Construction finance takes the usual broking timelines and turns them on their head, necessitating new ways of thinking about clients, processing and lenders.
‘When the loan settles, the hard work begins’ is an old and illustrious cliché on broking, intended to get brokers to think about after-settlement service as more than the odd newsletter. Except, that is, in construction finance, where it’s 100% true… says MPA (Mortgage Professional Australia) Magazine.
Lending in the construction finance space is undergoing a serious shift.
• Brokers report major lenders are being used much less often
• Developers are struggling to access finance from banks, causing delays
• And both major and non-major banks are tightening lending criteria for new apartments
Here’s what our Director, Kristen Unsworth has to say:
“It’s more your traditional townhouses, house and land packages and the occasional super fund lending as well,” explains Unsworth. “It’s really a variety.”
With these individual projects the clients can come in all shapes and sizes, and you can’t rely on borrowers having construction experience. “Most clients aren’t really aware, particularly those clients doing their first construction loan,” Unsworth notes. “They need to have their hand held the whole way through, so it’s very important as a business owner to make sure those clients get that service.”
There’s much to do after the loan settles, insists Unsworth. “They have five or even six progress payments during the construction phase. A lot of these people don’t live in the same state; they live in different states. They want to be kept informed; they want to see photos, how the property is being built.”
The importance placed upon ongoing service also comes up in remuneration structures. Many major commercial brokers dealing with large developers charge a fee-for-service, but for Unsworth’s brokerage trail commission plays an important role. “We don’t charge a fee-for-service. Trail allows us to grow a business and look after clients after they settle. After they settle it’s not finished; you’re always getting phone calls in those first six months. They need their hand held the whole way; you’re their point of contact.”
Communication is crucial. Unsworth’s brokerage has a contract manager, and many other brokerages in this space have a disproportionally high number of support staff to handle after-settlement service.
This excerpt was taken from Mortgage Professional Australia Magazine. Read the full article here.