As banks, lenders, and governments offer more homebuying incentives during the ongoing difficulties of the COVID-19 pandemic, one top broker says that if brokers learn the details of these offers and can avoid their pitfalls, they can become a key part of their client strategy.
Luisa Hough, a B.C. based broker with Xeva Mortgage, says that she focuses on bank and lender incentives for her clients. In past months major banks have been offering cash-back incentives and lenders have been given breaks on legal fees and appraisal costs. She says that while these incentives can help with prospecting, they’re most useful as a ‘closing bonus,’ something that helps a client choose a mortgage. Though they do come with potential pitfalls, in these uncertain times, Hough says that incentives provide her with a competitive edge.
“I've noticed that my clients seem to like when there is an incentive. It's like they're getting a deal. It's like they're getting something for buying something even though there's no cost to them,” Hough says. “It's an added bonus, especially because buying a place is one of the largest decisions they make. So any little incentive seems really make a difference for them…Some lenders don't have any incentive and homebuyers are getting very savvy so they're aware and are asking us for those incentives. If I can't get an incentive from the bank, then I will sometimes give them something to help towards their legal fees or to help towards their appraisal. I try not to. I try to focus more on my value. But if that comes up, then I will definitely help them with it.”
Hough says her decision to step up and provide an incentive herself is determined by the specific client and the sort of help they need. She says that while clients are more educated than ever about incentives, they can often come with misconceptions around what, exactly they’re entitled to.
Cash back incentives are particularly popular, Hough says, but many banks and lenders won’t allow that cash back to make up part of the down payment. As well, she says that client’s often don’t hear the words “up to” when an ad on the radio says they could get “up to $5,000.” It’s her job to play educator, then, and show the clients that while the incentive can still benefit them, they may need to adjust their expectations.
Hough says that cash back incentives are particularly popular now as so many Canadian’s savings, or lack thereof, were exposed by the COVID-19 pandemic. Many now are trying to build emergency funds that can weather any future shock. The cash injection of an incentive, Hough says, is often going to form the basis of a client’s new emergency fund, making the incentive even more popular.
Brokers need to be judicious about when they play the incentive card, Hough says. Depending on the client, incentives can act as a lure or a key part of closing. Hough says she’ll rarely start a conversation with incentives, and normally only does it in a situation where she’s competing directly with another broker. She says she prefers to establish a relationship and trust with the client around what she can provide through the life of their mortgage. With that established she can offer the lender’s incentive as a bonus.
Leading with incentives, Hough says, can encourage rate-shopping among clients and result in escalation as brokers cut deeper and deeper into their own commissions to meet client demands. She says that if brokers use incentives as the core of their client strategy rather than focusing on the relationship and service through the life of a mortgage they set a transactional tone in which it’s very hard for brokers to win. She says that brokers need to educate themselves fully on these incentives and apply them judiciously on a case-by-case basis.
“First I establish the relationships, establish the trust, get to know clients on a personal level with what they're looking for,” Hough says. “Then I add incentives saying, ‘on top of what I just did for you this is what I was able to get for you.’ I'll also offer options if there's a lower rate with no incentive. I look at a lot of the products, and I’m not always looking at the incentives. But if I feel that that's what they're looking for, if they're looking for treats, then we'll talk about the incentives and put them into that product.”