ROOKIE: Tell me about what the mortgage market looks like.

BRIAN BRADY: The world has been reset to 1999 in terms of underwriting guidelines. Bankers consistently react badly to market conditions. When there’s euphoria they loosen, and when there’s fear they tighten. That’s the opposite of what they should do.

The smartest thing I’ve seen done in 15 years, in terms of financial engineering to market conditions, is the use of …

Editor’s note: Brian Brady, a nationwide loan originator who works primarily with California real estate agents and is a blogger, engages in a Q&A with Inman News columnist Alison Rogers, the "Real Estate Rookie." Brady shares his insights about how to reach out to a client, capture them as a lead, work the lead and close it. He discusses the current mortgage market, the goal of social media marketing, and what it takes to catch a client.

ROOKIE: Tell me about what the mortgage market looks like.

BRIAN BRADY: The world has been reset to 1999 in terms of underwriting guidelines. Bankers consistently react badly to market conditions. When there’s euphoria they loosen, and when there’s fear they tighten. That’s the opposite of what they should do.

The smartest thing I’ve seen done in 15 years, in terms of financial engineering to market conditions, is the use of 125 percent LTVs (loan-to-value-ratio loans, these so-called "no-equity" loans allowed you to borrow 125 percent of the value of your home). They were around from 1996 through 2005, but the real boom was 1996 through 2000. Those loans have all performed pretty well, because they were issued at the bottom of the real estate cycle (the values of most of those homes rose).

The dumbest, by banks, was expanding loan guidelines from 2004 to 2006 — that was dumb because real estate had disconnected with the underlying fundamentals of income. Real estate had gotten to valuations that the population couldn’t support. In areas like San Diego, New York, South Florida … we lied to ourselves and said there’s a "bunch of rich people." We were deluding ourselves.

ROOKIE: And going forward?

BRADY: We are really going to suffer until the government gets out of the banks. If Citi and Bank of America were allowed to fail, we’d get through this faster.

There’s the interesting story of the subprime game — the back door: When Bank of America bought Countrywide in 2007, (BofA) was a good bank. Then it became the third- or fourth-largest subprime lender (through the purchase). Then it bought Merrill Lynch and First Franklin and became number one — and it didn’t even buy ’em cheap! Then it went to the government for bailout money.

ROOKIE: What about individual real estate? Here in New York City, we had a good bonus year this year, but people are not buying. Is that because of the credit crunch?

BRADY: There are loans in California, but the only loans that are being made are government-backed loans. The private mortgage market is dead. Trump Financial in New York City is probably making some super jumbo loans. And that will be how we find the turnaround: When private money, hedge fund money, makes jumbo loans, then the rest of the world will follow.

If you’re an investor on Wall Street, and you can make a million-dollar loan at 65 percent, with 35 percent equity, at a 7 percent rate — wouldn’t you make that loan? You’re protected even if Manhattan drops another 20 percent. The free market for loans between investors and borrowers is truly 7 percent.

ROOKIE: So why are mortgage rates so much lower? …CONTINUED

 

BRADY: They’re government subsidized.

ROOKIE: Let me switch you a little away from the market to your private business model. I heard you speak at Inman Connect two years ago about your business model and how you handled leads from blogging, and I’ve been wanting to interview you ever since.

BRADY: I subscribe to the "Millionaire Real Estate Agent model," that if you have 50 strangers in your database, that’ll spit out a transaction, while if you have 10 people in your database that you have permission to market to, and you’ve had some interaction with them, you’ll get a transaction.

Everything I do online — blogging and social media marketing — is with the goal of speaking to someone on the phone, to stick ’em in the database, e-mail them monthly, give them a phone call every few months. I’m looking for that conversation online to turn into an offline conversation.

You want to both establish expertise and gain top-of-mind status.

ROOKIE: My problem in New York is that everyone I know has four friends or relatives who are Realtors.

BRADY: When you meet with someone, ask them, "Who’s your Realtor?" Most folks will not know! They might say, "I used Jill six years ago when I bought the house, but I don’t know where she is."

So say, "Can I be your Realtor?" They might say, "I don’t need a Realtor now," and you can say, "Well, but call me if you want to know what your house is worth."

In college, I used to tell every girl, "If you don’t have a date on Saturday night, call me, I’m your back-up guy." And you know what? I had a lot of dates.

ROOKIE: So when I get told, "My sister-in-law has a license," what then?

BRADY: You can say, "Has she been your Realtor for the past three years?" The point is when you meet someone, to establish the relationship, and tell them that you’ll love them and hug them and keep them.

ROOKIE: But I think even for people you have established relationships with, it’s hard to hug and keep them. In my market, your renters become your buyers, but my attrition rate for renters I’ve done deals with is 50 percent.

BRADY: That’s not bad.

ROOKIE: I find it disheartening. …CONTINUED

 

BRADY: But now you know, if you want to beef up your sales, you just need to double your renters. Think of who your apostles are — these are people who can refer one person a month to you.

ROOKIE: One person a month? I think one person a year is good!

BRADY: Those are just raving fans. You have to turn them into apostles. Sometimes it’s just a matter of hanging around with them or being around them. This one guy I did a transaction for, when he moved here I took him out to lunch, and because I knew he was a University of Florida fan, I invited him to watch basketball with me if I was going. He has been a lead machine.

One more for you: What do you say to people when they say, "How’s the market?"

ROOKIE: Most people are down on the market here, but I’m a bit of a contrarian.

BRADY: That’s not the answer. The answer is, "That depends. Are you looking to buy, sell or invest?"

If they say "Neither," then say, "Don’t worry about it. You should be more concerned about what the Mets are going to do. Real estate doesn’t affect you." When people ask me about the market, I say, "Are you looking to buy or refi?" That is how top producers determine if someone is an "A," "B" or a "C" prospect.

Alison Rogers is a licensed salesperson and author of "Diary of a Real Estate Rookie."

***

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