Competing on Rate Makes You a Loser

First to avoid any confusion–I am not advocating gouging your clients; I am advocating you not competing against our not so scrupulous “bait ‘n switch” brethren. You know, the ones that give your prospects good faith estimates “assuming” 720+ credit, big income, six month reserves, 15 day rate locks, etc.

I want to point out a great post by Morgan Brown over at the Bloodhound Blog, When Banks Compete, You Lose. This article builds nicely on good faith estimate and loan originator shopping posts by Brian Brady.

All of these posts are targeted at consumers looking for mortgages (BTW, building on my previous post about building your mortgage business–notice how they are talking to their audience not their colleagues. This is a hard skill to master in blogging, but they both do it nicely), but they have big value for improving your sales presentation. Here are some of the top things you should focus on:

• Internet consumers have a tendency to get straight to the point–what is my rate and payment?
  • Pivot with education: “You are obviously are an educated mortgage shopper. So, you know that a lot of important data goes into those two questions like your credit, income, and financial objectives. Let me ask a few of those questions and I will be able to give you an accurate, honest answer to those two questions.”

• If you counter by throwing out teaser rates and payments then you will ultimately fall into the pile of bait and switch, no integrity lenders when the client is finished “shopping”
  • Pivot with trap door sales: “You have been quoted some very good rates there. Have you considered that the prepayment penalty that is probably included, plus the astronomical credit score required, and the unreasonable reserve levels required might have you wasting a lot of time on a mortgage rate and payment that is only a teaser. Give me the next 20 minutes, I will ask some important questions, get a better understanding of your objectives, I will give you an estimate that you can rely on.”

Read the articles and slow your customer down so they don’t work against themselves. Remember when you compete like your lesser skilled competitors do–you will lose the deal and your trusted relationship.

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