Almost overnight, real estate has gone from a seller’s market to a buyer’s market. Terms like ‘points’ and ‘seller concessions’ that were rarely heard are now back on the table. No doubt these new challenges require new, creative approaches for realtors and lenders. We sat down with Executive Vice President of Main Street Home Loans, Mike Farrell, to discuss the strategies he is employing to get the job done in this rapidly evolving landscape.

Full Transcript is Below:

– Welcome into NFM TV. I’m your host, Greg Sher, hoping everyone is safe and getting by in these really difficult times. We’re really excited to bring forward Mike Farrell, the Executive Vice President of Main Street Home Loans, of course, part of the NFM family. Mike, thanks for being with us on NFM TV.

– Thanks, Greg. Happy to be here. Looking forward to it.

– Let’s get right into it. So the main reason I wanted to have you on here was to see what you’re finding out there in the environment as the narrative changes and the pendulum swings from a seller’s market to a buyer’s market. Kind of wanted you to help us dust of that playbook a little bit. So, with that in mind, have at it.

– Yeah Greg, what we’re seeing right now is there’s definitely a shift in a seller’s market to a buyer’s market right now. Certain pockets of the country are still in that seller’s market, but I do expect a shift toward the second part of this year. And, you know, for right now, originators are gonna have to start figuring out how to work in those types of environments. Before it was just, “We just gotta get a house. “So we just need to put a loan out there, “get the contract, get it accepted.” Now, originators and agents really gotta start figuring out how to help with negotiations. And a lot of it, you talked about dusting off, dust off the calculator and let’s talk about some real math, and that’s really how we’re gonna have to start selling, I believe.

– So let’s get into some of the differences whereas before, seller concessions were a small part of it in a seller’s market. The demand for that and the creativity around that is definitely gonna be more prevalent. How can you present that as a loan officer? What are some recommendations as to how you kind of move all the financial pieces around the transaction?

– Well, I mean, if were an originator anytime pretty much in the last seven to eight years, the word points, or paying points, was something you probably shied away from, or that was the evil word and nobody wanted to do it. They said, “I don’t wanna pay points, “I don’t wanna pay points.” And the reason why you did that was because, you know, if you did the math on it, a thousand dollar investment on points was really only returning five to six dollars a month, so that would be like me saying, “Greg, give me $10,000 and I’ll save you 50 bucks a month.”, you might not do that, right? Because that breakeven point would be way, way, way down the line. Now we’re seeing that spread between interest rates where you could save some significant money by paying a point or half a point, maybe even two if you had that kind of cash. So, when it comes to a buyer’s market, what I’m kind of seeing is, is that most times when it’s a buyer’s market, what does the buyer end up doing on their offer? They end up trying to lower the price, right? They go right for the price, and, you know, if you save 10, $15,000 off the sale price, people probably think they probably won. The seller’s not too happy because they have a lower net sales proceeds, right? And then the buyer is thinking, “Oh, I just saved 10, 15 grand.” It doesn’t really change their payment that much. It doesn’t really change a lot on their wallet because 20% down on $15,000 is not really a lot of money when it comes down to your out-of-pocket expenses. But, if we shift over to the seller subsidies that you were talking about, if I was to say, “Hey Greg, “I’m gonna make an offer on your house for $500,000, “but instead of me offering you 480 for your house, “why don’t you give me $10,000, “and I’ll give you full price.” What that does is, and this is the stuff that I do with clients is going, “If I take that $10,000, “and I use that to take your interest rate “from let’s say 3.75 down to three and a quarter, “you’re saving significant, significant money there.” So, it’s a very different strategy right now, and I think that if you learn this piece of it and you can really become a financial, almost a financial advisor, so to speak, in our business. So that’s a big shift, and I think if loan officers can really focus on that piece of it, they can go a long way with this.

– Well you mentioned the last seven or eight years the topic of points hasn’t even come up, so for those people that have sort of entered the business in that window of the last seven or eight years, it may not even be a comfortable talking point. How do you broach it, how do you couch it to a borrower?

– You know, I think, so for me, I’m a big presentation guy. There’s an old saying Bill Gates used to have that “90% of business earned “is due to the speed of which you respond “and the professionalism of the presentation.” So as an originator, I’m very fast on communication. I respond quickly, I text back quickly, I return phone calls quickly, but when it comes to actually presenting the product, I’m really, really slow and methodical with that, and a lot of it has to do with the presentation, or I call it consultation. So, what I do is, is that I bring a wide range in here, and I show people, okay, listen. You came to me, Greg, as a client, and you said ‘Hey, I wanna buy a $500,000 house, “and I wanna put 20% down.” Well most lenders will treat it like a drive-through restaurant. They’ll go, “Here ya go, Greg. “Here’s everything you just asked for.”, but that might not be what is best for you, your family, your goals, your dreams, your hopes, all those kind of things, right? So when I learn about what people are doing, what your age is, age of your children, I’m looking at how much money you have saved in the bank, are you using your 401k plan, do you have a college savings plan? All those kind of things relate to how I would structure a mortgage for you because you are different than me. Your credit’s different, your house size is different, your income is different. So, all those things are going to be structured perfectly for you. Now, do I do a pre-approval letter in five minutes based on that? No, I can’t. So, my consultation is 30 to 45 minutes, sometimes an hour long, but at the end of that consultation, I’m not getting, “Well, somebody’s got a lower rate than me.” It doesn’t happen because they go, “Okay, well this guy knows way more than I do, “and he’s got my back and he’s trusting me, “and I trust him, “and I’m just gonna listen to what he’s saying.” and be that advice person for them. So, you know, I think if you structure things that way, I think originators still, to this day, they fire off those pre-approval letters and they fire off those mortgage numbers so quickly, and you lose all that valuable time, which gives people that opportunity to shop.

– Also, it builds the relationship. Shows that you care enough to invest and to ask all of those questions of the borrower, so that’s super insightful. I also wanna mention that you’re personally closing around 10 million dollars in the month of April, you know, that’s what you have lined up. I mean, you’re certainly one of the top producers in all of America, in addition to helping manage a group of loan officers. How many?

– So Main Street has about 160 employees today. Pretty amazing after just a hear and a half of establishing a name . But yeah, I think we have right now about 66 originators out of all of that. It’s been a wild ride, but it’s balancing. I’m a very big time management person. I try to have a lot of balance, and a lot of that just comes with having really good systems and efficiencies.

– Well, and you didn’t learn them overnight. You’ve been in the business since January of 2001, so you’re going on 20 years in the business. How does this stack up, these moments in time with what you’ve seen throughout several crises?

– Yeah, I mean, I’ve really been through two big ones. When I came into the business it was a refi boom that was starting in 02, 03, 04. And as someone who didn’t have any, I didn’t have past clients so who was I gonna refinance, so I was straight out into the realtor world, knocking on doors, things like that, making appointments and so forth, and that really helped me build that piece of it. And then you had the late 2000s where the market kinda dipped, and I was at a big bank at the time. And then now, this is totally different. I mean, I can’t even imagine. We have 10 rookies at Main Street right now that Tim Reinhart and I kinda mentor. Can you imagine just getting into this business in the last six months and then this happens? I mean, it is unbelievable. But, there’s some positives that you can look at, and it’s, number one, our business is still going right now. We’re an essential business so to speak. Real estate is still moving. Our loan business is still going. We’re still closing loans. People are working, which is a blessing. But these are huge opportunities right now that if you were an originator, and at the last quarter of 2019 you did not put together your marketing plan for 2020, or get set or get your plans in place, if you wanted to start some kind of systems or put some efficiency in place, try new softwares out, this is the time. Our spring market is now probably gonna be in the fall, so we have a lot of time right now. This should be considered winter, I would say, is what you’d usually prepare for the next year. So there’s some opportunities here too.

– Let’s talk about realtors. Is this a good time to be contacting them, or is it a time to be respectful of their space? How are you approaching that, and how are you advising the salespeople at Main Street?

– So, what I’m doing is, is that, I feel like everybody is starved for information. Any news channel, social media, there’s just so much stuff being thrown at us right now, but if you hyper-focus in the markets that you’re in as an originator, you could really come out of this very, very well. I’m actually doing a video every single morning to my realtor data base, and I’m just saying here’s what happened since yesterday, here’s what’s going on today, here’s what you need to prepare for for tomorrow, and then I’ll update you again on that. I’ve gotten huge responses on this. We’re all working from home. I’m in a T-shirt sometimes. So it doesn’t really matter what you look like, what you feel like, just get yourself out there and do things like that. We’ve heard it all before. Just go put yourself out there, do a video, do something. But I’m doing it every single day, and I’m just literally being honest. I’m not trying to sell product because look, most originators have all the same stuff. It’s conventional, it’s FHA, it’s Jumbo. Sometimes there’s unique products, construction to perm, renovation. I’m really focusing on how can I help their day get better, and can I give them one nugget that’s gonna help push their business to the next level? And then, I’m the guy they go to for things like that because I’m the one helping them the most, sometimes more than their own brokers are doing.

– So how can people follow you? What’s the best way to see what you’re putting out there in the universe during these times?

– You know, so I’m really big on, most of my videos come through email and text. I actually haven’t even jumped into the social media side. You don’t see a lot of videos of me on social media other than the one you’re gonna produce on this one. It’s just shoot me an email and say, “Hey, I’d like to start receiving your information.” and then we’ll start from there.

– I’ll tell you what, we’ve got your information now on the screen, so you don’t even have to blurt it out. Your email is right there along with your phone number. Mike, thanks so much for your time and imparting your wisdom on us all, and we wish you well, and your family, and everyone at Main Street Home Loans, and look forward to talking to you here. We’ll get some more updates from you in the days ahead.

– Thanks, Greg. Stay safe yourself. Stay safe everybody.

– We look forward to seeing you again. Hope you’ve enjoyed this time with Mike Farrell, the Executive Vice President of Main Street Home Loans. I’m Greg Sher from NFM TV. We’ll see ya again next time.