Bank Financing: Understand the Appraisal

I'll make this a short post, just to clarify some things about the bank financing appraisal process.  Mostly for my benefit really, so I don't forget haha!

So, let's say you want to buy a townhouse unit from a seller.  The seller agrees to 20% downpayment and bank financing, because really, it's the same banana, and the seller will get paid anyway.  The question is, what do you do to get bank financing?  Well, first of all, go to a bank and ask them for their requirements for the appraisal.  That would usually be a certified copy of the TCT (or CCT if condominiums), etc.  You will also have to pay for the appraisal fee (typically 3 - 3.5K within Metro Manila).  After a week or two, the bank will then let you know how much the property is worth according to their appraisal (fair market value) and up to what percentage they're willing to finance it.  Typically, banks will finance up to a maximum of 70% of the appraised value.

Now here's the tricky part:  the appraised value vs. the selling price.

Don't expect the appraisal value to match the selling price.  In most cases, the appraisal value will be less than the selling price.  So going back to our example, if the seller was selling the property at 5M, and he agrees to a 20% downpayment, but the bank only appraised the property at 4M and will only finance 70%, that means you have to shoulder the difference and that will be your downpayment amount.  To illustrate:

20% of 5M = 1M -> this was supposed to be your downpayment (equity)
70% of 4M = 2.8M -> this is what the bank will finance (loan)
5M - 2.8M = 2.2M -> this is what you will actually have to pay as downpayment (equity)

The reason why developers are able to offer bank financing that is equal in appraised value and selling price is because their properties were pre-appraised by their partner banks already.  That's why they will let you know what banks are affiliated with them.  So unless you can get a better (or same) bank appraisal elsewhere, you should seriously consider the affiliated banks of the developer.  But if you're buying a resale unit such as our example, your best bet would be to ask the seller for a discount or price cut, to lessen your equity contribution aka downpayment. 

Oh, and yeah, the most important factor to get bank financing:  your financial status.

How do banks determine how much you can afford?  They'll look at how much you're making in a month, and will lend you an amount that you can pay off with 30% of your net income, subject to how long the loan will be.  If the property you're loaning for is not within that margin, then you don't get the loan.  Simple eh? Hehe.

Did I say this was going to be a short post?  Ooops.

Don't put your eggs in one basket,
Jon

The Secret to Increasing Sales Productivity

You might be wondering why I'm writing about Sales per se.  Well, so am I.  That may not instill a lot of confidence in my article but actually, I've been listening to some sales materials  on CD as well as watching youtube videos about the grand art of selling, all to widen my understanding of one of the most basic and oldest of transactions: Sales.  So I find myself wanting to share the lessons I've learned so far.

It's important to note that all of us are sellers as well as buyers at one time or another.  So when selling, it's important not to lose sight of that fact.  In Sales, the real secret to increasing productivity is asking the right questions (probing) and listening for the real answer.  

And overcoming objections.

And improving your closing technique.

And having a great team. 


The truth is, all of those are true.  However, if you absolutely suck at asking questions, and you don't care enough to listen for the answers, you'll just be going around in circles trying to overcome objections, aside from wasting time and effort trying to close people who won't buy from you anyway.  That's why I believe that asking the right questions and listening for the real answers is the precursor.  When you ask the right questions and you listen to answers, you will find out what your client's reason(s) is/are.  You will find out the why's and why not's, as well as a lot of other things.

The not-so-secret secret: QUALIFYING YOUR CLIENTS.

Qualifying.  First time I heard that, I knew what it meant, but I didn't know how and what to do in the context of Sales.  In other words, qualifying your clients means finding out if they actually have the intention to buy whatever it is you're selling.  To qualify a lead you need to do a couple of things:

1. Find out their motivation.  Ask them why they're inquiring about your product or service, find out if they have a definite and specific timetable.  Anything other than a straight answer might mean that person is just curious and not really looking to buy.  They might even be asking for a friend or family member, so make sure you ask to be referred instead.  This is important to avoid the "I'm not interested" and "I'm not ready to buy yet" as well as other price objections.
   
2. Ask who are the decision-makers, who else is/are involved in the decision-making process.  Try your best to involve all of them when discussing or presenting your product or service to minimize the "I have to ask (whomever)" scenarios.  If in case you do get the "I have to ask (whomever)" scenario, try to see if you can speak with whomever it is they have to consult.  If they refuse or won't let you speak with that person, it's possible this is not the real objection and you may have to probe deeper.
   
3. Competition.  Find out who they've spoken with, what other product(s) they like or are considering.  Let's face it, we can't always win against the competition.  That's why you need to know if it's a battle you can win.  Find out what's important to your clients, and see if it's something you have or can offer, then play it up for maximum effect.  Please, don't resort to mudslinging to destroy your competition, that's just wrong.
   
4. Price, price, price.  Here's the reality of Sales: Price is King.  Check if your client has a realistic budget, find out what payment options or terms you can offer.  See how much leeway you have in terms of pegging a price on a product or service, how much of a discount or rebate you can bargain with to close the deal.  Dare I say it?  Be blunt if you have to.  Better find out if your client can afford it or not, and if he knows what he's getting himself into.  If you find out that your client can afford your product or service yet a price objection comes up later on when you ask for the deal, it's not the money that's the problem; it's a VALUE issue, you'll need to prove your and your product's value.
   

As you can see, qualifying properly will save you a lot of time, effort and money.  You won't be wasting your time trying to follow-up with unqualified non-buyers.  In the short term, you'll have less clients, but in the long term, you'll gain the few real clients who are ready and willing to buy.

I won't go into overcoming objections, closing techniques and teamwork, but suffice it to say that asking the right questions and listening for answers is the fundamental skill one needs to learn to be effective in Sales.  Don't be afraid to ask the questions that need to be asked, there's no other way unless you're psychic.




Ask and you shall receive,
Jon