Realtors Behind the Scenes of Our Economic Mess

June 22, 2010 by  
Filed under Debt and Credit

I often wonder why Realtors haven’t received much of the blame and scorn for their role in the inflation and collapse of the real estate bubble. As much as the banks are accused of predatory lending to simpleton home buyers, why aren’t Realtors targeted as well?

Here is a brief example of what I am referring to.

We all know that California has been a real estate disaster of epic proportions. For many years, California law has allowed homeowners to walk away from their home and mortgage without being obligated to pay any deficiency amount after the foreclosure or short sale.

The problem is that the law does not apply to a refinanced loan or home equity loan. This means that all of those Californians who used home equity to finance their lifestyle were stuck with paying what they had promised.

“Unfair” say the Realtors. If the lenders are bothering these ex-homeowners to pay what they had borrowed, they will have a hard time re-entering the housing market.

Red alert! Realtors want everyone borrowing and buying again. Who cares about careful borrowing and personal responsibility? There are commissions to be made!

So of course the Realtors are behind a pending bill that will extend the “no recourse” loan protections to everyone in California.  It is time to re-inflate the real estate bubble.

Have you ever noticed on those house-hunting shows on TV that the real estate agents almost invariably show the buyer a home that is above their price range?

Have you ever heard a Realtor tell a buyer: “Wait – stop – you can’t afford that! ”

You are more likely to hear “Can you borrow the down payment from someone in your family?”

Here is a link to the article in the New York Times.

Don’t you think that Realtors need to own some of our economic mess?

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15 Responses to “Realtors Behind the Scenes of Our Economic Mess”
  1. mdb says:

    I have a hard time blaming anyone other than borrowers. A realtor is a sales person working to maximize their pay check. If you take their advice, and you are not paying for it (the seller pays their salary), you are a fool. As the saying goes, a fool and his money are soon parted.

  2. Holly says:

    I agree w/Mr. TML. Absolutely, the realtors were in on it. In fact, they played a significant role by leading new homebuyers to many of those unscrupulous lenders with their ‘creative’ financing using phrases such as, “Mr. Mortgage Broker, Let’s see what we can do for Mr. and Mrs. Smith!” *wink, wink*

  3. Brandy says:

    I love watching HGTV and seeing the realtor saying just look at this really expensive home. On Property Virgins, they say the amount the persons approved for plus down payment is the max amount. But really realtors are after commissions. The more the house the more the commission. The buyers need to be more responsible. The raltors also show houses without what the person wants. Like you want a 2 bath “just take a look at this 1 bath house”. Hold the realtor to the mat as what you want, pricewise and all.

  4. morrison says:

    If we follow your train of thought, the car salesmen who sold those runaway Toyotas are also at fault. Not just Toyota. Same should also hold for waitress or cashiers who sold those Taco Bell burritos that caused some people across America who got salmonella poisoning. Or the ticketperson who sold you a pass to a musical show that bombed. He or she should be held accountable for an individuals’ peril. Is it a lifeguards fault that when you got to the beach, it rained? How about looking at the weather report first?

    If your train of thought were true, nothing in this world would ever get done.

    A salesperson is a salesperson is a salesperson.

    Let the buyer beware.

    A broker is a salesperson. Their job is to sell homes. They make their living by getting people to buy and sell homes. Period.

    People spend more time checking out which model MP3 to buy, which costs $99 than checking out a home which costs $399K.

    Give me a break, will you please?

    When people take responsibility for their own lives and stop looking for someone to blame, someone to dump on, this whole damn world will be a lot better place to live in. Or am I blaming somebody or something right now?

    Hmmm. I wonder?

    As for California, they are their own worst enemies. It’s a dead, lost state. Move on and talk about something else.

  5. joewatch says:

    Of the people to blame for the real estate bubble, real estate agents are on the bottom of the list. A real estate agent’s job is to match buyers with sellers.

    It’s the buyer’s resposibility to determine if they can afford what they’re buying and to determine if what they are buying is worth the price they are paying. Unfortunately, most people are bad at doing this due to lack of financial expertise/knowledge to determine their credit worthiness and lack of expertise/knowledge on how to determine a home’s proper value. So they have to pay experts for help, just like you need to pay a doctor for help with your health problems. Buyers shouldn’t be relying on real estate agents — they’re not getting paid by the buyer to give them advice. They’re paid by the seller for matching them with a buyer.

    I would say that banks and mortgage brokers are at the top of the list because they should be the ones who should be determining the credit worthiness of the buyer before lending money and the true value of homes that will ultimately be theirs if the buyer defaults on the mortgage. They are suppose to have the most experience since they’re doing lots of transactions every day.

  6. MasterPo says:

    100% agree with mdb and Morrison.

    TML, you’re just adding fuel to the every growing fire of “It’s not my fault – he/she/they made me do it!”

    Would you accept that from your kids? I hope not.

    • Rick Beagle says:

      Says the clown who doesn’t think BP should be held accountable for their actions, and feels tax payers should pay for the clean up. Since the Rethug appointed dominated SCOTUS just made corporations, citizens, I think that makes you a hypocrite.

      But honestly, deception has always been part and parcel of the salesperson game regardless of field. Ultimately the responsibility lies with the buyer, not the seller (unless laws were broken – say selling an out of state buyer, a house known to be sitting atop a moving mudslide).


  7. Rob Bennett says:

    I very much agree with the point being made here.

    I also think it is fair to blame the stock selling experts. And — dare I say it? — the personal finance bloggers who say that there is no need to take price into consideration when setting your stock allocation.

    All who pushed Get Rich Quick stuff are to blame. And all who fell for it are to blame. There’s lots of blame to go around. And the sooner we begin talking frankly about what caused the problem, the sooner we can get serious about setting things on a better path.


  8. Another Reader says:

    I don’t think it’s fair to blame real estate salespeople for selling properties at higher prices when the market supported those values. That was the market at that point in time. A lot of real estate agents I know are in the same situation as the folks that bought properties through them. They bought properties at or near the peak, thinking the properties would maintain or increase in value. Now they are short selling, losing properties to foreclosure, or going bankrupt just like their clients.

    I do think it’s fair to blame the folks on Wall Street, who were very knowledgeable about the mortgage backed securities they created and sold. A lot of those people knew very well the loans they packaged and sold were unlikely to perform. They went ahead anyway, securitizing and selling those loan pools to unknowledgeable and unsuspecting buyers. To me, that’s fraud and should be punished as such.

  9. MasterPo says:

    Yea Ricky.

    Someone held a gun to BP’s CEO’s head and told him to blow that rig!

    Just like those “evil” and “rich” bankers snuck into $8/hr Wendy’s workers’ homes in the middle of the night, dragged them from their beds, and forced them to sign those mortgage agreements for 110% ARM-5 financing with no money down.

    Keep that Kool-Aid coming my sorely misguided friend.

    • Rick Beagle says:


      I think you missed the point, and read only part of my comment. My point was simple, the oil is flowing into the gulf due to reckless actions by our new corporate citizen BP, and as such, following your logic, should be held responsible for all fees vs taxpayers that you have alluded to in the past. Personal responsibility should not be suspended just because it’s a company you like.

      As to the rest of my comment, I agree that the buyers are responsible for this not the Realtor (unless laws were broken).

      Rick Beagle

  10. Jack Clark says:

    @ morrison – Your post is 100% on target.

    @ TML- It’s surprising that you would write an article like this.

    As written by others, the Realtors really have no blame just like the banks to me have very little blame.

    No one is at fault except for the borrower/buyer.

    If a person cannot educate themselves enough about a rough estimate of what they can and can’t afford than it is their fault alone and not the fault of the Realtor/loan officer.

    • I agree that the ultimate responsibility for making stupid decisions falls on the shoulders of the stupid people. I just don’t appreciate folks like some Realtors who exploit people who rely on them. The rules and paperwork say that Realtors represent the seller (or buyer, if a buyer’s agent). The reality is that Realtors represent the deal. They will say and do almost anything to get a deal in play and closed. That puts some of them in the same category as used car salesmen. Is that what you want?

      I want professionals to act like professionals and not encourage a deal that they know from training and experience will not go well after the deal closes.

  11. Jack Clark says:

    “I want professionals to act like professionals and not encourage a deal that they know from training and experience will not go well after the deal closes.”

    As do I TML but the reality is like you said, the Realtors (like most people who work in monopolized fields where there is little to no choice) are in it for themselves and ever relying on them for much of anything, particularly financing help, is just plain out in out stupid.

  12. MasterPo says:

    This all comes down to PERSONAL RESPONSIBILITY. Something sorely lacking in America today.

    It is NOT the job of the realtor or the bank or the insurance company or the seller or anyone else involved the house selling/buying process to ensure the buyer has the means and capability to reasonable be able to afford the purchase. If the buyer can meet the requirements of the sale it isn’t any of these other people’s jobs nor responsibilities (nor accountability) to ensure years from now the buyer can still meet all the obligations of the sale and ownership.

    That is the job AND *responsibility* of the buyer only. PERIOD.

    (yes, I know the bank does a credit and income check but that isn’t the same as ensuring the person is capable of affording the mortgage for 30 years. It’s much more an at-this-moment view.)

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