It was July of 2020 and the interest rates had just dropped below 3%, every Title & Escrow company was slammed! In this season, most companies were well on the way to making more money than they had in years, or in some cases, ever! Consumers were refinancing in astronomical numbers!
Every title company wanted a great piece of the current refi market and most would do about anything to obtain it. The problem; almost all were late to the party and not prepared.
Many national companies had already established national refi rates with some of the biggest banks and lenders and yet that left many doing what they have always done; waiting until all the noise has fully hit and then reacting. Unfortunate for most, whereas a few had prepared, most did not see the magnitude of this market anomaly!
By August, nearly every remaining title company or agency, started a race to the bottom, and feeding off of the scraps the National’s hadn’t secured.
As time passed, companies begin promoting their new fast, fancy and furious (negative profit margin) refi rates. A direct result of not being properly positioned pre-market ruckus.
They would continue to only compete on price for almost two years until the middle of 2022 when rates singlehandedly cooled the market back down.
Why did this happen? The moral of the story is simple, “any vendor not properly positioned in a market before that market erupts is only left with one thing to try to paint the picture of value; PRICE”.
Here is the good news; it doesn’t have to be like this. You can position properly and be poised to pick up the market driven revenue that comes from this next upcoming refinance market.
Don’t get me wrong, even well positioned, you will have to deal with some elements of competitive pricing, but when ultimately positioned, you can choose which of that business you are willing to take and which you are willing to simply let the next sucker take.
Consider some very simple steps to prepare right now. As I write this, rates are currently between 6.88% and 7.29%. So, there is time, just not much, as rates are expected to decline to near 6%.
Our safe assumption is that anyone who has properly positioned before rates drop below 6% will be the winners in this next refinance blip in the market. However, keep in mind that you can’t start this process when rates are at 6%, you must start earlier as the positioning process takes time.
If positioned properly, the further the rates go down below 6%, the more revenue your title company will capture.
The goal of positioning is always to be there first. It’s when we are not first, the race to the bottom occurs.
As of the date of this article, approximately 68% of all purchase transactions currently have mortgages, while 32% of closings are all cash.
Here is what this means:
If you are a title agency/company that closes 100 purchase files monthly, right now you are interfacing with 68 opportunities to engage mortgage lenders each month. When you remove the nationals (corporate banks) from the equation it is estimated that you remain engaged with at least 45 lender opportunities as mentioned in the example above.
How are you mastering those opportunities to best and most effectively position your title company with those lenders to allow you to capture the small amounts of refinances they currently have, while developing your position to “almost” automatically pick up all increases in their refinance orders as rates drop to 6% or below? If you are like most title companies…you simply aren’t!
Consider a very simple acknowledgment-sales based process.
Since most lenders in purchase files in the market we are living in, only hear from title companies when something is needed, doesn’t balance or the loan funds are needed, the lending world has subconsciously learned to dread the title company.
Since the true meaning of differentiation is simply doing something different, it’s time to own the scenario!
Try this:
- Call all local lenders upon the opening of a purchase file that they are on to introduce yourself.
- Thank them for “the business”. This will be a call they have literally never had before! That’s right, treat them like an actual customer.
- After the small talk, ask if there is any additional information or details that your team should know as you work through this current file.
- To wrap up the call, use this script: “I wanted to thank you once again for the opportunity to work with you on this file and work together to provide a smooth experience for the buyer. And before I let you go, what one or two refinance files are you working on right now that you might give me the opportunity to handle for you?”
Let’s look at the simple reasons this works so well.
- They have never been thanked on a purchase file before.
- They were treated as an actual customer removing their feeling of file inferiority.
- Most lenders have some low-level refi activity right now.
- Since we are at the edge of a refi market, where they send their low-level volume matters less to them giving you the opportunity to be consistent and build rapport.
- You are the only one talking to them intentionally.
- You asked for the order. They respect that.
This process will immediately start the pre-market positioning needed to be in great working relationships with your active local lenders in your market as well as align you to see incremental and possible radical refi growth as each of your properly positioned lender clients see their activity rise with lowering rates. Also consider that these very same lenders will likely see increased purchases loans as rates come down and the buyers they have been keeping warm can now qualify. Win! Win!
The choice is pretty simple and you are truly the one in control.
Will you take on this extremely simple positioning initiative? Or play the reactive role most traditionally have and wait until rates are lower, blood is in the water and all the noise only creates a new race to the bottom?!
Darryl Turner is the CEO of The Darryl Turner Corporation.
This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.
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