Blasting a deal to 50 lenders is a red flag, not a strategy, Weinberg warns
The headlines are full of headwinds in the mortgage market as summer comes to an end. For brokers, the only thing that matters is finding a way through those headwinds.
August home sales data released by Zillow today showed a 0.6% decline in sales, with pending listings falling 2.6% year over year.
With the slumping market, it becomes more important than ever to find a way to get a deal through to closing, which can tempt brokers into sending the same deal to every lender they know. However, shopping deals to multiple lenders could cause some problems at the front end of loans.
Sending the same deal to dozens of lenders at once often signals a problem with the deal itself, not persistence on the broker's part, according to one veteran lender. He can usually tell within seconds whether a broker has actually done the work before picking up the phone.
Glen Weinberg (pictured top), COO and partner at Fairview Commercial Lending, said firing off a deal to every lender on a broker's list tends to backfire rather than speed things along.
"I see it all the time; people do the shotgun approach," Weinberg told Mortgage Professional America. "These people have a great deal, and they'll blind carbon copy me and send it to like 50 lenders all at the same time. I don't even respond to those, because they didn't do any due diligence on what I do. Know the lenders that can fund your deal, and shop it to them selectively."
The shotgun approach backfires
Weinberg said the pattern is easy to spot, because the same deal tends to resurface again and again once it starts making the rounds.
"The shotgun approach doesn't work, because inevitably I see the same deal five different times, which is a huge red flag," he said. "There's a deal in Denver. I passed on it once. I've now seen it six more times from six different brokers."
That particular deal illustrated a problem Weinberg said he sees often. Brokers pitch a number on paper without understanding what actually makes a property financeable.
"None of the brokers understood the fundamental issue with the deal," he said. "You've got this property assessed at like $3 million, and they only need $350,000. So on the surface, it's amazing. But the taxes were $100,000 a year, it's vacant, and you can't redevelop it because it's a historical building."
It is why Weinberg said brokers and lenders have to go beyond the surface numbers to figure out whether a solid deal on paper is actually a dud.
"I don't care what the tax assessed value says," he said. "There is no value, or limited value, in that property just because of what you can or can't do with it."
What good brokers do differently
The brokers he actually takes calls from share a few habits that have nothing to do with how good a deal looks on paper, according to Weinberg. He said the first differentiator is knowing the basic facts of the file.
"If you're calling a lender and you want to talk about a deal, at least know the property address, how much is owed, how much is needed," he said. "Just because you think you got this great deal and you want to get it out quick, take a minute and do your homework."
He said having real control of the deal matters just as much. Weinberg can tell quickly when a broker is working a file directly with the borrower versus passing along something they picked up secondhand.
"They don't have control of the deal; they don't know the basic simple details," he said. "Make sure you understand it, and make sure you've talked with the borrower."
Weinberg pointed to a Denver-based broker he has closed multiple loans with as an example of how the relationship is supposed to work.
"He sends me exactly what I need, the address," he said. "He understands the full story, has direct contact with the borrowers, and when I have questions, he gets it answered quickly."
That level of preparation holds up even when a deal gets complicated.
"He clearly sets expectations with the borrowers," he said. "This is a realistic timeframe, this is what we're going to do, and there are no surprises. No surprises for me, no surprises with the borrower. That is the key to a happy borrower."
That broker's selectiveness about who he works with, Weinberg said, is part of what makes him worth prioritizing.
"I know he's not just shopping this to 50 other lenders," he said. "He's like, ‘Hey, call me, I've got to talk to you on a deal.’ He's my first callback."
Weinberg said brokers who take the opposite approach get the opposite result.
"I get like 20 emails from this one broker a week," he said. "I just ignore it now. They've all been crap, no control over it. It goes straight into the junk folder."
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