Page 14

BY GIBRAN NICHOLAS

OCTOBER 2009 O

OREGON MORTGAGE PROFESSIONAL MAGAZINE

O www.NationalMortgageProfessional.com

Converting Rate Shoppers With Unique Knowledge

8

On the one hand, it’s kind of nice that most of your competitors have left the business. On the other hand, why is rate shopping so intense and cut-throat in today’s marketplace? The answer is that although less people are selling mortgages, the salespeople who have survived are all selling the same product! After all, there are only so many ways to uniquely package a Federal Housing Administration (FHA) or conventional 30-year mortgage. So, how do you stand out from the crowd and motivate people to do business with you in this cut-throat environment of commoditized mortgages? One powerful way to convert and motivate rate shoppers is by adding value to them through relevant and unique knowledge that your competition is overlooking. Let’s face it. Most, if not all, of your competitors are milking that first-time homebuyer tax credit for all it’s worth. Most, if not all of your competitors are doing FHA presentations for their local Realtor offices. But let me ask you this: How many of your competitors are talking to clients, prospects, real estate agents, and financial advisor referral partners about creative downpayment ideas involving interfamily gifts and loans? What about gifts of equity involving properties that would take too long to sell at a reasonable price in today’s real estate market? What about creative ideas on how to solve or reduce negative equity problems? What about creative ideas on how to cope with a job loss and/or avoid foreclosure? Knowing how to properly structure interfamily gifts and loans is a huge way to differentiate yourself from the competition, convert and motivate rate shoppers, and gain exclusive access to referrals of your clients’ wealthier friends and relatives. Gifts and loans can be used for many purposes including: O Helping loved ones catch up on mortgage payments or avoid being late O Helping to provide funds for a downpayment on a new home O Helping to subsidize income temporarily due to loss of job O Helping to reduce a negative equity situation in order to allow for refinancing or selling a home

Exclusion,” but they did not yet use their second checkbook called, “The $1 Million When dealing with gifts, it is important Lifetime Exclusion.” So, mom can deduct the $8,000 from to understand two important rules perher lifetime exclusion and be left with a taining to the gift tax: $992,000 exclusion that she could still O The person(s) receiving the gift is use in the future. Dad could deduct the never subject to paying tax on the $8,000 from his lifetime exclusion and be left with a $992,000 exclusion that he gift; and O The person(s) giving the gift may not need could use in the future. Or, mom and to pay gift taxes if the gift falls under one dad could otherwise split the $8,000 and each deduct a portion of it from of two possible gift tax exclusions. their respective lifetime exclusions. The bottom line is that no gift tax The first exclusion is would need to be paid, that each individual has a even though the parents $13,000 annual gift tax exceeded their $13,000 exclusion that replenishes annual exclusions! Most of every year. The second your competitors don’t exclusion is that each indihave any clue about this. vidual also has a $1 milHeck, even you may not lion lifetime exclusion have known about this that can only be used until just now. This is exactonce, and that does not ly the type of unique replenish. In other words, knowledge, insight and this is kind of like two value that would cause a checkbooks from which rate shopper to think twice you can give gifts. The first “So, how do you about nickel and diming checkbook allows you to stand out from the you about an 1/8th of a gift up to $13,000 per percrowd and motivate point in interest rate. This is son, per year; and the secexactly the type of unique ond checkbook allows you people to do business knowledge, insight and to gift up to $1 million in with you in this cutvalue that would cause real total throughout your lifethroat environment estate agents to want to do time above and beyond of commoditized more business with you the $13,000 per year. mortgages?” versus your competition. Consider an example involving parents who want to gift $60,000 to their daughter Structuring interfamily and son-in-law in order to help them loans Knowledge on how to structure interpurchase a home. In this case: family loans is another area that could O Mom could gift $13,000 to the be very useful in converting rate shoppers, closing more deals, and gaining daughter O Dad could gift $13,000 to the daughter more qualified leads and referrals. O Mom could gift $13,000 to the son- Consider a case involving Jane who is getting a $50,000 personal loan from in-law O Dad could gift $13,000 to the son-in-law her brother, Bill. Jane plans to use the funds in order to pay down her mortIn this example, a total of $52,000 was gage balance, eliminate her negative gifted tax-free using the $13,000 annual equity problem and qualify to refinance gift tax exclusion. But remember, the gift the remaining mortgage balance into a in this example was $60,000. Does this lower interest rate. In this case, Jane would need to mean that the parents have to pay gift make payments to Bill in order to repay taxes on the remaining $8,000? Probably the personal loan over time at a certain not, as long as they haven’t used up their $1 million lifetime exclusion. In other interest rate. Jane and Bill could negotiwords, mom and dad used the first check- ate the interest rate and repayment book called, “The $13,000 Annual terms as they like, as long as Jane pays

Structuring interfamily gifts

the minimum “federal rate.” The federal rate is updated periodically by the IRS and is currently in the neighborhood of 4.3 percent for long-term loans. In other words, the $50,000 would be classified as a gift and Bill may need to pay gift taxes on all or part of the $50,000 unless Jane agrees to pay him at least 4.3 percent annual interest on the loan. Additionally, when Jane applies with the mortgage company to refinance her mortgage, she will need to notify them of the $50,000 personal loan so they can account for the payments on the personal loan when calculating her debt ratios and qualifying her for the mortgage. As far as Bill is concerned, he is also benefiting from this transaction because it gives him the opportunity to earn a rate of return on his money, while simultaneously, helping someone that is important to him in his life. In fact, you could even use this opportunity to talk to Bill about his own mortgage, housing and real estate situation. Perhaps he would be a great candidate for purchasing or refinancing a primary home, vacation home or investment property. The bottom line here is that you are the hero to both of these clients by being the one to suggest and implement some creative solutions that your competition is overlooking. Yes, you need to be up to speed on the latest FHA guidelines and mortgagee letters. Yes, you need to make a habit of visiting eFannieMae.com and reading up on the latest changes to conventional underwriting guidelines. Yes, you need to make sure your loan process is fully compliant with the new Real Estate Settlement Procedures Act (RESPA) rules and the Fed’s amendments to Regulation Z. This is the price you need to pay in order to survive in this ever-changing, ever-crazy mortgage industry. But if you really want to crush your competition and take your business to heights never before seen, you need to be able to have intelligent conversations with clients about these and other financial and life issues that have nothing to do with lending guidelines. That’s where the unique knowledge you will gain from certification training really equips you to stand out from the continued on page 10

orMP_OCT  

U.S. POSTAGE PAID NMP MEDIA CORP 11431 PRESORTED STANDARD 7 46 OCTOBER 2009 O

orMP_OCT  

U.S. POSTAGE PAID NMP MEDIA CORP 11431 PRESORTED STANDARD 7 46 OCTOBER 2009 O