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Should Realtors be blamed for the sub-prime crisis? (A rebuttal)

I just saw a post on ActiveRain by Lance Winslow titled How Much Should Realtors Be Fined for Their Part in the Subprime Lending Crash - Can We Jail them?

I debated using my god-like powers to feature the post, as it's been a pretty slow news day here at on ActiveRain and I'm sure it would generate some interesting responses. Bob thought it might get the natives a little too restless having a post calling for the jailing of Realtors on our front page, so he pulled me away from the edge :) Basically the gist of it, should agents be punished for any part they had in the the housing bubble, and the subsequent fall out that is in process. Did agents against better judgement coerce buyers into getting in over their heads?

First of all I'm not an agent, never have been and never will be, but I saw lots of transactions from the sidelines. I saw just as many cases of agents talking people away from the edge if you will, than doing the opposite. Occasionally I saw agents (often newer ones) that got caught up in the whole "real estate never goes down", "you should buy as much house as you can get a loan" hype, believing it themselves. Just like near the top of the stock market boom in 2000, everyone many stock brokers were believing the hype themselves, it wasn't purely self serving. Not to say there wasn't sleezy agents out there, but it was the minority so lumping a whole profession together does a diservice.

I did see a lot more outright fraud on the lending side of things, again there are A LOT of great loan officers out there too (many here on ActiveRain). Unfortunately some of the best ones I knew ended up leaving the industry during the height of the boom because they got too fed up and couldn't compete.

You can make just as good of a case to lump blame on the home buyer, a lot of them knew full well they were speculating and got caught. But really it's a whole system that created the situation, the same system that created the massive stock frenzy back in 1999 and 2000 and is burning people again this time around.

Posted by Matt Heaton on 01/02/2008 06:56 PM

Comments (28)

28 Comments on Should Realtors be blamed for the sub-prime crisis? (A rebuttal)

JAN

2008

many people are to blame for the sub-prime mess. Wall street should take alot of the blame for

creating the product and buying up these bad loans. Everyone, including the customer is too blame

for this mess--thanks--mike

I'm raising my hand as one of those agents talking people out of over buying. We never had a "bubble" here in the Dallas area, but there have been some neighborhoods who had a bubble and it's about the same thing. Overall, in my area, I would blame the home owners and the appraisers for the bubble in those neighborhoods as they're the ones who set the prices, waited for buyers to submit offers, and even had appraisers say the values were ok.

If they want to hang the Realtors, hang the mortgage people, home owners, and appraisers as well... oh, wait, that's almost everyone!

Right Matt...I'm messing with another post he wrote about weather real estate professionals should be subjected to lie detector tests. I think we should use truth serum and shock treatment and maybe even a colonoscopy to read internal aura from time to time. :-)

YOU NEVER CAN BE TOO CAREFUL when you're trying to pin blame. After all, if we could just make a certain segment of the financial industry own up, we could move on to finding out who is to be blamed for so many other things! BTW...don't you agree that we should start licencing and enforcing regulation on the Blame Pinners? After all, pins are rather blunt and there should be some sort of training AND we don't want any pins that come from foreign sweat shops used in attaching American blame that has been cruelly tested on lab animals...

Matt, maybe they should have taken a fixed rate, rather than a teaser or an arm. Wendy

I commented on his post, no I don't agree.

I've been waiting for someone to suggest that. I haven't read Lance's yet but I will.

Every time I post something about the "real estate market" (speaking in general terms) I get responses telling me that real estate is local. It seems like "blame" is the same way...it's specific to each deal. In some cases, buyers should have known better and still got in over their heads. In some cases Realtors were pushing too hard for a commission and gave terrible advice or worse. In other cases, lenders were trying to score points (haha) by putting a qualified buyer into a less-desireable loan or even finding a way to get an approval knowing the buyer couldn't repay at a later date.

There's probably plenty of blame to go around, but it's best leveled (if at all) on a case by case basis. I think the best of the best (many of whom are on AR) are the ones who care about their customers just as much as they care about making a living. And in my experience, those are the folks who make a great living and will weather this storm and come out ahead. Thanks for the post...well done.

Well said Matt. How can we police what people do against the advice we give them.

I consider it a conflict of interest to be a licensed MB.

It`s my opinion we sell real estate not mortgages.

I remember the days when i would question these 100% no money down loans.

The Mortgages Brokers would ask one question:

"what do you care as long as the transaction funds?".

They were right, the sellers only cared about onething, closing, the buyer cared about only onething, moving.

Where does the blame lie?

Thanks for the heads up and I'll check it out.

Matt - you'be inspired a post about a real life situation we went through last year - I'm off to write it now.

Matt..I commented on the othe post...Tried hard not to call this gut an insensitive f##king idiot..where people get off making comments about things they have no understanding of will tend to make me a bit crazy..especially now that I am sitting here on my last glass of wine out of a fairly good sized bottle....I thingk even striaght sober I would not have let his post just go lightly by...If someone else goes to his post..please tell him to screww off

Matt, I just read Lance's article per your link. I don't think that realtors should be held accountable for these situations. Granted, I also think that most of the realtors that got in at that time to for what they thought was a quick gain, neither had the experience to consult they clients properly or fall into the sleazy agent category as you suggest. Most of these agents have either left the buisness or are leaving it now because they do not know how to work in this type of environment and can probably not hack it.

Yes, as realtors, we do have a responsibility and duty to advise out clients properly. Personally, I always felt that the run up couldn't continue forever. Did I expect what we are preesntly seeing? Not to this degree. The realtors that lead their clients down this path will see the fallout as well. Surely, they will not be seeing referrals from those that have suffered nor will their name be bantered around to friends and family in a complimentary way.

But as you stated the whole system that created the situation. So we do come to a difficult situation. Where do we put the blame and to what extent. Personally, the majority of it has to lie with the end lender. They had the fiscal and economic knowledge to know where this was all heading. But they had one problem - GREED! Unfortunately, they aren't the only one who did and that is what fueled this situation to where it is now. It was greed on everyone's part to one degree or another. But the lenders are not mom and pop operations. They have the actuaries and as I previously stated the knowledge. It's not like they couldn't have seen this coming.

OK, so for the long dissertation.

Matt - Here's the post you inspired - if you don't want the link in your comment feel free to delete it - it will be interesting to see what kind of responses I get.

Am I to Blame when my House Flipper's Plan Flops into Foreclosure?

Yes, the title was WAY over the top, yes I know that, but in the bloggosphere, well sometimes you need controversy to spark emotion to get to what's real. No, I do not think in reality "Realtors should be jailed" but, I think that we need a bit of honesty that the feeding frenzy had to go thru Realtors to continue, they were in the flow of the deals, so, sure they are not solely to blame, but they cannot be in total off the hook either. I think the topic is worthy, it is providing some good discussion, so that is "fair for all concerned" and it appears that many seem to believe that there was at least some fault from some Realtors, which probably closer to the truth than none at all. - Lance

And by MANY you mean... there are 2 responses that actually say anything about Realtors being somewhat responsible for said crisis....

I say everyone does time in jail! Bad drivers that raise the rates for car insurance, Homeowners who's homes have tragically burnt to the ground, any and all sick people that use their health insurance so that they do not die (especially those individuals that rely on medicines to survive).

Damn them all ... send em to jail so that they can pay for what they have done to us!

WAIT! those were just the victims...someone else must be to blame!!! my bad... lets include all of the Insurance Brokers that actually took the risk of selling said people the car insurance in the first place! They should have known they were idiots before they insured them! They should have known that the Smiths home would burn to the ground! And don't even get me started on giving people health insurance... Like people aren't gonna die sooner or later! How dare the companies provide services to people without paying the price for their mistakes and health problems!

Sorry Matt :-) Had to vent again.....

I'm with whoever is saying it's a conflict of interest to be a multi profession professional. Is it a professional if you're wearing MANY hats at once? I think not....so in all fairness...some are to blame...

Now...if we can just throw blame out the window and pick up where we left off before ethics didn't matter to some anymore???

I'm off the hook ...I'm a REAL estate agent.... isn't that more than enough on my plate?

Lance..When you say spark emotion, does that mean you are bored. What else do you do for fun, yell FIRE!! in a crowded theatre??

You obviously have no actual knowledge of what we do, what we go thru, and how many of us are VERY PROUD of the counseling and other Proffessional Services that we as Realtors provide. If you really are sincere, then pull the post. This forum is for positive re-inforcement in a Realtor dominated arena. Suggesting that we be jailed and make license plates shows a lack of respect for our Profession, one that most of us come here to improve. We are a very large group, and by the numbers, less than 1% of Realtors are involved in any wrong doings, fraud or other ilegal acts. For you to suggest that we should be jailed implys that we are guilty of breaking laws, not doing our jobs.

Maybe when you are done here, you can go down to the mall spray glue on the toilet seat,that too will SPARK EMOTION.. that is a room that could be the basis of your next report....Just hang out in there for a while and leave us hard working, well intentioned Realtors to do our jobs.

JAN

2008

I not only object to his post (and others bashing Realtors) but to the "Google Juice" the posts get that is driven here, to a platform that was built for real estate professionals. There are several forums out on the net that do nothing but bash Realtors and other real estate professionals. I hope this won't turn into one of them because of the precedence set by one person.

I realize this didn't add to the flavor of your post. Delete it if you wish..it won't hurt my feelings.

I'm sure you know what the sign on Harry Truman's Presidential desk said... and that was the role of the consumer in the bubble frenzy. A lot of the terrible deals that went through did it without benefit of an agent to blame. Some went through without a mortgage entity involved. But, none went through without a buyer. I have had to talk to too many people that put themselves in a bad situation WITHOUT buying a house (refi and get a new boat) that it is quite obvious that it wasn't us.

Of course there was a little fraud that went around, and the occasional innocent consumer, but they are a pretty small minority.

Matt - I just haven't seen the stuff happening in my market that I keep reading about in recent posts. I'm not aware of agent's that coerce their clients, nor title companies that assist with mortgage fraud and/or predatory lending (Ed's post today) or local lender's that are leading my clients astray. I've certainly been reading a lot of posts about where to lay blame and I am looking forward to seeing us move on.

JAN

2008

Matt...

Now I'm cheating and not even reading them.

Instead I am answering the title :)

Yes. I think we should shoot them all. They make for good 'target' practice :)

TLW...ROAR!

JAN

2008

Mike:

I understand your frustration Mike, I really do, but, I think it is unfair to say that I know nothing about what Realtors do, tell me I do not know what I am talking about and then make this statement with a straight face:

"Less than 1% of Realtors are involved in any wrong doings, fraud or other ilegal acts. For you to suggest that we should be jailed implys that we are guilty of breaking laws, not doing our jobs."

I suppose you might stretch your systematic categorization to eliminate many items that are very common in the industry and strike them from the "Wrong Doings" list. But, I really question that, I doubt anyone in the general public, congress, lawyers, judges, others in the industry would go for that either. You may think I have absolutely no empathy and for the most part you would be right, but I do understand the arguments of the otherside. - Lance

while many people do shady deals, I would venture to say that the majority of realtors honor the Code of Ethics and work for the good of the client! You will find rotten apples in any profession, but it is like anything else, because of a few, don't mis-label the masses!

JAN

2008

Matt, You broached another subject here: what should get "featured"? This is a subject (the mortgage melt-down) that really is at the heart of our industry. I think all aspects of this crisis need to be "aired" on this blogsite. I have seen a great many posts on various aspects of the crisis ignored while light-weight crap gets featured. Your instincts were correct. Feature it and every other well articulated post regardless of which side they take. Let us read it all and decide for ourselves.

Bill Roberts

BTW I posted on this: You're Blaming Me For What?

JUN

2008

Yep, as some people have hit on before, everyone invloved in the process then should go to jail, including the buyer and the seller. Let's get real, when you sit down and are told what your payments are going to be, it's just like buying a car, you think, I can do it! But in reality you can do it, if you eat tuna and peanut butter sandwiches everyday.

I have had many a client who comes to me with a pre-approval and that's the cost of homes they want to look at. I take the time to sit down and discuss with them, that just because you are pre-approved for $$$ doesn't mean you can afford that much, unless you want to be house poor. The majority of clients listen to me, evry once in a while, i get one that doesn't care. It is fully up to me to decide for them, and say i won;t show you these homes--no--I feel I have done my job as long as I have informed them of my thinking. They should know what they can spend and what they can not spend.

I live in a community where house values have dropped, by about 6-7% this last year, but when I got my tax bill, my value had skyrocketed from the 294K I paid in Sept. 2005, to the tax assessor telling me it is worth 363K today. If it was I would sell it and move down the street to the one that is like mine that is selling for 300K. Things like this hurt people too, because their tax bills go through the roof, and they can still afford the house, just not the taxes. My taxes have gone from around 6K, to almost 10K in 3 years, i am glad i can afford it, but imagine the people that spent at the top of their limit, they can not afford a hit like that, so it goes through all people, but to jail a realtor for someone buying what, apparently, they could afford at the time they bought, it's nonsense!!!!!!!

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Should Realtors be blamed for the sub-prime crisis? (A rebuttal)

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