Watching the recent events in America and other parts of the world in finance regarding banking and Wall Street, has almost been like watching a sporting event. The peaks and troughs of the share market have been like watching the scores in a basketball game. The attempts by the Central Bank of America and Congress to strategise a victory, in itself has been a fascinating television event. Unfortunately, unlike a basketball game, there is far more riding on the result.
There is a trilogy to a real estate transaction:
• Real estate;
• Legal; and
• Finance.
These industries usually battle for who is the most important person in this trilogy. Although all parties are important, the finance broker and the financial institutions are the most important parties. Without the dough there is no go! Without the funds to buy, property cannot be sold or bought.
Hence, finding some rhyme or reason to the current Australian response to this global trend, is important. What is most important is that real estate agents should look for a business response and a personal response for consumers.
Don’t get me wrong, Australians are in a better position than Americans and Europeans. Since 1959, the Banking Act has strongly regulated banking in this Country. Since the 1920s the Reserve Bank has been involved with the control of money supply and has had an important impact on the economy. We have heard a great deal about how a bank should be controlled in this Country in relation to interest rates. However, don’t get caught by the lack of control on banks. Banks are required to place a third of their deposits into a statutory reserved deposit. Banks are closely watched by the Reserve Bank, APRA and the Treasury to ensure similar situations to America do not occur.
This is not to say that there are no problems in the lending market. The trusts which have provided the basis of the sub-prime lending market are definitely causing problems within the industry. There is a higher level of mortgage foreclosure than ever before because these lenders require a return to their investors.
Trying to make sense of the current financial market is almost impossible. No one would have predicted a full one percent being cut by the Reserve Bank yesterday. No one would have expected the banks to take the bad public relations position of not passing on the full one percent! The only thing that we can state which is certain is that the confusion and the uncertainty will continue.
What does this mean for a real estate agent? The success of a real estate agent is currently governed by the brokers to whom they refer business or local banks. Handing over the control and the success of your business is dangerous. Real estate agents need to be able to understand and control how properties are being financed. The trend in the market will be to consider access to affordable finance, and not the value of a property.
Real estate agents need to at least understand the loan market. Aggressive real estate agents need to get involved in the obtaining of finance for their clients. We suggest that two things occur in real estate offices:
• Real estate agents obtain the knowledge of their mortgage counterparts; and
• Real estate agents consider how they can be competitively involved in the access of finance.
The ultimate goal would be for real estate agents to become a mortgage broker in their own right. Nevertheless, many agencies do not have the personnel or the basic qualities to become a mortgage broker. What should be a minimum is that real estate agents start to undertake mortgage broking courses. The Certificate IV in Mortgage Broking is a three day course, which provides all of the basic knowledge and skills required to become a mortgage broker. This basic knowledge will give real estate agents the skill to be able to talk to prospective purchasers and assist them to package their finance. It is no good showing properties to people who cannot get access to finance, because you are wasting valuable time yours and theirs. Learn to qualify your purchasers and learn to qualify them from a finance prospective. This is going to be the paramount consideration of the next three years in real estate.
Does this sound like an advertisement for one of our courses? Probably! It is not intended to be an advertisement. Nevertheless, our involvement at Leverage is to ensure that we provide a complete package of services, and these packages of services have been designed to cover the four realms of the marketplace. We are in a perfect position at Leverage and the Australian College of Professionals to make such a judgment.
Considering everyone thinks this is probably still an advertisement, please note that our next Mortgage Broking course is Tuesday 14th October to Thursday 16th October 2008. Not meaning to miss the opportunity, this is the best course in town.
• The legal underpinnings are delivered by Bruce Horton (a previous Regulator of Building Societies and Cooperative Societies in New South Wales),
• The application process is taught by John Sullivan (twenty years at the National Australia Bank),and
• The business process is taught by Craig Swan Reverse Mortgage Broker of the year in 2008 for the Mortgage Finance Association of Australia). Skills and knowledge personified.
Leaving the jokes aside, it is paramount that real estate agents consider what they do in this credit crunch. Don’t wait on the side line, become an active member and don’t allow others to control your destiny.
Until Next Time
Bailey Compton and the team at the
Australian College of professionals
Leverage News 