The Truth About Lending Tree

In anything like this I find it best to start with the business model.

What is a business model?
Simple, it's what the company does, or plans to do, on a regular basis to make money.

DO NOT forget, every business is in business to make money.
Even Non - Profit's must have a business model, a plan to bring in money, or they will soon cease to function.

Lending Tree (hereafter to be referred to as the tree) portrays itself as the best and easiest vehicle for you to use to compare different lenders.
And you know very well that "When banks compete..."

But there's a couple of things you don't know.
The tree's business model is all about selling referrals, almost.

Fill out the application on their site and in 4 hours you'll receive up to 4 offers from competing lenders!

Hey that's pretty cool.
One stop shopping!

But how do those lenders know to send me their "best" rates?
Could it be because the tree sold your name and info to them for around $500?
True story!

So they advertise on TV, radio, ballparks, bus stops, and so on.
Meanwhile they bombard us with offers to sell us "red hot financing leads".
Four lenders pay $500 each for your name.
They know they have to beat the other guy so it quickly becomes a contest of who can bait and switch the other guys better.

You, the consumer, buys into what you believe is the best sounding one and commit to a loan.
You, the consumer then find out later, you can't get the rate they offered, or at the fees they originally offered but it's too late now. You've swallowed the hook.

The lender closes another loan, makes money, buys more leads.
The tree collected $750 on selling your name - so it made money.

This is the lead generation business and make no mistake, this is a big business.
I get lead sales offers everyday, not one - many!
It's not just the tree either.
Have a high traffic website? - You can collect names of people who want to refi and sell them!
Got a blog like this? - same thing.
Buy an Autodialer and download the names and numbers of people with sub-prime loans into it.
Let it run each and every day. Collect all those people that "Press 2 now" for more info.
Sell them, not just once but over and over again!

See those banner ads, pop up ads, or that long column of ads on a website - that's all about lead generation!

What's that you say?
How come the tree collected only $750 when it sold 4 lenders at $500 a pop?
Smart cookie you are!

You see, the tree also owns it's own mortgage company called The Home Loan Center.
OOOOPS!

Chances are the first quote and probably the best was from them!
Nothing like faking the public into believing they were getting an honest deal while drive applications to your own people, all the while still making money off from 3 other lenders.

Too bad they couldn't keep it a secret. Now they are involved in a class action suit.

Also related: BankRate - same animal, same tactics, same problems - class action lawsuit.
This one not brought on by consumers but by the advertisers themselves.

In anything you do, anything you buy, ask yourself the simple question -- what is the business model working here?

Oh here's a mini bibliography of sorts:

http://www.bizjournals.com/charlotte/stories/2006/10/09/daily31.html

http://www.consumeraffairs.com/finance/lending_tree.html

http://inkblots.markwoodman.com/2005/05/24/cutting-down-the-lending-tree/

http://inkblots.markwoodman.com/2006/05/23/stump-grinding-the-lending-tree/

http://www.epinions.com/content_17983901316/show_~allcom

http://thesqueakywheel.com/complaints/2006/FEB/complaint8288.cfm

http://thesqueakywheel.com/complaints/2006/SEP/complaint9941.cfm

http://realtytimes.com/rtapages/20030909_lendingtree.htm

"I contacted LendingTree.com regarding a refinance loan and was told by the representative Mr. Daniel Lete that I would have to give him a $400.00 deposit to secure the lock-in interest rate on the loan and receive additional information regarding the Mortgage lending process. I stated that I was concerned about providing my credit card information without getting any information in writing first. Mr. Lete assured me that my deposit could be refunded. However, after giving my credit card information I was sent an e-mail from Mr. Leta which included detailed information on the loan and the very limited circumstances which I would be entitled to a refund of my deposit. Mr. Lete was quite misleading.

The matter resulted in my not getting my deposit back after the loan agreement was never signed or processed. After getting the lock-in interest rate, I needed to change my refinancing amount. I was advised by Mr. Lete to get a home equity rate because of the low amount I was requesting. I declined to proceed with the process after I was quoted a very high interest rate."

Broker Tour Tuesday

Tuesday is Broker Tour day here in my area.

If at all possible, I'll try and get out of the office on Tuesdays and meet some of the dedicated and professional Agents in the area.

That sure sounds a lot like sucking up doesn't it?
Well... Yes and No.

Walk into an open house on the weekend and you are likely to be greeted at the door by a relatively new agent.
Why? With inventories as high as they are running it's easy to see, there's plenty of open houses out there.

The experienced, dedicated and professional agent is still out there but may have 3 or more listings that all need to be held open at the same time. Those open houses need to be manned by someone, and legally they have to be manned by a licensed agent. As a new agent you'll have ample opportunity to work every weekend holding open house.

Take someone in your office's listing, pack the corner signs in your trunk and create some flyers to hand out.
The concept is simple: expose the home to as many eyeballs as possible.
But then again, as most people should be using the expertise of a Realtor in finding their home, isn't that contradictory?

It is. But there's a lousy fact hanging out there.
Typically, from the time a person starts looking for a home to the time they actually purchase a home, they come in direct contact with 17 Agents. That's a number from the National Association of Realtors. People don't stick around, they are flighty. Very little "stickiness".

Turning the tables, how do those 17 agents manage to come in contact with the potential buyers?
Mostly by marketing.
That means putting their faces on everything from shopping carts to restaurant take out bags.
My local drugstore pharmacy bags have a Realtor ad on them.
Newsletters, Bus Stop Benches, Pizza Boxes, and anything else they can to generate the phone call. Oh yeah, and by holding open houses.

That's right!
The underlying reason to hold an open house is to meet and greet potential buyers.
Selling the house is secondary. They know chances are they are not going to sell this house to you.
It's all about establishing a relationship, it's starting the conversation, it's building common ground.

Walk into an open house and the first question you'll likely be asked is,
"Are you currently working with an Agent?"
They want to know if you are attached to an agent already or do they have a chance on earning your business.

The bigger original question was, "What's a Broker Tour?"
Every area has a local Realtor marketing group.
In my area it's called CCRIM.
Contra Costa Realtors in Motion - catchy eh?
Solano has it's SAOR - Solano Association Of Realtors
Name aside it's a wonderful idea.

When an agent gets a new listing they are able to put it on Broker Tour.
Like I mentioned, in this area it's Tuesday.
From 10 till 2 or so, the agents will hold the home open not for the public, (although they are always welcomed) but for the other agents.

This way, when a home comes on the market, a good agent has had a chance to preview it, and then possibly suggest it to their clients.

But I'm not looking for a home.
I'm also not a Realtor.
So what am I doing on Broker Tour?

In part, I'm doing the same thing the new agent is doing on the weekend - I'm meeting and greeting, not the public but the professionals that drive the market.
I'm always looking to build professional relationships with honest dedicated agents.

On the other hand, I need to hear the word that's out on the street.
I need to know the vibe, the pulse of what's going on.
How the market is treating them and so on.

I'll use this information in my TV and Radio appearances as well as in the seminars.