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Giving it Away For Free in the Mortgage Business


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In business, it's not only necessary from time to time to give away services for free, it in fact is profitable. This is a tried and tested marketing strategy that has been around for decades and is used by every Fortune 500 company. But we don't use it very often in the mortgage business? What I mean by “giving it away for free" is simply doing a retail loan for someone at wholesale pricing. No yield spread, no overage, no additional fees. And no commission to you or your company what so ever. You are doing the loan absolutely free of charge and you are using all of your individual and company resources to make the loan as attractive and inexpensive to the borrower as possible. Plain and Simple.

I speak with mortgage professionals every day. Over the past six months, I have asked them how many loans they have intentionally offered to do absolutely free of charge within the past year. Over 97 % of them said none. It's understandable. We work in a commission based business and doing loans for free is pure heresy in most circles. But if you look at virtually every other industry, giving services away for free is a standard, and lucrative, part of their business plan. New automobiles can go for $ 15,000 to well over $ 200,000 a piece. Most people don't realize that the first models that come off the factory floor are actually given away for free to the “correct consumers". It may seem a bit strange to give away a $ 200,000 sports car for free. However, if it is being driven in the right neighborhood by the right person, it's the most cost effective marketing campaign a company can engage in. Geniuses like Gates, Dell, and Godin have actually built entire industries completely centered around giving stuff away for free. So should you be doing loans for free? In the proper circumstances, yes. Two key situations where free loans should be considered are:

1. Your borrower has the potential to provide you additional business through referral or word of mouth marketing. Many mortgage consultants have been raging for years about the positive benefits of CPA, Financial Planner, and Insurance Agent referral relationships. Offering to do a loan absolutely free of charge for one of these coveted referral sources may be needed. Remember however, you are not the free loan as some quid pro quo gimmick. Your offer to provide a free mortgage is an opportunity to showcase your ability and service offerings; not simply to get their referrals. Always remember you are a financial professional. You are not a hand bag designer trying to give away your product to Paris Hilton so she can parade around Rodeo Drive with it on her shoulder. You might also consider offering your services for free to a local, influential business leader; someone who has sway in the market place. Maybe you should do some free loans for victims of a natural disaster for some good PR? You could then advertise that right on your website. You should avoid doing free loans for political and government figures however. You don't want your name in the news if they decide to run for president one day (or assist one find a VP).

2. The potential free loan you provide is directly related to the acquisition of a paying loan. The most obvious example would be for a FSBO. In exchange for them plugging you to a potential buyer, you will do their loan for free on their new home purchase. A quick side note on FSBOs. If you decide to pursue them as a lead source, make sure that you have compiled a very nice real estate sales tool kit that will assist them sell their home. Realtors provide excellent 20 page tutorials for home owners on how to market and sell real estate. They provide great tips for homeowners on how to make their homes more attractive to buyers. Take one of these manuals, along with some independent information about real estate marketing, and compile a nice tool kit in a PDF document branded with your company name. Provide the FSBO lead source with a hard copy and electronic copy via email. You want them to have something electronic so they can forward it to other FSBO sources, and thus potentially generate more leads for you. I can't tell you how important it is to have these docs in PDF format. You don't want other people coming along and copying your stuff. We'll talk about that later.

Ok, so let's not be afraid to give it away for free. So much of the mortgage industry is trapped in the old business mindset of “take the money and run. " Many mortgage professionals are so concerned with maximizing profit from every transaction, they sometimes fail to see the forest through the trees. Every Fortune 500 company gives stuff away for free from time to time and there is good reason for it. Sometimes, in an effort to pierce a potential market place, you must start by offering services for free. People don't know you from a hole in the wall. And the only way they will get to know you is to offer your services for free. This is the same way you need to view your mortgage business; especially if you are new to the industry. You just might need to provide some services for free so people can take a look at you.

One last thought about free stuff: in addition to occasionally originating a mortgage for free, you should always try to provide as much “up-front" free value to the consumer as possible. Mortgage professionals do this in a variety of ways, mostly by providing the borrower educational information “up front" that can save them money. A cheap and easy way to provide borrowers with upfront value would be to this: once you come in contact with a prospect, you should immediately provide them with an electronic/hard copy brochure (PDF, and company branded) on “tips for reducing home energy costs" or “the best ways to get good, affordable, home insurance. "

This is a tried and true marketing technique of every major company in the world. They try to provide as much upfront “free value" to the consumer before they ask them to pay for services. If customers feel that you're providing them value immediately, they are much less likely to purse a competitor. It also builds immediate goodwill because they know you're looking out for them.

Lastly, if you work for someone who is hesitant about using company resources to do a free mortgage, just send them this article. If they don't change their mind, you might want to find a company that embraces a more 21st century marketing outlook. I looked back at my loan originations recently and I realized that some of the most profitable loans I ever did. . . . . . were the ones I did for free.

For more Mortgage Marketing Tips, you can read The Mortgage Manifesto completely free. You can locate it at .

Craig Flaherty


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