You Get What You Pay For

It seems all we talk about these days is ‘the competition’ and how to beat them. From board games to reality TV, the concept has never been more prevalent in modern culture. But when does quality come into play? Sure…we’ve all seen those ‘Coupon Queens’ fight it out to the last nickel over the one thousandth roll of bargain brand tissue but really now…who would ever need a 1000 rolls of anything much less cheap toilet paper?? Which brings me to the point…when do quality and experience trump the competition?

I was reminded of quality and its importance on two recent occasions with clients….one a purchase and the other a refinance.

The purchase client had contacted me in January of this year and we sent out a proposal entailing the terms necessary to close the deal. I did not hear back from them and the terms were expiring so I called and was told that another firm had seen my proposal and bested it with a lower rate and lesser cost after seeing our proposal.

Naturally, I inquired as to who it was that could do those stellar terms since I know the market inside and out, especially when it comes to providing the best available terms for my clients. The name they provided was of a company that does not specialize in this property type. I was quick to discover that the company had produced quite the ‘dog and pony’ show just to sign the client. The client soon told me that the only reason they didn’t go with us was the competition’s slightly lower fee. I let them know that if it did not work out, please call me back and we’ll see what we can do to be of assistance.

Four months later, I receive a call from a real estate broker inquiring about the same transaction. The story goes that my client paid some fees and the glittery promises completely fell through. Now they needed financing yesterday since they were beyond their ‘due diligence’ period and about to forfeit their earnest money because they had believed the hype sold them by the inexperienced albeit sparkly package the original lender had initially provided. Needless to say…you get what you pay for.

Oftentimes, borrowers will believe everything they read on the Internet, but nothing they hear from the spoken word of a seasoned professional. There is such a landslide of misinformation out there that it often can cost the borrowers an infinite amount of time not to mention money only to find out they could have used a professional to complete the closing on the property.

Just when I think I’ve heard it all, here comes a seasoned, high net worth client who thinks he can call all of the shots. I get it…he’s earned his way in the world and is used to working directly with his own local bank that takes him out to lunch and hold his hand and sometimes his wallet throughout the transaction. But that same bank, the one he’s paid every month to build his ‘Trumpesque’ empire is now kicking all of his commercial loans to the curb to satisfy the Federal auditors who are telling them they’re too rich in real estate and to liquidate their portfolios. So he contacts me and I provide improved terms over what the bank has been collecting on for the past 10 years on several of his holdings. He thinks it over but declines the offer thinking he can do better than what the national lender is offering at really competitive terms. Fine…it happens. But wait…here he comes back again two weeks later…

“Anita, do you remember those terms you sent to me…I’d like to move ahead with them now.”

Apparently the market he remembered with an open door five years ago was now closed…

Okay…what to do? Lenders typically provide a 3-7 day window for a proposal of terms otherwise known as an LOI, letter of interest. They will give you time to mull it over if you need to but it’s not an infinite invitation to the dance. So while my client was stewing about it, the lender is still sending out proposals to interested borrowers who are delighted to be approved and ready to move forward. It’s sort of like being picked last for the baseball team. No one likes to be picked last, especially when they’re holding all of the gold. Some lenders allow a resubmission while others frown upon them.

So when I explain all of this to the client, let’s just say he’s not happy. I told the client I’d gladly submit the loan again at another institution but the first one would not accept it a second time.

Rates and programs change daily much like the stock market…

Offers for financing, especially with great terms are rare and invaluable in today’s economic climate…

In short, remember the baseball analogy when you go on your loan shopping expedition and if you get an offer…take it!

Anita Huedepohl
Liberty Funding
[email protected]