Home Affordability Counseling: Is it your job?

Written by Ernest W. Lester

Author and Developer

THE INTERPRETER Real Estate Counseling Program®

April 3, 2008

At the time of this writing, this country is in the throes of a home mortgage default crisis so severe that home values are declining in most markets. Politicians are pointing the finger both at irresponsible lending practices and overzealous homebuyers.

“Responsible lending” is the new catch phrase. Mortgage underwriting rules have tightened almost overnight. You may not be hearing the words, but “responsible home buying” has also become a popular sentiment. It is likely that the next buyers you work with will have carefully considered what they can comfortably afford.

Connecting with your buyer’s sentiment about something can help sell the buyer on YOU. So perhaps this is the perfect time for home sales professionals to incorporate “affordability counseling” into buyer services. The idea is to connect by expressing your concern that your buyer not get in over his head.

My children’s grandfather was a locally famous Realtor® who built a large company, in part, on themes that helped his agents become successful. One of his quips was, “If you don’t list, you don’t last.” Another was, “A buyer is like a moving target…and the first one to shoot it down wins.” These quips translate to timeless advice:  You, as an agent, must first be found before you can be hired; and, your moment of opportunity is on that first meeting with the prospective buyer.

Who knows where this famous man got his wisdom; but I will tell you that he was one of the early movers and shakers within the Realtor® organization and epitomizes the professional standards of the industry today. One such standard is to “protect the seller” by making sure that you don’t tie up the listing with a contract that will never close. This is naturally self serving. And it is precisely the reason why “qualifying the buyer” is an important part of your job.

Affordability Counseling Defined

As the one coining the term, I will take the liberty of first defining it for you in terms of its objective: It is a means to the self-interested end of converting a suspect to a prospect and a prospect to a client and a client to both a paycheck and future business. I add future business because the process has the potential of delivering an extraordinarily satisfying customer experience which you hope will translate into future referrals.

Affordability counseling is similar to qualifying the buyer, to the extent that you ask the buyer how much he wants to invest upfront and per month (i.e.; his constraints); but from that point it becomes an actual counseling session, elbow to elbow in front of your computer, wherein you and the buyer together explore all possible purchase scenarios and accurately conclude the buyer’s purchase power based on his stated constraints. (A subsequent mortgage loan interview may dictate different constraints, but for now you just want to land the job of agent.)

Its initial purpose is to exceed the buyer’s expectations of you so profoundly during your moment of opportunity that you will land a loyal client at that moment. It is a way to be sure that you shoot down the target. But also as the home buying process goes forward, the same computer program will be used to instantly and accurately relate every list price, offer, counter-offer, seller payment change and interest rate change in terms of their bottom line: total cash at closing and total monthly payment. And, by the way, with one more click the program also delivers itemized Buyer’s Cost Worksheets and Seller’s Net Sheets and has other tools specifically for the listing side.

Let me also define what Affordability Counseling IS NOT… because so far it may sound like I am suggesting that you take on the role of a loan originator.  Affordability counseling is not at all about asking your prospect how much money he earns and how much he has in savings and how much other debt he has. Those matters and creditworthiness are loan decision matters that need to be decided very soon; but right now you are simply trying to be hired.

Affordability Counseling Delivered

By now you may be bracing yourself to learn how complicated it will be to setup and/or operate a computer program that does so much. The amazingly good news is that THE INTERPRETER Real Estate Counseling Program® For REALTORS is delivered to your computer almost completely setup! What’s more, the learning curve is very short...10 to 15 minutes tops, after which you will be comfortable using it in the presence of your customers.

Perhaps equally good news is that it is FREE to the Realtor®. That’s right, free! That’s because like many technologies today it is supported by advertising. It is available only through a sponsoring lender whose name, daily rates and loan programs and quoted loan fees are displayed within the program.

Having a lender sponsor is necessary in order to make the purchase scenarios real and totally accurate. Such can only be achieved by basing them on actually available interest rates, other fees and up-to-date loan program guidelines.

As you will quickly discover, having a loan originator-partner who is dedicated to helping you succeed and is providing you with such an extraordinarily valuable selling tool will greatly benefit your real estate practice.

For example, one benefit is synchronization of the cost estimates that both you and your lending partner render to your client. You will transfer a data file to your partner with the scenario for the loan application and, since your scenario is based on lender provided data, the lender’s Good Faith Estimate should precisely match your Buyer’s Cost Worksheet. How professional looking is that!

Furthermore, current market standard practice has become that buyers’ offers must be accompanied by evidence of loan pre-approval by an Automated Underwriting System. Again, this task can be greatly simplified by your ability to transfer the purchase scenario data file to your loan originator-partner who can then instantly import the scenario data into his lending system! In addition to the complete scenario data, your lending partner needs to know only a few other details which he can get in 5 minutes over the telephone. Presto: AUS decision without your buyer ever leaving your office!

Isn’t modern technology wonderful! :-)