It Wasn't Me - Who Brought About This Mess?

By
Services for Real Estate Pros with RJ Smith Realty Real Estate Solutions

I was at a class last week on Short Sales.  The instructor asked the question "Who is responsible for the current situation where so many homeowners find themselves in danger of foreclosure?"  The ideas started to fly around the room.  It was the stock market, the government encouraging home ownership for all, the banks, the mortgage brokers, unemployment, etc. etc.  Well, I raised my hand to add that although it might not be popular in a room full of Realtors, we as a group had to accept some of the blame.  In the frenzy of easily obtained mortgage money and the brisk paced market we were taking out people prequalified for mortgage amounts that really were not feasible.  I said that as a buyer's representative I would often find that clients had no idea of the monthly payments they were "prequalified" to make.  Many times I would say well based on your income you could qualify but do you want to eat??

I was not involvedMany agents in the room agreed but there were still a few that said some disturbing things.  Well I assume that the financial details were reviewed by the mortgage lender.... It isn't my job to tell someone that they can't afford what they want.... and most upsetting, well I tried to tell someone they could not afford a $450,000 house once and lost them as clients so I stopped questioning them.  I was floored that this was admitted in the class.

Bottom line we are acting in a fiduciary relationship with our clients.  We are required to look out for thier best interests.  If you work for the seller you need to explain the bottom line of an offer, they need to know how much they will clear at closing and all the things that can affect whether the offer is something that they can accept.  If you work for the buyer you absolutely need to make sure they understand what they are getting into.  

I hope that I can make a living doing this work for a long time to come but I won't let fear of losing a buyer or seller because I point out important financial information to them.  I trust that most of us feel the same.  I may lose a client but I can sleep at night.  
 

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Ambassador
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Michael Thornton
Complete Home Inspections, Inc. - Brentwood, TN
Home Inspector - Nashville, TN area - 615.661.0297

Paddy, We are now all having to pay the price for the greedy politicians and bankers who really did not seem to get hurt...

Jan 31, 2010 08:41 AM #1
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Steve Loynd
Alpine Lakes Real Estate Inc., - Lincoln, NH
800-926-5653, White Mountains NH

Paddy, I am a bit floored too, by the conversation you were a part of, we do have a fiduciary requirement to our clients...if they clearly can't afford a price above a certain level we shouldn't showing those properties. Buyers are like puppy dogs their eyes are bigger than their stomachs.

Jan 31, 2010 08:44 AM #2
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Nick Zappa
Eagles Wings Realty - Montrose, CO
Professional treatment of our clients, brings awes

Your doing it right. We have a couple of good lenders that we trust and they have really done well with our clients keeping everything in the open so they can be comfortable with budgets.

Jan 31, 2010 08:49 AM #3
Rainmaker
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Aaron Silverman
Bluewater Property Management, LLC and Lowcountry Turnkey Properties, LLC - Charleston, SC
Improving the Real Estate Experience through Educa

You provide a good service to your clients Paddy.  The real estate collapse was due to a lot of different factors converging at the same time.  By your work, you are helping to correct the problem one client at a time.

Aaron

Jan 31, 2010 08:59 AM #4
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Richard Weisser
Better Homes and Gardens Real Estate Metro Brokers - Newnan, GA
Richard Weisser Coweta Newnan Homes for Sale

Paddy...

I guess that I'm old school, but I think that competent adults are responsible for their own decisions. Very many of these buyers went in with the notion that "I'll live there as long as I can afford it." Most had very little or no skin in the game.

I am a firm believer in 20% down, but I am in the minority. Many, many buyers sought 100% loans and were not insulated against a declining market.

Jan 31, 2010 09:22 AM #5
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Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Authentic Feng Shui Expert

Paddy, I have to be honest, I'm not sure as many realtors think so much about their clients that they care enough to ask the right questions or advise them they may not be able to afford the home.  I am thinking of someone in particular who doesn't care about that as long as they make the sale.  Isn't that sad?

Jan 31, 2010 08:27 PM #6
Rainmaker
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Lisa Hill
Florida Property Experts - Daytona Beach, FL
Daytona Beach Real Estate

Hmm. I DO rely on my mortgage reps to explain everything on that end. I consider that to be THEIR job! I have a rudimentary understanding of the ins and outs of mortgages, and I have a couple of very trustworthy guys. I also have my own opinion about who's to blame; and it doesn't fall in the lap of just one party. However, I'd like to know why the question was asked, about who was to blame. The only reason I can think of for asking that question, would be to learn from our mistakes. But I find that usually, that's not the case. Everyone just wants to point fingers at someone else, and nobody wants to take any responsibility.

The way I see it, the entire nation got greedy! We got spoiled and forgot everything we should have kept in the fore-fronts of our minds. (Myself included) We should have been saving for the lean years, instead of spending everything we made. Buyers should have taken that same responsibility in their own decision making process. And no real estate professional of any kind, should have taken advantage of a client, just to put more money in their own pockets.

Just a few of my own opinions...

Jan 31, 2010 11:43 PM #7
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Paddy (Patricia) Pizappi
RJ Smith Realty Real Estate Solutions - Pine Bush, NY
Real Estate Associate Broker Hudson Valley NY

Hey Michael.  There is blame in a lot of different quarters.  It does appear that the end consumer is the one who suffers the most.

I agree Steve. 

Nick I trust that the lenders will do their job but I also make sure that my buyers ask the right questions and have answers that make sense (especially when working with a lender that is not familiar to me)

Aaron you are right here the mess was the perfect storm where many factors contributed.

Richard I do believe that adults should be responsible for their debts and for their actions.  I am not giving them a pass I am just saying that as agents we should make sure they understand enough to make an informed choice.

Carole there are people everywhere and in every walk of life that unfortunately only look out for #1 (themselves).  I think most Realtors are not like that.  I am sorry you have come across one of the ones who doesn't appear to care.

Yes Lisa.  I think that we need to learn from our mistakes and only by admitting that we may have had something to do with the why of this can we go forward and keep it from happening again.  There is a huge societal problem as you describe above that contributed to this.  I want it all and I want it now!  that was what we heard and what we saw happen.

Feb 01, 2010 05:48 AM #8
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Carla Muss-Jacobs, Principal Broker/Owner
BuyersAgentPortland.com | (503) 810-7192 Portland Metro Exclusive Buyers Agent | 100% Buyer Representation ~ 100% o... - Portland, OR
Buyer Focused ~ Buyer Results

I've always talked to the buyers about PITI.  What I found when they went to an unknown (by me) lender, is that many of them were being told the amoutn of the monthly payment but  it only included the P&I!  I was shocked, and then made it a habit of telling them to work from their monthly budget of what they are comfortable paying per month for PITI, not only P&I.  I think I helped a few buyers from getting in over their heads!

Feb 22, 2010 01:21 AM #9
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Paddy (Patricia) Pizappi

Real Estate Associate Broker Hudson Valley NY
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