HUNTING FOR THE PRIZE

As hunting season approaches, it is worth noting that our marketing efforts have many parallels to the quest of the hunter.

Just because it is deer season, would a hunter just wander into a field and begin shooting blindly in hopes that a deer will find itself in front of a bullet? or in duck season would they go to a lake and begin showering the air with shotgun pellets in hopes that a duck will fly into the blast?

Indeed the woods are always empty if you are a poor hunter.

Whether hunting birds, small or big game, the hunter knows what they are after and they plan and strategize accordingly. They put themselves in a position for success by being in the right place at the right time with the right tools for the job.

Our business is no different in that we must hunt with skill and purpose rather than a random approach. Your business will originate from what you know and who you know, which is where your efforts should be concentrated.

Anything else is just like shooting with a blindfold!

WE GIVE, WE GET, WE THRIVE

Expecting smiles before you give one up yourself is an expectation that will set you up for disappointment more often than not because of the universal laws of give and take. And while it happens occasionally, we cannot ever expect to take before we give or we will be disappointed regularly.

A relationship is no different, though far more complex than a simple smile.

Most successful relationships start with a smile but the most important rule of relationships is that it must be good for both parties or there will not be much of a relationship.

Friends are friends because they both get something beneficial from the relationship. If not, it fades away very quickly.

The same rules apply to business relationships as well. Therefore you must have something to offer. You must take the lead and give first. Expecting gifts from those to whom you have never given to is crazy.

And expecting relationships from those to whom you give nothing is beyond unrealistic.

So be sure to ask for the business but first be a giver. It's the only way to thrive!

THE TWO DEGREES OF SEPARATION

We see them whenever we leave home. They're everywhere; at the store, on the road and even in your office. They are all over and how we interact with them says a lot about who we are. And while meeting every stranger you see is a ridiculous notion, we can all make a better effort in the areas of friendliness and compassion for our fellow strangers.

Behind that unfamiliar face may be someone who teaches your kids, works with your best friend, partied with your mom or knows your boss. Most likely a very decent human being that may have been one of your favorite people had the paths of your respective lives deviated only slightly.

And if we had the time to meet them all we would probably  discover that most of us have no more than one or two degrees or separation if we live within 100 miles of each other.

So why not be nice and at least give up a smile?

Some think there is emotional risk to smiling at strangers but the opposite is really true. You'll feel better by smiling and your emotions will be raised to a whole new level because of all the return smiles you will receive as dividends for your simple investment of a smile.

More on smiles tomorrow....

RESIST THE URGE

You can't put it down. It's addictive. It has to be near you at all times. If you don't have it, you feel lost and god forbid you temporarily lost it. Your world is instantly turned upside down because you feel like you can't survive without it.

Those who own one know what I'm talking about - a cell phone with email capabilities.

Whether it's a Treo, Blackberry (sometimes nicknamed "CrackBerry" for it's addictive qualities) or some other device, more and more people stay connected with email via their cell phone. Email on the go is one of technology's greatest gifts, but it can be a tremendous curse if not used with discretion.

If you are a "user", please be careful not to use your email phone at inappropriate times. This is even become a social issue among the closest of friends. Checking your email while in the company of others will send the impression that you are uninterested in their company which is rarely true, but often interpreted that way.

Also, it should go without saying that checking your email whilst trying to operate an automobile is just a very bad idea. Did you know that the runaway number one cause of car accidents is drive inattention? Yet nearly everyone who owns a BlackBerry has committed this foul at one time or another and some are guilty almost every time they get behind the wheel.

Like many other thins in life, cellular email is meant to be enjoyed responsibly!

THE IRA BRIDGE

Another form of "bridge financing" that is unknown to most is that a temporary IRA withdrawal, which if used properly, can be a virtually cost free means of raising cash for a down payment.

Did you know that funds can be withdrawn from an IRA for up to sixty days penalty free as long as it is replaced in the same or another qualified IRA account within the 60-day period?

This is a slightly more risky form of bridge financing because if the money can not be placed, it would be taxable and subject to the 10 percent penalty if the customer is under age 59-1/2. However, this is not an all or nothing transaction as the taxes and penalties would apply only to the amount of the initial withdrawal that was not replaced rather than the full amount in the event the customer was unable to repay only a portion of the amount.

A borrower can also tap their IRA penalty-free if the money is used to pay up to $10,000 of qualified acquisition costs for a principal residence of a first-time homebuyer.

***As you might expect, the usual disclaimers have to appear here such as advising your customer to seek the advice of their tax or investment professional before taking advantage of their IRA for funds to close.

WHAT'S THE DEAL?

The word "deal" is defined in business as an agreement or transaction that usually has benefits for all the parties involved. And while the "deals" that we help put together clearly fit into this definition, we should be careful in how we use the word "deal" especially with our borrowers.

Please know that many of them will take offense to your use of the word when referring to their transaction because to them this not just a "deal".

This is their new home you are talking about. The culmination of years of hard work, planning and dreaming they have experienced and it is probably the biggest financial transaction of their lives.

And when people have so much time, money and emotion invested in a transaction, the word "deal" tends to trivialize that which is anything but trivial to them.

So try altering your vocabulary with a more sensitive and important word such as purchase, transaction or agreement because a deal is just a deal but a home is a bigger deal!

3 YEAR APR

These days a 3 year APR calculation is a more likely reality for most people than keeping their mortgage for all thirty years.

Here is how to perform this unofficial but incredible valuable calculation using your financial calculator to demonstrate your expertise to your customers...

Using yesterday's example of a $200,000, 30 year loan at 6.5% with $5,000 in closing costs, take the closing costs and divide them by the number of months the loan will be outstanding or in this case 36 months.

$5000 divided by 36 months equals $138.89 per month. Add the $138.89 to the P&I payment of $1264.14 and recalculate the interest rate based on the full amount of the loan of $200,000. You will then find the real APR is now a significantly higher 7.53%. Shorten the loan life to two years and your real APR is now a robust 8.04%!

Also, keep in mind that this calculation does not account for the time value of money so the real APR is still slightly understated but much more accurate than the 30 year calculation.

Understanding these numbers and showing them to your customers will set you up for success especially in times like these of higher interest rates. Because while interest rates are important, in the end the best mortgage plan is the one that costs the least during the time that the mortgage is outstanding.

APR CACULATIONS

APR is calculated by taking the amount of the loan minus the finance charges to determine the amount financed. Then the APR is calculated using the actual payments for principal, interest and mortgage insurance on a loan amount that has been adjusted to equal the amount financed.

Here is an example...

$200,000 loan amount at 6.5% fixed and $5,000 in closing costs. The P&I payment is $1264.14.

$200,000 loan amount minus $5000 closing costs equals $195,000 amount financed.

A loan of $195,000 with a P&I payment of $1264.14 equals an interest rate or APR of 6.758%. However, the APR is really one accurate if all 360 payments are made as scheduled.

Something more alone the lines of a 3-5 year APR calculation is a more likely reality for most our customers and right now it could be argued that a 1-2 year APR is a more likely scenario if interest rates decline as expected in the near future and the loans we make no are refinanced sooner rather than later.

Tomorrow we will look at how to calculate an APR based on a shorter time frame and show your customers the real way to save some money in this market.

TRUTH? IN LENDING

FACT: Any borrower who pays closing costs on a mortgage and then makes less than 360 payments actually pays a higher APR than what we disclose to them even though we disclosed it properly.

The assumption inherent in all APR calculations is that the borrower will make all of the scheduled payments for the entire term of the loan. This significantly minimizes the affect of closing costs on the APR and understates the true APR for any borrower paying closing costs and paying off their loan early.

The truth is that closing costs are really far more costly to the average borrower than the Truth in Lending disclosure would lead them to believe.

This is vital information that you should be conveying to your borrowers since the chances of them making all 360 payments are so remote. Your job is to be able to explain this to your borrowers in order to do right by them and further set yourself apart from the competition.

Tomorrow we will look at the numbers and then later we will look at how to calculate the real numbers...

FANTASY FIGURES

The Truth in Lending Act (TILA) is a United States federal law designed to protect consumers in credit transactions by requiring clear disclosure of key terms of the lending arrangement and all costs. The statute is contained in title I of the Consumer Credit Protection Act. The regulations implementing them are known as "Regulation Z".

The purpose of TILA is to promote the informed use of consumer credit by requiring disclosures about its terms and cost. TILA also gives consumers the right to cancel certain credit transactions that involve a lien on a consumer's principal dwelling. The APR calculation is the primary component of TILA. And while the intention of this disclosure is admirable, the APR output is misleading in the practical world.

The first practical inaccuracy of APR is that the only lender fees are factored into the equation which, as you know, leaves out plenty of expenses. Most notably (and expensively) attorney, appraiser and title fees.

The real trouble with the APR calculation though is that it assumes that the borrower makes all 360 payments as scheduled and without a single dollar in excess principal payments. I think you would agree that anymore people have better odds of winning Survivor or piloting the space shuttle.

This is what is known to most folks as fantasy. And the APR numbers we give our borrowers while technically correct, are really just fantasy.

To be continued...

I WILL FOLLOW

...Up that is.

All the carefully orchestrated prospecting in the world won't do any good without follow up. It's kind of like putting money in the bank and never making a withdrawal.

One strategy is to offer to send the prospect something. This can be a simple email, a phone call at a later date, an article of interest, book or other gift.

As long as the follow up does not involve their immediate attention like a phone call or appointment, you should always set yourself up to over-deliver.

Tell them when they can expect it and get it there sooner. Because over delivering is appreciated by everyone. Most referral sources you will encounter are so accustomed to being over promised and under delivered to by Loan Officers that your over delivery and follow up will start your relationship off right ever time!

WHEN SHOULD I PROSPECT?

Reestablishing old relationships and forming new ones is the backbone of our business. These are the people who will put food on your table, shoes on your feet and money in your bank account. Most of us can't get enough of them because most of us just don't go about it the right way.

Like it or not, prospecting is a necessary part of our livelihood.

And if you learn to embrace prospecting and go about it with a sensible plan, you will be far more successful than if you view it as a chore. This is not doing the dishes or taking out the trash.

This is seeking the essential contacts you need to help your empire thrive! The first question of prospecting is when to prospect. As good salespeople we should always be on the lookout for good prospects. And while being on the lookout is good, setting aside some time every week for nothing but prospecting is better.

Make an appointment with yourself to call new prospects every week because if you don't set aside the time, there will always be something else to do that is more comfortable. Once you establish the habit, it will become easier and more productive each time.

So if you need more production right now then you need more contacts, and if you need more contacts then you must set aside the time to prospect. It's a simple equation. So just do it!

THE NEXT QUESTION

Yesterday we learned the most powerful question in the world of relationship selling, "what could I do better for you?"

That question will provide you with all kinds of constructive responses. But what if the response is "nothing. you are already the best?"

Such a response is what we really want to hear anyway, so instead of leaving it at that, use the opportunity to ask "who else could use my help?"

This question is really powerful for your referral sources because every one of them has at least one colleague who trust them that is not using your services. And if you are really the best, they will have no reluctance whatsoever in referring you to their friends.

Who doesn't like helping their friends? And who doesn't like helping two friends at once twice as much?

Ask for their help in a sincere fashion and you will receive sincere referrals!

IT'S CALLED PROSPECTING

If your production is not the object of your wildest dreams right now, then you have two choices.

Your first choice is to wait for the next refi boom. Problem is, that could be in three weeks, three months or three years, or maybe longer. Nobody knows when it will start again and you should be positioning yourself for the next onslaught of homeowner's seeking better mortgages. What you need is more production and you probably need it sooner not later.

Your second (and far better) choice is to be proactive right now and being to rekindle old relationships and form new ones. Not only will your "proactivity" now pay off much sooner than the next refi boom, but it will make the boom that much better!

I know what you are thinking.... I know I should, but how do I find the time, who I am going to call, what am I going to say and how in the world am I going to follow up? As they say, "the word "but" wipes away everything in front of it", and the previous sentence is no exception because you should and you know it. Everything after the but is just excuses.

However, those excuses will all be null and void for you by the end of this week as we answer the when, who, what and how of forming new relationships.

To be continued...

FRIENDS FOREVER

We all have friends from our past that we miss dearly. Some have moved and some have died, but most of them just fade away from lack of interaction.

Our lives change, their lives change and all of a sudden we don't see them as often as we once did and our friendship fades away slowly. We still love them and they us, but without the regular contact we once enjoyed, new friends are made, life goes on and the old friendships wither.

But please don't feel bad that this describes you and some of your most dear friends.

It describes all of us.

We are so fortunate to be in a business where staying in touch with our old friends is not only fun but valuable. Better yet, even though we may not have seen them in years, we get to help our friends make a huge purchase and get fully acquainted with their lives.

Your friends are your biggest ally in life and in our business, so reach out and touch some old friends because even if there is no business to be had, there is a warming of the heart to be had that only an old friend can provide!

WIN MORE OFTEN

What happens to us in life and in business sometimes stinks, but how we respond is what really matters and how we are defined as a person.

Is our glass half empty or half full when the emotions are in a neutral or "half and half" position? Are most things that happen to us positive or just positively negative? When times get tough, do we quit or do we accept responsibility and stay in the game?

We all face failure, disappointment and defeat in life. Those who learn from defeat, learn to win next time or the time after that or the time after that.

It doesn't matter when you win so long as your attitude is dedicated to winning. If it is, the wins will happen soon and often enough and best of all, the losses will be far more pleasant!

NEEDY RHYMES WITH GREEDY

One definition of a transaction is that of a deal between two people with economic needs. Our customers have a need to borrow money and we have the need to earn a fair profit by meeting their economic needs.

However, the word "need" is a little strong for our side of the equation. We do not need the transaction as much as they do, but they also have a multitude of other choices so they don't really need us either. They need our services, not us. Or so they think.

This is why our "needs" in this case are not really needs but more like wants and desires. Most people are turned off by a needy person and your customers don't want a needy Loan Officer either. You want to help them with the transaction but your neediness will scare them off.

To avoid this pitfall and stand out from the crowd you must add a relationship with the customer to the equation because when you add a relationship to a transaction, you become a partner in the transaction.

Your customers want a partner, a trusted expert in their corner. But many of them don't think they need one unless you let them know. Because having a trusted source for borrowing money is usually higher on their needs list than finding an interest rate that is a 1/8% better. So add the relationship and you will find less shopping and more opportunity to meet needs!

ATTITUDE HAPPENS

They say "life sucks" and occasionally it does, but it beats the alternative every minute of every day!

As we embark upon the second half of 2006, a good way to begin is by starting with the fundamentals... of your mind.

We all experience some moments that are glorious beyond imagination while others are painful beyond comprehension. These moments of great joy or pain are often referred to as "character builders" since they test our strength and put our fortitude on display.

Such times are typically well defined in our lives, but most of our moments fall somewhere in the middle of the happy/grumpy scale. How we react to those moments in the middle is what really shapes our character since most of life happens near the center ground of emotions. Indeed, the rewards of a positive attitude are infinite in all phases of life.

Whilst our previous lives fly by we may as well enjoy every second. Because finding the positive and staying upbeat about whatever life throws your way is the most important discipline of them all! 

IT ONLY TAKES ONE MINUTE

Acknowledging the referrals and good deeds of your customers is one of the keys to obtaining the next referral from them. Be gracious and let them know how much you appreciate their referrals and how important they and their referrals are to your business.

You may think they already know that and they probably do. However, a simple, handwritten thank you note will properly convey your appreciation and blow most people away since these days less and less business people, in any profession, will acknowledge referrals or acts of kindness with something handwritten and personalized.

Which is a big "e-mistake".

Also, please remember to make it your practice to thank people for referrals immediately after you are contacted rather than waiting until the closing.

Why?

Remember that just because a transaction did not close doesn't mean it wasn't a referral. Your customer tried and they did their part. Just because something happened that caused the transaction to not happen of the borrower to go elsewhere is no reason to withhold your thanks!