Transaction

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Real estate has the power to change your life for the better, but it can do so much more than that. Today’s guest, Jen McConnell, used her commissions to fight pediatric cancer, and she later created a foundation to help further the cause. On this podcast, Jen shares how real estate changed her life and has given her the ability to impact the lives of countless others. Jen also covers the advantages of running your own brokerage, ways to deliver five-star customer service, and more.

Listen to today’s show and learn:

  • Jen McConnell’s start in real estate [1:34]
  • What agents learn selling homes for builders [5:31]
  • The Charleston real estate market [6:47]
  • McConnell Real Estate Partners’ sales and team structure [8:04]
  • The advantages of running your own brokerage [13:32]
  • Social media as a tool for real estate agents [15:20]
  • The financial crisis compared to this correction [17:17]
  • About The McConnell Foundation and donating to causes that matter [18:33]
  • Restarting in real estate after major life challenges [22:18]
  • Advice on starting a non-profit foundation [26:53]
  • Advice for agents on giving five-star service to get referrals [27:29]
  • Jen’s favorite CRM: Follow-Up Boss [30:19]
  • The post-closing checklist: When to follow up with buyers [31:13]
  • Transitioning from paid leads to referrals [34:42]
  • Where to find and follow Jen McConnell [36:25]

Jen McConnell

Jen was fortunate enough to start her real estate career when she was a junior in college.  Now with over 17 years of experience in the industry, she has a particular expertise in luxury real estate and custom home building. She moved to Charleston in 2006 after receiving her B.A. in Marketing from Ashland University. In 2022 Jen was awarded the South Carolina Women in Business Award, and chosen as a Top 40 Under 40 Real Estate Agent in Charleston.  Jen has also been featured on Charleston Home Showcase & Lowcountry Live and has been featured in Charleston Real Producers Magazine, Charleston Style & Design Magazine, Southern Living Magazine, The Post & Courier, Charleston City Paper, Charleston Regional Business Journal, Charleston Daily, Greenville Business Journal, Columbia Business Journal and many others. She is a Certified Luxury Home Marketing Specialist through the Institute for Luxury Home Marketing where she has been awarded the prestigious Million Dollar Guild award. Jen has also earned the coveted Realtor of Distinction Award achieving the highest rank possible as a Platinum Award winner through the Charleston Trident Association of Realtors. The Platinum Award places Jen in the Top 2% of agents in Charleston.

Jen is the Co-Founder of King Tide Investment Group and Blue Ocean Investments, both residential real estate investment companies based in Charleston, SC and Greenville, SC respectively. In 2021 Jen and her husband Josh opened their own brokerage on Isle of Palms and formed McConnell Real Estate Partners where she is the broker-in-charge.

Jen met her husband, Josh, in Charleston and was married at Wild Dunes on Isle of Palms in 2010. They now live on Isle of Palms and welcomed their daughter Bennett in 2016 and their son Bodhi in 2017. They have embraced all Charleston has to offer but most especially the outdoor living, the amazing restaurants and long summer days at the beach. The McConnell’s are avid Clemson Tigers, strong supporters of MUSC Children’s Hospital, the South Carolina Aquarium, Pet Helpers Adoption Center and are members of First United Methodist Church on Isle of Palms.

Jen prides herself on being persistent, utilizing her experience to always find the most advantageous terms for her clients, and providing unparalleled professionalism and expertise for her clients in each and every transaction. Whether you’re looking to buy, sell or invest in real estate throughout the Charleston area, Jen would love to share her passion and market knowledge with you.

Related Links and Resources:

Thank You Rockstars!

It might go without saying, but I’m going to say it anyway: We really value listeners like you. We’re constantly working to improve the show, so why not leave us a review? If you love the content and can’t stand the thought of missing the nuggets our Rockstar guests share every week, please subscribe; it’ll get you instant access to our latest episodes and is the best way to support your favorite real estate podcast. Have questions? Suggestions? Want to say hi? Shoot me a message via Twitter, Instagram, Facebook, or Email.

-Aaron Amuchastegui

Source: realestaterockstarsnetwork.com

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Loyalty? Not in the mortgage business. That is, if you actually want to save money on your home loan.

A few years back, an HSBC survey revealed that 52% of U.S. homeowners “switched providers” (sorry, they’re British) when obtaining subsequent mortgages.

This was mainly driven (53%) by the desire to get a better deal, aka a lower mortgage rate with fewer closing costs.

That survey also found that 46% of consumers investigated a mortgage switcheroo, again either to save money or to lock in a new low rate due to rising interest rates.

Other reasons homeowners decided to go with another mortgage company were because they moved and purchased a new property.

Or due to their current mortgage deal was expiring. I think they mean an adjustable-rate mortgage resetting.

Is It Bad to Switch Mortgage Lenders?

mortgage retention

A new report from Black Knight claims that loan servicers retained just 18% of the estimated 2.8 million homeowners who refinanced a mortgage in the fourth quarter of 2020, the lowest share on record.

Interestingly, those who refinanced to improve their rate and/or term were retained at a higher rate (23%) versus those pulling cash out as part of the transaction (11%).

This could be due to cash out refinances being harder to come by lately, and thus offered by fewer lenders. Or it just feeling more complex to the homeowner.

But here’s the biggie – among higher-credit quality rate and term refinances, borrowers who switched mortgage lenders received more than an eighth of a percent lower rate than those who refinanced and remained with their current lender/servicer.

In other words, you might get a lower mortgage rate if you switch mortgage lenders, instead of remaining loyal.

So is it bad to switch mortgage lenders? Not if you want to save money! Of course, your old lender might not feel the same way.

Mortgages Are Mostly a Commodity

  • Home loans aren’t all that different from one another
  • This is why lenders are increasingly coming up with unique ways to sell you one
  • The vast majority are 30-year fixed products whose only difference might be the interest rate or fees involved
  • And the majority just follow the underwriting guidelines of Fannie Mae, Freddie Mac, or HUD

It’s really no surprise that a lot of consumers don’t stay with their original mortgage lenders and/or loan servicers.

Aside from some existing lenders sometimes talking borrowers out of a refinance, the product is mostly the same no matter where you get it.

That makes customer retention difficult, especially when other lenders are aggressively marketing to homeowners.

These days, the majority of home loans are backed by the agency guidelines of Fannie Mae, Freddie Mac, or the government via FHA loans and VA loans. I think it’s something like 90% of mortgages.

This means mortgage loans are pretty homogeneous, despite what channel they’re originated in, or which institution provides the financing.

You could get the same exact home loan from a local credit union, a big bank, an online mortgage banker, or a mortgage broker.

And who really cares where you get your mortgage as long as the company is competent enough to close the thing, and honest in terms of rate and fees?

It’s not like you’re going to walk around and brag about your cool mortgage from X bank after the fact. It’s certainly not a status symbol, or a conspicuous transaction.

I’m pretty sure I’ve never had a conversation about someone’s branded mortgage before.

And I doubt an “influencer” is going to post about theirs on Instagram. Well, I take that back, they might…because someone paid them.

Mortgage Advertising Is Following the Insurance Model

  • Like mortgages, most forms of insurance are similarly boring and unoriginal
  • But that doesn’t stop mega insurers like Geico from advertising to you 24/7
  • Other insurers create catchy new names for run-of-the-mill coverage that isn’t really unique
  • Mortgage lenders are beginning to do that too in a bid to separate themselves from the crowd

This is exactly why insurance companies use celebrity endorsements and smart marketing gimmicks to get you to switch, or conversely, to stick around.

Car insurance isn’t cool or exciting and never will be, nor are mortgages, as much as I want them to be.

Ultimately, we’re all being sold the same thing, it’s just that some companies try to differentiate themselves by slapping clever names onto their products.

For example, Quicken Loan’s Rocket Mortgage is about reinventing the mortgage process, not the mortgage itself.

You’re still probably going to get a 30-year fixed home loan or some other ordinary mortgage that you would get anywhere else.

It’s just the way you get it that might change. Instead of meeting face-to-face with a banker, you might upload documents on your smartphone and authorize the release of documents electronically.

This could make the experience a lot easier and more pleasant, but it doesn’t mean you’re necessarily getting anything different.

Because everyone is basically offering their customers same thing, it comes down to price, customer service, and now perhaps clever marketing.

The one exception is portfolio home loan programs, which are actually unique to the mortgage lender providing them. These are loans kept on the originating bank’s books that contain distinct underwriting guidelines.

We’re starting to see more of them, though most lenders remain fairly cautious with the mortgage crisis still a not-too-distant memory, despite taking place a decade ago.

For example, a lot of the zero down mortgages you see are unique to the companies offering them, the latest one I came across from Ideal Credit Union.

And some of the so-called fintech disruptors like SoFi Mortgage are actually providing unique offerings like a 5/1 ARM with an interest-only option and jumbo loans as high as $3 million with just 10% down.

Be Careful Not to Pay More for the Same Exact Mortgage

  • While it’s important to use a mortgage lender you can trust
  • Such as one that can actually close your home loan competently without major delays
  • It doesn’t really matter what “brand” the mortgage it is after it funds
  • And there’s a good chance it’ll be resold to a different company shortly after closing anyway

Those exceptions aside, many of us have very similar mortgages that are only unique in terms of where they originated from.

As noted, most of today’s mortgages are conforming loans, meaning they meet the guidelines of Fannie and Freddie. Or they’re simply backed by the government via the FHA, VA, or USDA.

And just about all of them are 30-year fixed-rate loans that function exactly the same.

That’s why you have to ask yourself – if the company isn’t offering anything different, why pay more?

Might as well bargain shop and find the best mortgage rate with the lowest closing costs, instead of simply going with a household name because of a funny commercial.

At the end of the day, as long as they get you to the finish line, you’ll probably never think about your mortgage company again. Just make sure they’re reputable first…

Chances are your mortgage will be sold off in a matter of months anyway, so the company you get it from likely won’t even service it.

In fact, your final correspondence might be a notice of your home loan changing hands…

(photo: lamdogjunkie)

Source: thetruthaboutmortgage.com

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We may primarily focus on airline loyalty programmes and air miles here at TPG but there are a ton of other money-saving loyalty programmes that we also love and help us save money and maximise our travel adventures.

There are dozens of U.K. loyalty schemes out there – of which the Tesco Clubcard and the cross-retailer Nectar card are among the best known.

Both of the above work for travellers who use points and miles, albeit in different ways (their points earned from the loyalty programmes can be converted to Virgin Points and Avios respectively) – but there are other loyalty cards and programmes out there that have similar potential, if sometimes small, benefits for holidaymakers. The key thing to remember is that everything is cumulative, and even the smallest reward can eventually add up.

Here are a handful of loyalty programmes that may be worth signing up for, helping you earn on everyday spending, such as grocery shopping, buying toiletries, or even filling up your car with a tank of petrol.

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Tesco Clubcard

(Photo by Jason Alden/Bloomberg/Getty Images)

Good for: Collecting Virgin Points, earning points on everyday spending, and getting discounts on select items in your weekly food shop
Sign up here: Tesco

Tesco Clubcard is perhaps one of the best-known loyalty schemes in Britain– you can read TPG U.K.’s full guide here.

Though you can no longer transfer Clubcard points into Avios (its partnership with BA ended in early 2021), you can turn £1.50 of Clubcard vouchers into 375 Virgin Points, to boost your Virgin Atlantic Flying Club total. Essentially, you can get 2.5 Virgin points for every one Clubcard point.

So, how do you earn Clubcard points? Once you’ve got the card (or have it attached to your online account), you just do your usual grocery shopping at Tesco, picking up one Clubcard point for every £1 you spend. If you drive, fill up your car with fuel at Tesco and earn one point for every £2 spent. Once you’ve earned a certain amount of points, they’ll be collected into Clubcard vouchers, which you can then transfer into Virgin Points. Simple, really.

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Another benefit for Clubcard holders is that it can help save cash on shopping if they keep an eagle eye out for Clubcard Prices (reductions in prices) and various offers, both in-store and online.

Finally, if you’re keen to rack up even more Clubcard points, there is the Tesco Clubcard Credit Card –a no-fee Mastercard (alas with no signing bonus) that offers points for every transaction over a certain amount. Namely, you’ll get five points per £4 spent at Tesco supermarkets, five points for every £4 spent on fuel at Tesco, plus one point per £8 you spend at other shops and retailers. This is on top of the one point per £1 you’ll get from scanning your card, or shopping online.

Say you spend £100 a week (or £400 a month) at Tesco on your family’s food shopping, that’s 400 points (from your loyalty card) and 500 (from your credit card), totalling 900 Tesco Clubcard points, a £9 voucher or 2,250 Virgin Points per month.

Nectar

Good for: Collecting Avios, earning points on everyday purchases and regular food shopping.
Sign up here: Nectar

If you’re an Avios collector, then it’s definitely worth also getting a Nectar account. If you’re yet to sign up, you can read TPG U.K.’s full guide here.

Similar to the Tescon Clubcard you can earn Nectar points on everyday transactions. 400 Nectar points can be transferred into 250 Avios, meaning your everyday shopping can contribute to your points-funded dream trip. Until 16 November you can also transfer Avios back to Nectar points at this same rate (250 Avios to 400 Nectar points), after this date this conversion rate will change so you need to convert 300 Avios to get 400 Nectar points. The Nectar to Avios conversion however will remain (for now) set at 400 Nectar points for 250 Avios.

The easiest ways to collect Nectar are to shop at Sainsbury’s (where many purchases, including fuel, will earn you one Nectar point for every £1 spent), as well as at Sainsbury’s Bank, Esso, Argos, Very, even eBay on eligible items. You can also earn by spending with Booking.com, British Airways, DFDS, Expedia and Nectar Hotels (plus more brands, listed on the Nectar website).

To amplify your Nectar-collecting ability, there’s also the Nectar American Express Credit Card, which has a £0 annual fee in the first year (£25 from year two), offers a bonus of 20,000 Nectar points (when you spend £2,000 in the first three months) and a friend referral bonus of 5,000 Nectar points.

Spending on this card gives you two Nectar points per £1 spent on virtually all purchases, but you’ll earn three points per £1 on purchases at Sainsbury’s, Argos and other Nectar partners — as you can double dip for that third point with your loyalty card. Say you spend £100 a week (or £400 a month) at Sainsbury’s on your family’s shopping, that’s around 4,800 Nectar points or 3,000 Avios earned per month.

Related: The ultimate guide to British Airways Avios

Boots Advantage Card

Good for: Buying travel essentials, earning points on regular purchases
Sign up here: Boots

With Boots Advantage Card, you collect four points for every £1 you spend in shops, online or via their app, meaning you’ll be racking up points every time you pick up toiletries, make-up, skincare or even a Boots meal deal.

Every point is worth 1p, meaning 1,000 points is £10 to spend. They quickly add up, and though you can’t use your points to get money off a purchase (only to wipe out the full amount), they may well come in handy for frequent travellers. Whether you travel by plane or train, you might find yourself in an airport or station Boots picking up some forgotten sunscreen, travel minis, flight socks, travel adapters, eye masks, or a disposable camera to document your trip… the list could go on.

A range of offers and discounts will be available to holders, too, potentially saving you a bit of money in the long run… though only if you aren’t tempted by sales prices, and only buy what you actually need.

Heathrow Rewards

Good for: Collecting Virgin Points, Avios or other airline rewards
Sign up here: Heathrow

In a nutshell: if you spend a lot of time (and money) at London Heathrow Airport (LHR), then you’d be daft not to consider joining Heathrow Rewards.

Generally speaking, you get one point per £1 spent at the airport, as well as one point for every £10 spent at Travelex exchanging money, with a sign-up bonus of 100 points. You’ll even get extra points when you splash out on expensive items from the airport’s designer shops.

You can transfer your points (at a 1:1 rate) to either Virgin Atlantic Flying Club, into Avios points for use with British Airways, as well as Singapore Airlines KrisFlyer and Emirates Skywards, among others. Check out our guide to Heathrow Rewards for the full list.

Related: The best points and miles promotions running right now

Superdrug Health & Beautycard

Good for: Buying travel essentials, earning points on regular purchases
Sign up here: Superdrug

Similarly to Boots’ Advantage Card, Superdrug has its own rewards scheme called the Health & Beautycard, which could be useful for travellers in need of a few essentials such as travel toiletries, skincare products, vitamins, etc.

You’ll earn one point per £1 spent, with 100 points equating to £1 to spend in-store – though crucially you can use your points to pay for part of a purchase if you prefer. You’ll also have the chance to earn extra points as you shop, with periods where quadruple points are on offer, as well as receive various offers and discounts.

BPme Rewards

Good for: Collecting Avios, getting money off travel products such as luggage and tech, and earning points on regular fuel top-ups
Sign up here: BPme Rewards

Previously, petrol station BP’s rewards scheme was linked to Nectar, but it now runs its own programme called BPme Rewards.

Essentially, you can earn every time you top up your vehicle, wash your car or by nipping into a BP garage for a snack – snapping up two points for every one litre of Ultimate fuel, one point for every litre of regular fuel, and one point for every £1 spent in a BP shop or car wash.

So, how does this help holidaymakers? Well, you can convert 40 BPme points into 25 Avios (though note you can’t turn Avios into BPme points), with an upper limit of 30,000 BPme points being turned into Avios per day. An alternative might be saving them up for Amazon or Marks & Spencer gift cards, to be used for big travel-related purchases such as new luggage, camping gear, clothing, cameras or other handy tech.

Related: British Airways is launching a new wine club where you can earn up to 15 Avios for every £1 spent

Airtime Rewards

Good for: Saving money on your phone bill, earning cashback on everyday spending (even at stores without their own loyalty schemes).
Sign up to the app: Airtime Rewards

Airtime Rewards is a bit of an outlier in this list, as though its app rewards you for shopping at around 150 retailers like a traditional loyalty scheme, the reward comes not in point form but as cashback — which can only be used for the specific, immovable purpose of knocking some money off your monthly phone bill.

All you need to do is check if your phone provider will actually let you get the money off your bill (O2, 3, EE, GiffGaff and Vodafone are signed up) and be willing to download the Airtime Rewards app and submit your debit or credit card details, allowing them to track your spending and automatically apply the discount to your account’s wallet when relevant (but P.S. it won’t work for American Express cards).

Retailers signed up to Airtime Rewards offer varying percentages of cashback on your purchases, which could be anything from 1% to as much as 8%. Popular retailers the app lists include Boots (5% back), Argos (2%), Wilko (3%), New Look (2%), Halfords (4%), Currys (1%) and Waterstones (6%). Foodies can get money back from Wagamama, Zizzi, YO! Sushi and Ocado, while people who utilise public transport can get 8% cashback on LNER Trains.

How much you save depends on how often you shop at retailers like these, but it all adds up – and could knock the odd £5 or £10 off your phone bill, perhaps even monthly, meaning more to save for your next getaway. Or to help with any unexpected roaming charges.

Red by Dufry

Good for: Discounts on duty-free shopping, lounge access and even hotels
Sign up for the app here: Red by Dufry

Red by Dufry is the loyalty scheme for duty-free shopping at the airport, earning you points when you buy from Dufry shops – such as WorldDutyFree (which we have in the U.K.), ExpressDutyFree, Nuance (Asia, Europe and North America) and Hudson (U.S. and Canada), though tobacco purchases don’t count. You can use the discount and earn points at airport Michael Kors, Gap, Superdry, and Victoria’s Secret stores, too.

Sign up for the app and you’ll immediately get a Silver card (and QR code), which is scanned at checkout to earn five points per €1 EUR spent and get up to 5% off the price of your purchases. Other potential benefits, such as discounts on airport lounge access, various hotels, restaurants, museums and car rentals, are also worth exploring.

Over time, you can increase your discount. Once you’ve spent €400, you’ll have 2,000 and reach Gold status, giving you up to 7% discount – while spending €1,000 EUR gets you 5,000 points and up to 10% off your shopping with the Platinum card. A big bonus is that if your airport of choice is Heathrow, Dufry has confirmed you can also double dip and earn Heathrow Rewards at the same time as Red points – as well as redeem Heathrow Rewards as WorldDutyFree vouchers.

Related: Virgin Red vs BA Shopping: which one is most worth your time?

Waterstones Plus

Good for: Earning point on book purchases, and getting money off your travel guidebooks and holiday reads
Sign up here: Waterstones

As far as rewards go, Waterstones Plus is relatively low stakes, but when it comes to maximising your travel, every pound saved is worth the effort. Particularly if you’re an avid reader, who can’t survive a long-haul plane journey without (at least) one book to delve into, need the latest holiday read for a day at the beach, or prefer exploring a new destination with a trusty guidebook in hand.

Simply, you get one Plus stamp for every £10 you spent in Waterstones shops, on the website or in its cafés. When you have 10 Plus stamps, you’ve got £10 to spend in-store. You might also get some useful offers. There’s an option for students, too, which offers the same stamps-to-cash scenario but adds a bumper 5% discount on most purchases.

Texaco Star Rewards

Good for: Earning points on regular fuel top-ups, and getting money off travel purchases such as luggage and tech
Sign up here: Texaco Star Rewards

Another rewards scheme for drivers, petrol station Texaco’s offering – called Star Rewards – has another straightforward premise, with one litre of fuel purchased equaling one point. When you have 500 points, you’ve got £5 to spend, either with Texaco or by converting your points into vouchers that can be used with various retailers – plus you get a 200-point sign-up bonus.

Most notably for travellers, Texaco points can be converted into a Love2Shop voucher, which can pay for or be put towards online purchases at Argos, Currys PC World, John Lewis, Marks & Spencer and Sports Direct – potentially saving you money on travel purchases such as luggage, cameras, or even just some new shoes. You can also use a certain value of voucher towards purchases with the National Trust, boosting any U.K. trips you might take.

Costa Club

One for tea drinks and coffee addicts (Photo by Allina Rosanova/Getty Images)

Good for: Coffee lovers who want regular freebies while in transit
Sign up here: Costa Coffee

If you frequently find yourself drawn to the unmistakable mauve exterior of Costa Coffee when at any British train station or airport, then joining Costa Club – the brand’s loyalty scheme – is a no-brainer.

To be fair, there isn’t loads to think about here. When you buy eight (hot or cold) drinks, you’ll get the ninth free, or if you get your beverage in an environmentally-friendly reusable cup, you’ll only need to buy four to get your next freebie. A bonus is a free piece of cake on your birthday, too.

Costs can quickly add up as you wander the airport or while dipping into train station shops to buy snacks for your rail journey, so you might as well make the most of any savings.

Source: thepointsguy.com

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HomeServices of America, Berkshire Hathaway’s real estate brokerage business, has increased its ownership stake in Title Resources Group, an underwriter currently partially owned by Anywhere Real Estate.

Terms of the deal were not disclosed.

Anywhere, a competing real estate franchisor formerly known as Realogy, sold 70% of TRG to Centerbridge Partners in October 2021 for $210 million in cash.

Then in May 2022, HomeServices purchased its first stake in TRG, but the size and price were not disclosed. However, Anywhere reported it made a sale that quarter of a 4% share of its portion of the title company to an unnamed purchaser for a $4 million gain in a Securities and Exchange Commission filing.

More recently, iBuyer Opendoor Technologies took an ownership interest during March in the title insurance underwriter, but again, details were not provided. But in the SEC filing, Anywhere reported a further 1% reduction of its stake for a $1 million gain during the first quarter.

Title Resources Guaranty, TRG’s business unit, finished 2022 as the eighth largest underwriter by market share, with 2.5% of the premiums generated according to American Land Title Association data.

Industry-wide, title insurance premiums generated totaled $21 billion last year. Among the independent underwriters — those not affiliated with Fidelity National, First American, Old Republic and Stewart — TRG only trailed Westcor, which had a 4.4% share.

During 2021, TRG had a 2.4% share of the $26.2 billion of total title insurance premiums written.

“The team and I are thrilled about HomeServices of America’s decision to increase its ownership stake in our company,” Scott McCall, TRG’s president and CEO, said in a press release.” Our expanded relationship with HomeServices of America speaks volumes to the value we create for our customers and our best-in-class solutions.”

Muncie - Circa November 2021: Berkshire Hathaway HomeServices sign. HomeServices is subsidiary of Berkshire Hathaway Energy.

Muncie – Circa November 2021: Berkshire Hathaway HomeServices sign. HomeServices is subsidiary of Berkshire Hathaway Energy.

Jonathan Weiss/jetcityimage – stock.adobe.com

Messages were left with TRG and HomeServices to get further specifics about the transaction but not returned by press time.

“Our partnership has already created value for our operations,” Gino Blefari, CEO, HomeServices of America, in the same press release. “We look forward to continuing our collaboration and the positive impact we will have on the industry over the years to come.”

Source: nationalmortgagenews.com

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Mortgage lending is largely about the numbers. The process of originating a mortgage is logical, mathematical and should, therefore, be predictable.

From a homeseeker perspective, the process of searching for and purchasing a home is both logical and emotional. The logical side of the process often means a long list of requirements like square footage, number of bedrooms and baths, school quality, proximity to work and shopping, etc.

But for those searching for a home, there is a fair deal of emotion that factors into their decision to make an offer. Who hasn’t fallen in love with a property and conjured up visions of what life could be in a new home? This is likely one of the reasons real estate agents are known to say, “Marry the home, date the rate.”    

Once the homeseeker has found that dream home, it’s now time for them to figure out how they are going to pay for it. And while you might think that this is when the homeseeker flips the switch from emotion to logic, our recent research suggests that there is a strong emotional component to the financing of a home. Keep in mind that, for most, going through the mortgage application is something that happens a small handful of times in their lives. 

Earlier this year, CreditXpert fielded a national survey of those that had recently purchased a home, refinanced a mortgage or anticipated being in the market for a home in 2023. Through this survey we wanted to better understand how consumers think about their credit, the process of applying for a mortgage and what they thought about CreditXpert’s predictive analytics tool that gives them the precise steps they need to take to reach a target credit score.

After showing the participants the tool, we asked them to share the top three reasons they would use CreditXpert to improve their credit score. The number one reason (“will help me save money over the life of the loan”) was clearly logical and not much of a surprise to our team. But subsequent reasons caught us by surprise and clearly pointed to the emotional side of the mortgage application process.

The pink bars in the chart below clearly spell it out. Homeseekers cited more confidence that they were getting the best interest rate (28%), felt empowered to work with their lender (25%), took the mystery (fear) out of the process (21%), gave them more confidence (there’s the confidence word again!) they could qualify (20%) and took some of the stress out of the process (18%).

Picture-1

The mortgage application process is stressful, meet your borrowers where they are

All borrowers start out hopeful and get excited when they see a home that’s nearly perfect. As the deal gets closer to the closing table, applicant anxiety begins to enter the red zone. There are always one or two reasons for the applicant to panic before it’s all signed and then, when it’s all over, they swiftly go from elation to exhaustion, as they realize how much this process took out of them.

For the loan originator, the mortgage is a transaction. For the borrower, the mortgage makes a life-changing event possible.

Not to put too fine a point on it, the chart makes clear that for the mortgage borrower the housing/mortgage transaction is much more emotional than logical.

Building empathy to build applicant trust

The perfect example of by-the-numbers mortgage lending is the refinance transaction. If it makes sense, it’s clearly visible in the numbers for everyone to see. There is little emotion for the homeowners either, as they are only in the deal to get a better rate and term.

A purchase mortgage transaction is different.

New homebuyers are strapped into an emotional roller coaster and once they make the offer, they are in a desperate rush to the closing table.

Demonstrating empathy and understanding towards your borrowers is crucial for building trust. When people feel genuinely heard, understood and cared for, trust builds.

The simple act of helping your borrowers improve their credit score helps build that trust by empowering them, building their confidence, taking the mystery out of the transaction and overall reducing their stress. In a highly competitive market, that’s a recipe for closing more loans.

For those that need help qualifying for a mortgage, improving their score can be lifechanging. For those that are well qualified, improving their score could help you make a more competitive offer and lower their cost of homeownership. And for those where an improved score would not result in a better outcome, the simple act of showing them that you are shaking the trees and working hard for them will increase transparency, build trust and help you close more loans.   

To learn more about CreditXpert, click here.

Source: housingwire.com

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There are several businesses near me that either only take cash or highly encourage the use of cash via heavy discounts. One of them even takes pesos if that’s all you’ve got, but they prefer you don’t use credit cards. And it’s all about avoiding interchange fees.

That’s because every time you swipe, tap, or dip, the merchant has to pay for the privilege of accepting plastic payment methods. And that can add up fast for small businesses already operating on razor-thin margins. 

Even if businesses take debit and credit card payments, those interchange fees impact your shopping experience long before you check out in the form of higher prices. That’s why it’s important to understand interchange fees and how they impact the businesses you frequent.

What Are Interchange Fees?

Interchange fees are the fees card networks like Visa, Mastercard, and American Express charge for processing and settling payment transactions. These (usually) invisible costs help compensate the various parties involved in the payment card ecosystem. 

Card issuers like banks and credit unions collect these fees from the merchants who accept the card as a form of payment. They help facilitate the smooth transfer of funds between the merchant’s bank (the acquiring bank) and the bank that issued the payment card.

Interchange fees may seem like an additional burden, but they help keep the payment card system functioning smoothly. For example, the card networks and issuers use the revenue to cover the costs of maintaining the payment infrastructure, ensuring fraud-prevention measures, and providing customer support services.

How Interchange Fees Work

When it comes to interchange fees, there are a lot of moving parts and hands in the pot — which is only a mixed metaphor if you don’t consider how modern manufacturing works. Fortunately, they’re fairly straightforward to understand.

Structure & Calculation of Interchange Fees

Interchange fees aren’t arbitrary. Payment technology companies like Visa and Mastercard determine them through a structured process that takes various factors into account, such as: 

  • Transaction type. Online purchases, in-store payments, or international transactions may have varying fee structures. For example, you might pay a foreign transaction fee if you use your card overseas.
  • Card type.  Whether it’s a credit card, debit card, or rewards card can impact the interchange fee applied to a transaction. For instance, debit cards tend to have lower transaction fees than credit cards.
  • Merchant category. The industry or sector in which the business operates is also a consideration. For example, transactions made at a grocery store might have different interchange fees compared to those at a gas station or a restaurant.

Regardless of the factors involved, the calculation methods typically involve a percentage of the transaction amount, a flat fee, or a combination of both. 

The specific calculations depend on the card network and region. Card networks like Visa and Mastercard have intricate fee schedules that consider multiple factors to arrive at the appropriate interchange fee for each transaction. They update these schedules regularly.

Participants in the Interchange Fee Ecosystem

To understand interchange fees fully, you must take a closer look at the key stakeholders. These participants play crucial roles in determining and collecting interchange fees. 

  • Card issuers: Financial institutions like banks and credit unions issue payment cards, including credit, debit, or prepaid cards. They collect interchange fees from merchants on behalf of the payment networks they partner with.
  • Payment networks: Payment networks like Visa, Mastercard, American Express, and Discover act as intermediaries between merchants, card issuers, and acquiring banks (merchants’ banks). They facilitate transaction authorization, clearing, and settlement and establish fee rules and structures.
  • Merchants: Merchants are physical stores, online retailers, or service providers that accept payment cards. They have agreements with (acquiring) banks to process their card transactions and pay interchange fees to card issuers through those banks. 

How Interchange Fees Impact Consumers

Interchange fees are as important to consumers as they are invisible. That’s perhaps a bit strange in a country where retailers calculate tax at the register and have a line on the receipt for it (it’s included in the tag’s sale price in other countries). And it impacts everything from the cost of your rewards card to the cost of the products you buy.

Funds Secure & Ever-Larger Payment Card Systems 

Payment networks invest some interchange revenue in the technological infrastructure needed for seamless transactions, including secure processing, fraud-prevention, and data security. Those are vital to consumers’ trust in the network and the merchants who use them. 

The fees also provide crucial revenue that helps cover the costs associated with expanding, ensuring more options available to Americans nationwide (and potentially abroad).

Increases Prices

Interchange fees can impact the prices consumers pay, even if they don’t use payment cards for their transactions. 

To offset these fees, merchants factor them into their pricing strategies. That means that even if a consumer pays with cash or another non-card method, they still usually pay slightly higher prices for goods and services.

By incorporating interchange fees into their overall cost structure, merchants distribute the expenses across all customers, regardless of their payment method. That helps ensure the business can cover the fees without cutting into their desired profit margins. 

The extent of the price adjustment varies across businesses and industries. Small businesses with tighter profit margins may feel the impact of interchange fees more significantly and may adjust prices accordingly. Larger businesses with higher transaction volumes have more flexibility to absorb these fees without significant price adjustments.

Limit or Discourage Card Payments

A relatively small number of merchants and service providers have taken to charging the interchange fees directly to the customers who use plastic payment methods as a way to disincentivize them. For example, my local government services, such as the Department of Motor Vehicles, charge you for swiping.

Still others positively reward customers who pay in cash. I buy all my appliances from local secondhand appliance places, and they give you a discount that amounts to at least free delivery for paying in cash. And there used to be a pizza place near me that would even accept Mexican currency to avoid having a customer tap or dip. 

Some are even more forceful about it. The only plastic their employees will touch are bags — maybe utensils. A restaurant down the street, also a pizza place, only started taking credit or debit cards during the pandemic. And they’re not alone.

This type of avoidance keeps their prices in check, but it could also limit their foot traffic or growth to those willing to carry or go get cash. Government services can pull it off because they’ve cornered the market. Small-business owners are often compelled to comply or risk losing their livelihood.

Funding Rewards Programs

Controversially, interchange fees play a role in supporting cardholder benefits, such as rewards programs. Card issuers use them to fund incentives like cash-back rewards, travel miles, loyalty points, and exclusive discounts at partner merchants. 

To some, these benefits enhance the overall cardholder experience and incentivize card usage. They may have several cards in their wallets for various purposes, including cash-back credit cards, travel credit cards, and gas rewards cards.

To others, they’re at best an expensive nuisance. You spend your own time and money trying to earn rewards you already paid for via higher prices due to interchange fees that would be lower if there were no rewards cards.

Still others think they’re part of an overall trend of reallocating money from the have-nots to the haves. People with lower incomes often can’t afford rewards cards’ steep yearly fees if they even qualify in the first place. But nonetheless, they pay extra for products — even those they pay cash for — thanks to interchange fees. Yet they reap no rewards.

Interchange Fee Impacts on Small Business

Interchange fees can present significant challenges for merchants, especially small businesses, making it harder for them to compete effectively. These challenges ultimately become a problem for consumers too.

Creates a Financial Burden

Small businesses typically operate on thinner profit margins compared to larger enterprises. As such, interchange fees can significantly impact their bottom line, especially for businesses with high transaction volumes or lower average transaction values. 

They can make it more challenging for them to allocate resources to other essential areas of business growth.

Increases Pricing Pressure

To offset the interchange fees, small businesses must adjust their pricing strategies. That can result in slightly higher prices for their goods and services compared to cash-only businesses and larger competitors who can spread the costs over a higher volume of transactions — and may even pay lower fees because of that volume. 

Higher prices can potentially deter cost-conscious consumers and make it more challenging for small businesses to compete. This pricing pressure can affect customer acquisition and retention for small enterprises.

Limit Negotiating Power

Large merchants and national chains may have more leverage due to their higher transaction volumes, allowing them to negotiate more favorable terms.

In contrast, small businesses may face less favorable fee structures or have fewer options to negotiate better rates. That puts them at a disadvantage in terms of managing their interchange fee expenses.

Requires Technological Investment

Implementing payment card acceptance infrastructure and staying updated with evolving technologies can be costly for small businesses. They must invest in point-of-sale systems, security measures, and training to ensure smooth card transactions. 

Interchange fees further strain their financial resources, making it challenging for them to invest in the latest technology and stay competitive with larger, more financially equipped players in the market.

Causes Cash Preference

To avoid interchange fees altogether, some small businesses may prefer cash transactions or even incentivize cash payments. 

This preference for cash can limit their customer base and pose challenges in an increasingly cashless society. It can create inconveniences for consumers who prefer or rely on card payments, potentially leading them to choose competitors that offer more flexible payment options.

Those secondhand appliance places I told you about can get away with it because their closest national competitors are big-box retailers like Lowe’s and Best Buy. Those charge about three times as much for brand-new appliances, often only a year model or two newer (for better or worse) and with only a slightly better warranty. People are willing to run to an ATM for savings like that.

A mom-and-pop stationary or hardware store doesn’t have the same luxury. Only a select few people who want exactly what they have and nothing else are going to bother with that.

Interchange Fee Regulation & Evolution

Just as interchange fees haven’t always existed, they won’t always be the same as they are now. Regulations and new technologies are bound to change them somehow — if payment network and banking policies don’t get there first.

Regulatory Efforts & Policies

Payment networks have implemented voluntary initiatives aimed at increasing transparency and competition. For example, some networks have adopted standardized fee disclosure practices, enabling merchants to have better visibility. These initiatives also promote fair competition by ensuring that all participants in the payment card ecosystem have access to essential information regarding fee structures and terms.

But industry efforts seem to have fallen short if Congressional action is anything to go by. 

For instance, the Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act, named for Sen. Dick Durbin (D-IL), introduced regulations on debit card interchange fees for issuers with over $10 billion in assets, aiming to provide relief to merchants.

In 2022, Durbin was at it again, this time taking aim at credit cards. The Credit Card Competition Act, which he introduced with Republican co-sponsor from Kansas Sen. Roger Marshall, would set similar limitations on credit card interchange fees. The bill has yet to pass, but they plan to reintroduce it. 

This is the bill everyone says would kill your credit card rewards. And maybe they’re right, though there are other revenue streams that can fund those — streams that come from bills only credit card users pay rather than costs everyone bears whether they pay with plastic or not. 

And if you’d still rather not pay extra for goods and services just to get those rewards, you’d also be forgiven. 

These regulatory actions, along with other measures implemented globally, demonstrate the ongoing efforts to address interchange fee practices and ensure fair and equitable outcomes for all participants in the payment card ecosystem.

Technological Advances & Future Trends

Technological advancements have significantly transformed the payment landscape, paving the way for new possibilities and potential changes in interchange fee structures. 

  • Digital payments, including mobile wallets, contactless payments, and peer-to-peer payment platforms, have brought increased convenience. Interchange fee models have to adapt and may have to accept getting cut out altogether.
  • Alternative payment methods like cryptocurrency have taken a big hit lately. But they’re not down for the count. Blockchain is (probably) the future. These innovative payment methods operate outside traditional card networks and will almost certainly challenge the traditional interchange fee models, given that they already charge interchange-like fees to keep them operational.
  • Open banking initiatives enable the integration of various financial services and promote increased competition within the payment ecosystem. That could drive the exploration of alternative fee models tailored to specific transaction types, consumer segments, or payment scenarios.
  • Artificial intelligence offers new opportunities for personalized pricing and risk assessment. That could lead to the development of dynamic interchange fee structures that consider individual consumer behavior, transaction history, and risk factors, resulting in more tailored and optimized fee models.

As the payment landscape continues to evolve, interchange fees are likely to adapt to accommodate technological advancements and emerging trends. The future of interchange fees may involve greater flexibility, transparency, and customization, allowing for a more dynamic and efficient payment ecosystem.

Final Word

Whether you’re all for interchange fee limits or you want them to keep their filthy paws off your rewards program, one thing’s for certain: We could use more transparency around interchange fees in the United States. 

By learning more, consumers gain valuable insights, allowing them to take practical steps to navigate their financial choices more effectively. At the very least, you know you might be able to get a better deal from small businesses on higher-dollar goods and services by offering to pay in cash.

Heather Barnett has been an editor and writer for over 20 years, with over a decade committed to the financial services industry. She joined the Money Crashers team in 2020, covering banking and credit content for banking- and credit-weary readers. In her off time, she enjoys baking, binge-watching crime dramas, and doting on her beloved pets.

Source: moneycrashers.com