyone can accept a mistake, because no one is perfect, but to be deceived and to see the CEO of a company try to ignore the issue will never be acceptable.  What if Tony Hayward said, “Sorry America it was a software issue with the drill even though we know we were being risky in our drilling methodology,” instead of taking responsibility?  Granted, there was a lot of trying to pass and whining about wanting his life back early on, but eventually BP made the smart move to show some humility.

Apple had the opportunity to save their branding today with a simple apology.  At least in the eyes of 46% of the people, the brand was tarnished.  The other 54% I’m sure will look with more skepticism at Apple going forward because they failed to show that humility.  Regardless, the Apple brand has taken a hit over the past 2 weeks, and today’s actions didn’t improve it as much as could have been done by showing humility.  As a salesman you’re going to have to apologize at some point.  As a manager you’re going to make errors that will require you to apologize.

The point of my rather length blog is to just admit when there are issues.  Don’t make excuses, blame others, point fingers, or create scapegoats when a simple acknowledgment of error will get you further.  In my experience anyone can accept a mistake or error, and more important than the excuse is how you will fix the error.  People want to know that the error has been rectified and they have been made whole.  Sure you can “fix” something with a simple solution like a bumper, but to shirk responsibility will increase skepticism of all future actions.

What do you think about Steve Jobs response?  Would more humility and a willingness to admit an error been a better response or worse?

Ryan Lucia
recruitment@voyagemtg.com

Last night I attended the Placer County Business Tweetup at La Provence in Roseville.  It was a great event, as usual, but something was said last night that struck a chord with me about networking.  As I was speaking to this person, Dr. Jared Thomas, he said that being on Twitter (or social media in general) is like being at a Tweetup, but in a virtual setting.  We both acknowledged that being at the live event is always preferable, but then I got to thinking about how networking in general is improved via events like Tweetups, and afterward via social media.

Maybe you’ve already thought what I’m about to present.  I’d imagine that from a networking standpoint quite a few haven’t thought about how easy social media makes it to maintain contacts made at networking events.  Think about any networking you’ve done in the past.  You’re at the event, you’re talking to people, you swap cards, you talk about hooking up at some point, you part ways, you might send an email the next day, or you may call if there is immediate business impact that can be made, but in general these connections fall by the way side.  You might make contact at some point down the road if it makes business sense, but in general that card is filed in the Rolodex (or Outlook), and you move on.

Keeping the Networking Going After the Event
This is probably the biggest piece of value in Social Media.  Not just the ability to connect with people, but the ability to stay connected to people you’ve just met.  Sure you connect with people on Twitter, Facebook or LinkedIn, but making that live connection solidifies that relationship, and makes it tangible.  Imagine now the ability to easily stay connected with all these people that you met at events, at a sporting event, at your kids’ soccer game, etc.

Sure social media makes it easier to actually maintain, and cultivate these relationships, but are you actually doing it?  That’s the epiphany that I had.  Many of us are using social media (most likely you arrived here because of it), but are we using it well enough to cultivate the relationships we are making at live events?  My bet is that we aren’t doing it as well as we could, or should.  I know I’m not.  It took the comments from Jared to make me realize where I’m missing the boat.

What Mutual Benefits Exist When Meeting People at Events?
Many of these events that I attend are tough for my business and job.  Many of the people I meet will never do business directly with me (become a loan officer or branch manager for Voyage), but I always keep the game face on because at some point they may need a loan which my organization can provide.  They could also know someone interested in being a LO or branch of Voyage.  That’s a long shot, but possible.  I did notice though that many people I talked to last night could feasibly do business with everyone at the event.  A hair stylist could work with just about anyone as long as they aren’t bald.  An insurance and finance guy/gal could possibly do business with everyone in the room.  Even the LO/Branch Manager that attended with me last night could do business with anyone there.  Not everyone could be a consistent referral source, but everyone could possibly be a candidate for a loan at some point in the future.

So, what mutual benefits exist between our Branch Manager and any person she could have met last night?  That will probably be different for each person there.  While talking with people she needs to be finding how they can mutually help each other because that’s where the connection will exist in the future, either via social media or in the real world.  Once you have that connection, the act of maintaining that relationship becomes actionable and worth maintaining versus just throwing the card in the Rolodex, and contacting at some point down the road.

By using the short time to find a mutual benefit (or area of interest) it becomes easier to actually develop and maintain that relationship via social media or otherwise.  As an example, I met a woman and her fiancé last night.  There were talking about their coming wedding, and were looking for some wineries to visit in the area they are getting married during the day before the ceremony.  I knew of a couple of websites, and offered to email those sites to her (which I did this morning).  Could she help me today or tomorrow?  Maybe, but that’s not the key.  Just having the connection could lead to future benefit for both parties, and that’s more important than me finding another LO immediately.

Ultimately, that’s the way to ensure you’re keeping the networking going after the event, and to properly talk with people via social media.  Engagement, communication and sharing are all great, but if we don’t acknowledge that relationships are built upon mutual need we can’t effectively network or build relationships.  How do you quickly find areas of similar interest or need with others?  Do you have any post event rituals that you observe after a networking event?  How do you personally use social media to continue building after an event?

Ryan Lucia
recruitment@voyagemtg.com

Wait what? Bleeding? Yesterday, Voyage Team Goodness had a blood drive here at our corporate offices and invited the BloodSource Bloodmobile to help collect. Bloodsource was hoping to get 25 pints, but Team Goodness and some folks from other businesses in our complex stepped up and exceeded the goal. At the end of the day 29 people came to donate and 27 were able to give blood.

Per BloodSource, each pint of blood is enough to save 2 lives. So total lives saved by our donors yesterday = 54.

Not bad for a couple of hours of work. If you’re interested in hosting a blood drive and want to work with BloodSource (great people to coordinate with and fantastic personalities helped to alleviate fears of the weary donating yesterday!), reach out to them.

BloodSource
10536 Peter A McCuen Blvd
Mather, CA  95655-4128
916.456.1500
800.995.4420

http://www.bloodsource.org/HostaBloodDrive.aspx

I want to extend a special thanks to Maryka Spyksma here at our corporate office for coordinating the effort, rallying the troops, and going door-to-door to rally others to join our blood drive.  Great job Mary-K (inside joke)!

Here are a couple of pics from the event!

Maryka Spyksma and Scott Schembra, show us their bandages post-donation!

Nick Lucia, Director of Customer Experience, gives the thumbs up
after the needle was placed to draw blood.  This was Nick’s first ever donation.
Great job!

Ryan Lucia
recruitment@voyagemtg.com

In talking with Lisa, my girlfriend, last night about her bourgeoning salon, we chatted about a client that has now twice weaseled out of paying for her services.  She has twice asked for haircut X, but then complained that she didn’t get what she wanted, or didn’t like it after it was done.  My thought is that this lady has probably done this to ten other hairstylists over the years and just keeps moving on when they catch on to her game.  My question was, how quickly do people catch this type of behavior and does it happen two to three times, or even more before they cut bait?

That got me thinking about this type of situation in general.  Most of the time, it’s a client firing us, right?  What happens though when you need to FIRE your client?  It shouldn’t happen very often.  In fact, in the last decade I can count three clients that I’ve had to fire (of course with consultation with others, including my superiors).  Why did I fire them, and what are good reasons to let a customer know that you no longer want their business?

You are making less than you’re spending to get or maintain the client
This should be a no brainer.  If you’re spending more money to maintain, or gain, the clients business than the client is bringing in, or can bring in, you’re losing in the end.  The argument could be made that the loss on the single transaction could lead to more business.  Basically, it’s a loss leader.  In some cases this may absolutely be the case, and you need to make the decision as to whether or not it’s worth it.  For example, at Airborne there were rare occurrences where we would take on a very large customer at a minor loss because the volume supported a route, a truck load or an airplane.  Better to make something by filling the space than to make nothing.

In most cases, it won’t be like this situation.  In fact, I would argue that losing today with the possibility of more business in the future is not often the wisest course of action.  I’m sure we can all think of situations where people promised something if we did them a “favor.”  How often has that panned out?  In my personal experience, that’s a rarity.  If that person can directly bring you more business, it may make sense.  In most cases they can only indirectly bring you additional business (referrals) which isn’t a guarantee.  Don’t lose on the transaction for an empty promise, move on.  I don’t think the person asking for the favor would work for free either.
The client is taking so much of your time it’s hindering you from gaining other business
I’m sure we’ve all had those clients that take an inordinate amount of time.  How do you decide if someone is taking too much of your time?  The advice I once gave one of my sales guys that was handed down to me from my first director is, “If you’ve missed multiple appointments, or have been hindered from prospecting or following up with other clients, it’s might be time to move on.”

Broad advice, but you have to decide how much other business you may be losing, or not cultivating, because of the TIME-SINK Client.  One client will not make or break your week, month, or year.  There are plenty of potential clients out there, go find them!
The client is abusive or wants you to do something that could get you in trouble
It should go without saying that a client that is constantly abusive should be told to hit the bricks.  You don’t need to deal with that negativity or abuse, let someone else put up with it.

In situations where the borrower wants you to bend the rules, omit information, falsify information, or worse to earn their business it’s best to send them packing.  Our industry already has a bad enough name without exacerbating it further stupidity.  Further, losing your license, or having your name permanently attached to bad paper isn’t worth it either.  Let them convince some other chump.
There will always be clients that will slow you down or be more demanding than others.  More demanding doesn’t mean you’ll lose money.  The purpose of this piece is to make sure that sales guys remember that not every piece of business is necessarily good business.  If you have a situation, make sure you assess whether or not it makes sense to continue to do business with that client.

What other situations have you experienced where you’ve fired a client?  How did you handle ending the relationship with that client?

Ryan Lucia
recruitment@voyagemtg.com

Beyond ID4 being a great movie in its own right, I thought it appropriate to talk about how great it is in the context of our business as it is today.  If you haven’t seen ID4, I’m sad for you, but here’s a quick synopsis:

Evil, locust-like alien race comes to Earth and positions small (comparatively to the mother ship, but HUGE in general) ships around the world over major cities.  People don’t know their intent.  One genius, Jeff Goldblum, figures it out, but no one, including the President, Bill Pullman, listens, and billions die in a fire-storm brought down upon the human race by the alien ships.  We try to fight back, but fail.  More people die.  We try a nuclear-tipped cruise missile, it fails because the alien shields are amazingly powerful.  Will Smith, a Marine pilot, takes down one of the alien small fighter ships by making it crash.  President finally listens to genius and we figure out a way to bring down the aliens.  Jeff and Will save the world and smoke a cigar, their “victory dance.”

I won’t tell you all the details because you should see it.  So what does this movie have to do with our business (real estate and real estate finance)?

Simple.  The underlying message of the movie is about perseverance against near impossible odds and situations.  While our business’s situation is far from impossible to overcome, it is going to take perseverance on many of our parts to get things progressing in the right direction.  On the bright side, the downturn in the market and changes in the licensing system (for the finance side) has helped to get rid of lot of the dead weight and “wood” that was in the business.  Much like in the movie which had some people trying to hinder success, many of these people were also part of the problem, so it’s nice to see them gone.

The positives continue:

• Less bad information going out to the marketplace.  Better educated clients equals faster closings.
• As we regain trust of the marketplace, we overcome the negative perceptions and generalization of those people that remain.
• Less competition!
• Better compliance.
• Rates are incredible right now.  See HERE for why they are better than any tax credit.

Is it all sunshine and daisies?  Of course not.  But, for those that can hang tough, battle it out in the trenches, become the salesmen that they should know how to be, and persevere there is a light at the end of the tunnel which leads to a good sized pot of gold at the end of a rainbow.  How’s that for a visual?

Some economists say the economy’s recovery rests on the housing market recovering.  Work together (Real estate pros and mortgage pros) and make magic.  Take it upon yourself to be Jeff and Will, they had to work together to persevere too.

Happy Independence Day!

Ryan Lucia
recruitment@voyagemtg.com

I’ve heard quite a few complaints from real estate professionals lately about how business has slowed so significantly without the first time homebuyers’ credit that lapsed at the end of April.  I’m also hearing it from my Loan Officers and Branch Managers that are primarily focused on purchases.  My retort, especially over the last two weeks is, “Are you kidding me?  Who needs a first time homebuyers’ credit when rates are at historical lows?”

If this isn’t incentive enough for people to be out looking for a home, then I don’t know what is going to pull the housing market out of the doldrums.  Sure, many people are still suffering from credit hits, or from being upside down in their homes, but there are still many people out there capable of affording a home, and qualifying for a loan to purchase that home.  Be it conventional or FHA, it can be done.

What was so great about the tax credit anyway?  Sure you got eight grand, but you also get taxed on that $8000 dollars.  Depending on your tax bracket you could lose from 25% to 35% of that credit.  I’m sure most people, myself included, would be ecstatic to still get a credit of $5200-$6000 after taxes, but let’s compare 30-year fixed FHA rates from early April to today.

(HUGE NOTE: I’ve chosen 1 of our primary investors to make the comparison.  This lender has pricing that is typically in the middle of the pack.  Not the lowest, and not the highest, but they get loans done quickly, efficiently while helping us take care of the borrower.)

Our example is going to be a $250,000 home with 5% down (95 LTV), a mid credit score of 665, 45 DTI, in CA.  The investor I’m using for the example has a 1/8 point hit for the loan amount.

Based on yesterday’s rates (6/29/2010), the borrower’s scenario would have yielded:
4.5% rate at par with 2% on the back for the broker.

With a loan amount of $237,500 the monthly payment (sans taxes, insurance, and MIP of $108.85 because it’s FHA) is $1203.38.  You also have 2% to play with at closing if additional motivation is needed.

Based on rates from 4/1/2010, the borrower’s scenario would have yielded:
5% rate at par with 1.75% on the back for the broker.

With a loan amount of $237,500 the monthly payment (sans taxes, insurance, and MIP of $108.85) was $1274.95.  You still had 1.75% to use as a broker credit at closing, but the $8000 tax credit should have sufficed for motivation.

The difference in monthly P&I is $71.57 or $858.84 per year.

Someone could say that it would take 9.31 years to make up the difference in the $8000 tax credit, and he’d be right.  There is a key difference though.  The difference is that the money that $858.84 is money saved that has already been taxed.  The tax credit still has to be taxed.  At the 30% tax bracket a first time homebuyer getting the tax credit would only net $5600.  Now it only takes 6.52 years to make up the difference.

There are other ways to make up the difference, if really necessary.  You and the Realtor could give up 1 point each of your take in the transaction if you’re looking for a marketing avenue.  Total back to the buyer would be $2500 from the realtor and $2375 from you for a total of $4875 back to the buyer/borrower.  Also consider that many sellers, right now, are willing to pay some of the buyer’s closing costs decreasing the gap even more.

The main benefits of home ownership also still exist, especially with the glut of bank-owned properties available.  The primary benefit of appreciation is even better than in the past as these buyers are starting at a price that is low, and it’s very likely that the property has nowhere to go but up.

Look folks, the bottom line here is that there is plenty of incentive, right now especially, for people to buy homes.  We, as industry professionals, all know it.  We also know that consumer confidence is down.  It’s time to bring back the salesman inside you (if you haven’t already).  Have you accepted the fact that the days of people calling you are gone?  I talk to quite a few people that haven’t really accepted that fact.  If you haven’t it’s time to make the shift!

The point of this blog post today is to encourage you to get creative.  Re-ignite the fire of your inner salesgod, if you’ve forgotten about that person.  Get out in front of people, find new ways to build your database (I wrote 2 different series on that in the middle of last year if you need ideas), ask questions (if you need help remembering how to do that, refer back to my 2 month long series that started HERE), and revitalize your business, and the market!  I’m not saying you don’t have challenges to overcome, but remember, as Tom Brokaw once said, “It’s easy to make a buck.  It’s a lot tougher to make a difference.”

What are some ways you can make a difference?  Can you show your clients and borrowers how buying a home can mean so much more to someone financially than an $8000 tax credit?  How?

Ryan Lucia
recruitment@voyagemtg.com