proposal for use of outside lender incentive allowed verses incentive for preferred lender only?

Question

I work for a new home builder. We are offering incentives for buyers who close with our preferred lender. I have found that a lot of our buyers will choose not to purchase from us because of the simple fact that they trust their outside lender over ours (rates and monthly mortgage may be lower). I have addressed this issue with my boss and he has asked me to present a proposal on "how this would worK?" If the buyer closes with our lender we will pay for their closing costs...if they use an outside lender they are responsible for their closing costs. Any ideas on how to structure a convincing proposal??

Answer 1

I agree, most are offering huge incentives here in AZ. I have seen some say up to $7500 off ***to use towards closing costs of preferred lender. It is also a way to know how the lender works and streamline the process.
I would say check with your attorney on structuring the verbage of your details and make sure laws are ok. Other that that structure it the way you suggest, pay closing costs if you use your preferred lender. You can arrange the lender to charge a point origination and give better rates. What state are you in?
I am a mortgage broker and a Realtor in AZ.
http://www.azspotlighthomes.com
http://www.myarizonahomemortgage.com

Answer 2

You have stumbled on the great mystery of sales, proof that people do not buy based on rates, cost or any thing logical. They distrust people they do not have a relationship with.

You want them to go with the preferred lender. Don't sell the lender, sell yourself. Build a relationship with them first, then sell the home, then sell the lender.

My suggestion - start out with a prospect that is interested in your homes, sit down and discuss why they feel your home is a good choice,(let them tell you, not you tell them) really take an interest in them and why they would be an asset to that neighbor hood. Find out personal info, birthday's anniversaries, children's needs in school etc. and inform them. Then between the time they visit and come back(if that occurs) e-mail or mail interesting tidbits from the news or whatever about additional advantages to you development, new stores in the area, schools, whatever.
At the time of them putting a deposit, review the highlights of your conversation with them. Then throw in the advantages of the preferred lender, lower rates etc.

It's a bit longer, but you will find worth it in the long run, more referrals, less service calls after closing etc.

Work with your preferred lender to offer the same kind of service that you do. Think how you would want your mother treated.

Answer 3

Around here, I think nearly all builders have their own preferred lenders. They typically offer $X amount if you use the builder's lender rather than an outside one. My builder offered $10,000 if we used their lender. The $10,000 can be used towards closing costs, towards the price of the home, or split between the two. Unless your lender is offering above market rates, that's usually a good enough incentive to cover whatever other price advantages outside lenders may have.