Why not beat the banks at their own game?

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It may go against conventional wisdom, but one of the most successful brokers in the industry suggests using the bank’s preapprovals against them by sending your clients there first and then beating them on rate.

“Very simple solution - just do not do preapprovals for your customers. We no longer do them,” Jim Tourloukis of Verico Advent Mortgages wrote on MortgageBrokerNews.ca. “We tell clients to go to their bank for a pre-app and when they buy to give us a call. Nine out of ten times they come back for our rates. Very simple.”

Tourloukis’ comment was written in response to a broker who uses a similar tactic – at least with longstanding clients.

“Unfortunately you do have to issue preapproval letters but any time you put a rate on a piece of paper you are a sitting duck. I don’t know how to avoid that because many customers and Realtors want to see the preapprovals,” George Christopoulos of the Mortgage Centre told MortgageBrokerNews.ca last week. “The only way around it is if you build a relationship with your client where you say, this is today, ‘this is the highest you’ll pay but if the rate changes when you have an actual deal we’ll lower it for you.’”

While Tourloukis’s ploy may work in the current rate environment, one broker points out it may not be so easy in the event of a rate hike.

However, for the time being the tactic has worked.

“In a rising rate environment we would lose these potential clients; if we ever get to this situation again (a rising rate environment), I might change my mind and start to do pre approvals,” Tourloukis wrote. “However, at this stage, we are far too busy to spend time on pre-apps. The funding ratios on these are far too low to spend time.”
  • Bob on 2015-03-17 11:44:02 AM

    Whats stopping the client going back to the bank and they'll match the rate and throw in other banking sweetners to entice the client to stay. There's more profitiability for the banks on other cross sell products than mortgages

  • Bonnie on 2015-03-17 11:54:26 AM

    I suggest building a solid trusted relationship with the clients and they will not go to the bank at all. Why give your client to the bank?

  • Jim Tourloukis, Advent on 2015-03-17 12:15:19 PM

    The client WILL go to the bank as they should. Do you not shop around when you purchase a car? Heck, many people drive around for hours to save .03 cents a litre on gas. Surely you expect clients to shop around for their biggest purchase. As such, we choose not to waste our time on pre-apps. We actually tell the clients to shop around and to 'call us last' once they are done their shopping. We do this for 'real deals' as well. If we offer a better value proposition, we win. If not, then we have only wasted 7 minutes of our time. Do you lose some clients under this approach? Of course. However, this approach allows me and my 2 assistants to funnel through 750 funded deals a year. It works.

  • Dustan Woodhouse on 2015-03-17 12:37:11 PM

    The strategy Mr. Tourloukis is using is not one that many brokers will be able to relate to, it is not until one is past perhaps the 5yr mark that his starts to seem more logical.

    Once well established not only with referral sources but also wading deep into renewals of past clients that time becomes of such value that chopping out a part of the process that for many felt like productive work is truly a smart move.

    If I am honest and I look at the true number of pre-apps I have built over the years the ratio would not suggest it is the highest and best use of time.

    There is a fundamental difference to 'we are writing an offer this weekend and want to be sure we qualify' and 'we are thinking of getting into the market next Spring and would like to know what we qualify for now'.

    Saying 'No' is the toughest thing to learn how to do, it is not natural. I personally am struggling with this very thing currently as there are only so many hours in the day.

    Thanks for sharing a thought provoking approach Jim. It is brilliant and takes serious discipline and self confidence to implement I am sure.

  • Jake Abramowicz on 2015-03-17 12:40:25 PM

    I agree that pre-approvals are a waste of time in the fact that over 80% of clients do not end up buying a property during their rate hold period.

    Where did I get this stat from?

    Anecdotal evidence!

    All joking aside, I "do" pre-approvals but do not focus on the rate aspect. Generally I tell people their best rate will be when the deal becomes firm.

  • Rick Robertson (Mortgage Mentor) on 2015-03-17 12:41:47 PM

    I've been sending clients to their bank first for years!!! I give them the words to ask the bank. "What is the absolute best rate you can give me on...?" That makes it hard for the bank to offer something new and lower. if the bank does come back lower I ask the client why they would want to deal with someone who didn't treat them honestly the first opportunity they had. ?? Like Jim says - it saves a ton of time. I don't want someone to deal with me because I out maneuvered them with a creative sales pitch - I want them to deal with me because they trust my advice!

  • Jim Tourloukis, Advent on 2015-03-17 12:54:10 PM

    Hi Dustan, Thanks for your comments. I must add one more piece. Potential clients (and I use the word 'potential' as they are not clients until they sign) are sometimes surprised by this approach as they rarely are told to go to the competition. It actually creates a 'deemed scarcity' of supply whereby the client now wants to deal with you. Look, unlike other successful brokers who have effectively implemented a contract with the client (a contract which forces the client to finish the deal with the broker), we feel this is a much more efficient approach. We spend very little time with a 'potential client' until we are convinced that they are ready to move ahead and not waste our time. There are many things we as brokers can do to limit the time wasting that can go on in this industry. Not doing pre apps is one of them. There are many more that we use every day. As we all know, people will waste as much of our time as we let them!!!

  • Ron Butler on 2015-03-17 2:40:46 PM

    Another winning aspect of Jim's approach is he has the best rates (a couple of us also offer very low discounted rates) therefore he is perfectly positioned, as he says: "deemed scarcity" which amounts to: "what I have is so good I cannot spend a lot of time on you till we are dead certain you are ready to sign" That is spot on, when you offer highly discounted rates efficiency is paramount. Everything changes when you offer highly discounted rates and the first change is always to insist on efficiency

  • Walter Scott on 2015-03-17 7:17:45 PM

    Clients often use broker's pre-approvals to negotiate better rate with bank...

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