Broker points new way to new construction buyers

Broker points new way to new construction buyers

Brokers looking for an in with clients “buying off the plan” should bypass the developer’s office and head straight to online homebuyer forums, said an Ottawa mortgage professional successfully using that detour.


“I don’t think a lot of brokers know about these sites and how they can get access to buyers who already have one-year rate holds with the banks but are coming up to the four-month mark before closing,” said Dan Faubert, a high-volume broker with Ottawa-Carleton Mortgage. “It’s the perfect time to get them because I can offer them a better rate than what they got a year ago from the bank, and they’re now free to cancel that deal and go with a broker.”

The little-known strategy has helped the 26-year veteran grow his book, with new construction deals now accounting for 10 per cent of his business. As little as two years ago, they made up only one per cent to two per cent of his funded volume.

Online forums, or chat rooms, bring together thousands of new construction buyers exchanging tips, commentary and complaints about the process of buying a condo, townhouse or detached home from off a developer’s plan. While some of those websites are focused on a particular development, others draw their membership from across the market.

Faubert, and a handful of other mortgage professionals, has been successful in mining those online forums for leads by striking up conversations with users and providing informal advice, which helps build relationships. The strategy is similar to those used by brokers on Twitter, although the forums provide Faubert with a more-targeted group from which to draw deals.

The conversion rate is much higher than working with developers during the sales phase, he told MortgageBrokerNews.ca. It has also proven more successful than using the limited number of one-year rate holds available through the broker channel.

Nationally, the value of building permits in September fell five per cent from August, according to StatsCan. But the value of permits increased in Ontario, Manitoba, Saskatchewan and Nova Scotia.

That kind of growth has reignited broker calls for greater access to one-year rate holds, says the head of a leading brokerage, arguing mortgage professionals are hamstrung in their efforts to capture a bigger share of condo sales during construction.

“The numbers point to the need for more broker channel lenders to offer one-year rate holds to help brokers attract the business as clients are putting down deposits on condos,” said Terry Kilakos, broker-owner of North-East Mortgages.

The extended rate holds are aggressively used by the banks, which generally fund large-scale condo developments with the understanding they’ll be allowed to set up shop in a developer’s sales showroom. The arrangement has discouraged some brokers from aggressive pursuing leads at that stage of the buying process, in large part because of the dearth of product available through their lenders. At least a couple of banks using the broker channel offer the long-horizon rate holds, although that service usually comes at a premium in terms of higher rates, said Faubert.

It’s one of the reasons why he prefers to get new construction clients who’ve already won a rate hold with a bank, knowing that he can win them over at four months before closing by offering a more competitive rate.

“Using rate holds would put me in the same boat as the banks, in that the rates i offered them a year ago would not be competitive” Faubert told MortgageBrokerNews.ca. “But connecting with them later on these forums is much more successful.”

2 Comments
  • Ontario Broker 2011-11-08 5:13:08 AM
    Years ago Mortgage Brokers often had a number of varied one year rate locks, usually at slightly reduced finder fee (i.e. .5%) BUT unfortunately there were a number of money hungry Broker rather than honour the Lender commitment which got them the deal in the first place for the sake of the almighty dollar would move the same deal that the initial Lender would hedge the rate on their behalf for a year and move the same deal to another 120 day Lender that would pay them .75%. Essentially Brokers shot themselves in the foot when the close ratio of cap rate deals fell below 25% the Lenders simply cut the program off.
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  • Ontario Broker 2011-11-08 5:19:35 AM
    Is it that some people like to see their name in print or do they really like to purposely create more competition between Brokers for a deal. This is called the Storage Wars (TV Program) Syndrome. No one knew you could buy the contents of a storage unit until the TV program and now 100's of people are showing up to....you got it buy storage units and now everyone is paying the premium of more competition. Not sure why certain individuals like to spread their niche marketing ideas of developing business to the Broker Community only to create....you got it, more competition. Should check first with the few other Brokers that were developing business the same way if we wanted the secret out.
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