Why not beat the banks at their own game?

Why not beat the banks at their own game?

Why not beat the banks at their own game? 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.”