Realtors not immune to foreclosure
Realtor Notebook
By Teresa Boardman, Wednesday, September 3, 2008.
It seems that some consumers believe Realtors created the current housing mess by selling too many homes.
It isn't quite that simple, but they state that we sold too many homes for too high a price and now the buyers are stuck with homes that they can't pay for and that are declining in value.
True, I have sold some homes and I even go out of my way to meet people who want to buy homes. I look for people who want to sell them, too. It is very rare to meet a seller who wants to list a home for less than the price I recommend, but it has happened.
It never occurred to me that I could be doing something wrong or, worse yet, something that might hurt someone else. I did help people purchase homes that later declined in value. I also helped people buy homes that they could not afford. Someone helped me buy a home in 1989 that is worth less today than it was in 2005. I wish I could remember her name. Did she sell it to me?
What consumers are not seeing and I am not reading about are the Realtors who are going through personal foreclosures. I know a few agents who cannot stay current on their mortgage payments and some that are in foreclosure. Others want to sell but they can't because they owe more on the home that they could sell it for. Doesn't that sound familiar?
Realtors are faced with a kind of triple whammy on this. They bought homes during the peak when they were making enough money to afford them. That is why it was a peak: because many people bought homes at the same time, including Realtors. Then home sales went down, followed by a decline in home prices.
Let me show the math for a Realtor who bought a home during the peak:
Home value minus "X" percent plus sales volume down by "X" percent (less income due to fewer sales) plus average commissions down by "X" percent (less income due to lower home prices) equals "Ouch!"
So maybe my math doesn't make sense, but I am trying to make a point here. Realtors are not immune from the ups and downs of the housing market, and they buy houses, too, and usually represent themselves.
There aren't any numbers on how many Realtors are facing foreclosure. If I were to guess -- which would be just wrong, but I'll guess anyway -- I would say that it is likely that as a group Realtors have at least the same loan default rate as the rest of the population.
As long as I am guessing, I'll suggest that it could be higher than that of the general population because it used to be so dang easy for us to buy homes and we had so many opportunities to do so. Most of us like real estate.
Most Realtors are not going to mention that they paid too much for a house and that they were tricked into buying it by the listing agents' marketing materials and the National Association of Realtors' proclamations that it is always a good time to buy real estate. Who would want to work with an agent like that?
Besides, they didn't pay too much in 2005 -- they owe too much on them in 2008. There is a difference. Why did so many people, including Realtors, buy homes in 2005? Who sold all of those Realtors those homes that they paid too much for?
Teresa Boardman is a broker in St. Paul, Minn., and founder of the St. Paul Real Estate blog.
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Submitted by Steve Simon on September 4, 2008 - 4:35am.
I'm sorry, but the whole flavor and point of this escapes me?
Not only is your math fuzzy, but the concept of your post seems fuzzy as well.
There is almost no general feeling of blame directed at real estate agents, compared to what is being aimed at appraisers and lenders!
Also to feel sorry for a member of the industry that bought in at the wrong time( there is an understatement), and without holding power?
I have read much better written by you.
Just my thoughts...
If the answer to a complex problem is very simple, it is usually incomplete...
Steve Simon is the lead instructor at the Steve Simon School of Real Estate www.stevesimon.us
Submitted by Michael Daly on September 4, 2008 - 4:43am.
touche!
Submitted by Chris Adams on September 4, 2008 - 4:59am.
Teresa,
We have all been touched by this massive wave:
7,000 foreclosures a day-according to Laura D'Andrea Tyson, an America economist and (former) dean of the London Business School.
In my opinion, greed and lack of oversight were major factors in this situation, leaving a bad taste in many, many mouths.
Steven Stearns
www.obeo.com
http://obeoman.blogspot.com
262-325-8687
Submitted by Lori Cox on September 4, 2008 - 5:28am.
IF your point is that REALTORS, like the rest of home buyers during the boom are human, point made.
Submitted by Richard Greenwood on September 4, 2008 - 6:26am.
Realtors are NOT investment advisors. If all you to do to make a living is sell homes, you better be able to convince buyers that NOW is always the right time to buy.
Realtors are salespeople NOT investment advisors.
http://TheGreatCorrection.com
Submitted by Jay Thompson on September 4, 2008 - 6:28am.
Steve Simon commented: "There is almost no general feeling of blame directed at real estate agents, compared to what is being aimed at appraisers and lenders!"
Really? Tell that to Mike Little, who was sued by his buyers because they felt he led them to pay too much (thankfully a jury had more sense). Google "real estate agents blame" and see some main-stream media reports saying just that. Read some bubble blogs.
I'll grant you that lenders seem to get more of it. But I assure you that agents get a ton of abuse and blame for the housing mess.
Jay Thompson
Broker / Owner
Thompson's Realty
Blog: www.PhoenixRealEstateGuy.com
.
Submitted by Kevin Tinsley Tacoma's #1 Mortgage Expert on September 4, 2008 - 6:46am.
I think it boils down to responsible home buying or lack thereof. If you purchase a home during a period of time when your income is higher than normal and/or with loan products that masks the true payment, most likely, those factors are going to catch up with you. Looking back, how many buyers would have actually qualified for the homes they bought if they had to qualify for them? Proof of income, based on actual tax return reported income - Not stated.
On a personal note, I do feel sorry for those going through through the process of losing a home to foreclosure. Regardless of how they got there.
http://www.HomeBuyerRewards.com
Submitted by sony nguyen on September 4, 2008 - 7:41am.
Last week, I met a lady whom owns 3 houses in southern California. She told me that she was a Realtor and bought the 3 houses with 100% financing. On average she owes $1 Million each and she is asking for help.
Another Realtor called me saying that she bought with her partners a triplex in Long Beach 18 months ago for $650,000. She and her partners spent more than $240,000.00 to rehab but run out of the money. She is looking someone to put $150,000.00 to finish the rehab that will sell for $600,000.00 at today market.
Having a license of real estate may give you a false impression that you are an expert of Real Estate. Selling and investing are different games.
Submitted by RealEstateCafe on September 4, 2008 - 10:16am.
My two cents:
Flames of "irrational exuberance" burning Realtors, too
http://tinyurl.com/5o23uu
Bill Wendel
The Real Estate Cafe
Serving a menu of money-saving services for "do-it-yourself" homebuyers & FSBOs since 1995
617-661-4046
realestatecafe@gmail.com
http://realestatecafe.pbwiki.com/timeline
Submitted by Jillayne Schlicke on September 4, 2008 - 3:02pm.
Foreclosure is sad no matter who it's happening to.
Foreclosure is also only temporary. Life goes on. We are all way much more than our "houses."
What doesn't kill you makes you stronger right? I believe Nietzsche said that.
Submitted by Michael Espiritu on September 4, 2008 - 4:48pm.
I highly doubt that a lot of consumers feel that Realtors are to blame for the present situation in real estate. Real estate has been and will continue to be cyclical. The trick is to be able to find the middle ground between feast or famine.
The foreclosure crisis hits all nationalities, income levels, educational levels. No one is immune!
My house is worth less than when I bought it but what can I do? I will keep plugging away, keep exceeding my client's expectations, and try to service my clients the best way I can.
I know many a Realtor who bought too much house without regard to "later on down the road".
I wonder how many agents, Realtors, brokers, etc have told a client that it was not in their best interest to buy at a certain time?
We as brokers, agents, Realtors should have some grasp of our clients's financial situation when they are searching for a home. You may not get THAT deal at THAT time but to be able save a client the emotional, physically draining and financial collapses a foreclosure can cause is huge!CLIENT SERVICE! CLIENT SERVICE! CLIENT SERVICE!
Michael Espiritu
Broker
Copeland Wealth Management / CWM Real Estate
So Cal
Submitted by Karen Ramsey on September 5, 2008 - 9:32am.
"...we sold too many homes for way to high a price"? I have a few comments on that.
First off, the seller's market evolved from simple supply and demand. Maybe some agents made buckets of money, but in my area, there were very too few homes to go around to support the number of agents in our association for agents to benefit from the boom. Sellers were the one's to benefit most and if you bought then, you probably sold then too so it's all pretty relative.
Secondly, it is the seller who dictates price, not the realtor. How many of you agents set the price during the boom? And how many buyer's were so frantic that they were willing to outbid the other guy to get the house? I can remember an appraiser saying to me one time, "Who am I to say the house is not worth xxx if there were nine offers for more that the asking price?" I think it's time that consumers take some responsibility for the market conditions as well. It was a perfect storm with too many factors to blame just one, two or even three entities.
I agree on the triple wammee for agents and foreclosure. I was personally affected by foreclosure and I know too MANY agents who are as well. I finally gave up after two years of trying to sell a house worth $200k less than I owed. The bank finally sold it for $280k, less than I owed after almost three total years on the market. Top producers cannot get their homes sold and are either doing short sales or losing them to foreclosure. Did we forecast this? Not at least to this magnitude.
I don't know about you, but one of the first things I learned in real estate is to always point out the good. There are some killer deals to be had for your buyers. When did it become common place for realtors to tell everyone how bad it is? All we are doing is adding fuel to the fire when we could be helping turn things around.
Submitted by carmen incali on September 26, 2008 - 4:10pm.
This IS true. The HUD information on the occupation of the people who foreclosed and whether or not it was their primary residence. And this is a problem with deregulation in and of itself. The real estate was infact treated as an investment market without the proper regulations.
Real Estate and Real Estate "professionals" used ARM loans to create false demand to keep prices high. Across the nation, the average price for a home was at a CPI of 180%. In California it was 300%.
Realtors kept prices high to garner higher payouts you get with more expensive sales. It's almost ironic but karma that these people are now foreclosing.
The point is that there was no economy to support the cost of housing. Note the imaginary bulls in this article. Real wages decline, foreclosures are up, yet they're in complete denial of the lagging demand. http://realtytimes.com/rtpages/20050222_orangeco.htm
The higher cost of real estate pushed borrowers to get ARM loans, which was at the time all what they could afford. And too many otherwise responsible borrowers are foreclosing on their PRIMARY residences.