LAS VEGAS–The most successful builder-based one-stop-shopping operations achieve capture rates of 90 percent for mortgage, 98 percent for title and 50 percent for homeowners insurance.
Compare that with the capture rates found at the most successful realty-based operations: 50 percent for mortgage, 70 percent for title and 40 percent for homeowners insurance. And those are the most successful – the average capture rates across the industry are much lower.
There are several reasons for the lower capture rates, Weston Edwards told a group of about 300 people at the Real Estate Services Providers Council’s fall seminar, “How To Win Through Successful One-Stop Shopping.” For instance, many realty firms view those service providers as vendors rather than true partners. They tend to view those services as ancillary, rather than viewing their own firms as true one-stop home-buying operations.
“For that reason, they’re just not getting what they could be getting,” Edwards said.
The figures Edwards cited were part of the results of a yearlong study that included interviews with 220 of the top 350 real estate brokerage firms and 51 of the top 150 builders, as well as a survey of 3,000 home buyers’ attitudes about one-stop-shopping realty experiences. One-stop shops may take various business forms, from wholly owned subsidiaries to joint ventures, and could include mortgage, title services or homeowners insurance.
“One of the strongest messages that came through is that one-stop shopping is the home buyer’s preference,” said Edwards, whose firm, Weston Edwards & Associates, works with companies to increase their capture rates.
Despite the fact that more home buyers now become prequalified with a lender and perform their own Internet research before talking with a real estate agent, 72 percent of survey respondents said they would still follow an agent’s recommendation for a particular lender. Yet, more than 40 percent of agents didn’t recommend one in 2003.
That’s a great opportunity for real estate brokerages, but “lenders are a group frustrated a bit by the fact they can’t control this whole process,” Edwards said. In response, many lenders have adopted the mantra “If you can’t beat them, join them,” he said. Almost all new builder mortgage companies have been joint ventures, and nearly all new realty firm mortgage companies are joint ventures or marketing fee arrangements.
To boost realty-based capture rates, Edwards offered the following suggestions:
- Have new agents agree–upon hiring–that they will recommend in-house financial services to clients. It’s a bold move, Edwards said, but many of the firms with top capture rates require it.
- Be clear to all employees and agents that in-house mortgages and other services are a vital part of the company.
- Mention each in-house service offered when answering the phone. “It’s a simple thing, but it changes the mindset,” Edwards said.
- Expect employees to market all services, and tie that expectation to bonuses and annual compensation. Those who don’t market all services would be “career adjusted.”
- Seek continual, honest feedback from agents on pricing and quality of services and act on those suggestions.
- Offer praise and compliments for a job well done.
Many builder-based operations already follow Edward’s steps with success, he said. The biggest challenge for realty companies to increase capture rates is gaining the acceptance of sales associates.
Edwards also talked about the increasing number of minority and immigrant home buyers and their impact on the industry. Home builders, he said, have learned how to effectively reach those communities. Minorities and recent immigrants account for half of all sales for some major home builders, and they are buying new homes twice as often as white home buyers.
“The home builders are making a ton of money harvesting this business,” Edwards said.
Realty firms must realize that the minority and white communities are really two distinct markets. They often prefer different means of finding out about homes for sale, and recent immigrants feel most comfortable working with loan officers and processors of their same ethnic group. That’s important for companies to keep in mind as they’re trying to reach those markets through joint ventures and other business arrangements. Those potential home buyers also sometimes need basic home-buying education, something home builders have started doing themselves, he said.
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