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Who is Most to Blame for the Real Estate Mess?

By Jan Chilton

Services for Real Estate Pros

January 03, 2009 12:04 PM

There is an interesting discussion going on over at The Real Estate Cafe about who is the most to blame for all the foreclosures and problems going on now. When I first ran across it, I became incensed and had to stand up for Realtors. Someone had posted that they were the most to blame for being greedy, not representing the buyer properly, yada yada.

I see the devastation from the real estate crisis every day here in Myrtle Beach real estate, and my old customers and friends are losing everything they made in a lot of cases. It hurt everybody, except maybe the ones that flipped a condo or two right at the very beginning and then stopped...and there weren't many that did.

One of my guys is so kind hearted and feels so badly that he has refused to sell anymore...and he's probably the most "blessed" human being in sales ability that ever was. It's a waste of talent to see somebody that good blame themselves and toss away that kind of ability over the greed of buyers and everyone else involved.

Anyway, I thought maybe some of you might want to get in on the comments and defend agents everywhere. Take a look and see, and maybe tell the story of your area. I personally blame the so-called "experts" in the media for yammering on and on about the bubble bursting until it became a self-fulfilled prophecy. And maybe you are an investor who got burned and you feel like telling your point of view, too.

http://realestatecafe.blogs.com/real_estate_cafe/2008/09/draft-add-lin-1.html

Jan

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Mark Organek

And the United States of America - Mesa, AZ

It's not a game, it's your life.

We all made the mess together. Cheap credit, rising material costs and flexible guidelines pulled out the greed factor in the public. Eventually, there was no one left to sell to and the bubble popped. Now, the poor mitigation policies of various, not all banks, and their horrible BPO valuations are just fueling the market down by creating more foreclosures.

Jan 03, 2009 12:15 PM

Jan Chilton

Myrtle Beach, SC

Real Estate Marketing

I can accept that. But to blame the real estate agents for the main part of it is just ridiculous in my opinion. I was THERE. Around here, they were just order takers. That's why so many of them don't know the first thing about being a Realtor. They got into it then, and never learned what a hard job it really is. But to blame them? Nope. I don't see it at all.

Thanks for the comment, Mark.

Jan

Jan 03, 2009 12:21 PM

Anonymous

Doug Procter

My personal feeling are that for the most part the lenders brought it all on themselves, "GREED MIGHT COME TO MIND". Two simple reasons the first being you sell these adjustable rate mortgages to a great many people who work 9 to 5 for $7.00 - $9.00 an hour. Well, folks, the best case senario is that they get a 25 cent raise. You do the math, it will not come close to the yearly mortgage adjustment. Secondly, they lent money to whoever produced a small breath. They wanted every little piece of the pie. When you lend to credit scores as low as they were, your going to lose. These people have spent their entire lives with 500 scores, it ain't going to get no better. It's their way of life.

Last but not least, they set themselves up for failure trying to grab that gold ring! That market everyone experienced was a freak market, should have never happened and will never happen again. To be honest, we can't completely let the realtors and appraisers totally off the hook as far as inflating home values.

Doug

Jan 03, 2009 10:32 PM

Jan Chilton

Myrtle Beach, SC

Real Estate Marketing

I'm not sure I can agree with the realtors inflating anything. With the first price increase, it's almost like the phenomenon took on a life of its own. Or maybe everybody did it together, like Mark said. It sure did cause some major problems though. Wow.

Thanks for commenting, Doug.

Jan 04, 2009 02:59 AM

Tim Ludemann

Ochopee, FL

What a great Blog...I believe Greed is to Blame...live and learn!

Jan 10, 2009 03:38 AM

Leslie Prest

Leslie Prest, Prest Realty, Sales and Rentals in Payson, AZ - Payson, AZ

Owner, Assoc. Broker, Prest Realty, Payson,

Lenders who got loans for people which they should have known weren'y viable down the road. I don't have all the qualifying info on my clients that the lenders have, so it is their responsibility to be honest about the loans.

Jan 10, 2009 04:28 AM

Jan Chilton

Myrtle Beach, SC

Real Estate Marketing

I agree, Tim. And with Leslie's post, too. Realtors have enough to concentrate on without having to be held responsible for somebody's loan-worthiness. And just as many of them got burned here as did the buyers. They got gypped out of commissions, lost good customers that could have been repeats, and in many cases are losing their own investments too.

Jan 10, 2009 04:37 AM

Brian Griffis

Realty Choice - Springfield, MO

The entire risk pricing mechanism broke down. Banks lent more than they should have, adjustable rates, exploding arms, and 125% mortgages that buyers had no possibility or intention of paying back obviously contributed to problem. Analyst rated securitized mortgages too high and investors bought these without doing proper risk assessment (because most simply trusted the analysts.) Buyers bought many houses as "investments" instead of places to live, thus reducing supply and increasing prices. I agree, Realtors did not have a huge part in this mess in general, although I can't let us off the hook totally. I saw lots of advertising during the boom that told people how house prices have increased X percent each year, equating single family houses with investments. Single family real estate should be thought of as lifestyle. One should buy what one needs, not simply as an investment. If prices go up, that is gravy, but that should not be the basis for most buyers. Some ads also talked about how real estate never has gone down, that one is crazy to pay rent, and those people are simply "throwing money away," so you know that those Realtors were telling their clients the same thing. So, just like in any industry, there are good and bad and ignorant. As a society, we simply fell into the same trap. We started to believe that prices would go up at unrealistic levels forever and there would never be a day of reckoning. So really, everyone is to blame. I guess the whole mess comes down to the capitalist system. In this system the two main drivers are greed and fear. Greed ruled the day for many years, now unfortunately, fear has taken the reigns.

Jan 10, 2009 05:10 AM

Anonymous

True. But house prices really DID increase or even double in most places. I know all of my guys continually prefaced that kind of statement with "Nobody knows what will happen in the future, but...." and it was completely true. I bought my own condo in 2002 for exactly half of what it is worth right now...even with the 15-20% drop in appraised value that came about over last year. So advising anybody to buy from then till about mid 2005 was completely valid.

After that, it started to crumble. But nobody knew exactly when that was going to happen, and I don't think it would have if the doom and gloom tv advisors had not kept warning about the "bubble". I put 90% of the blame on them, myself.

Then again, the problem came from people trying to get into the investment go-round that had no money. We had office employees that were pooling together to get the down payment to buy a $300K condo to "flip", when they were making $12 an hour. And the banks let them! I wish I had been able to buy an extra condo or two before they went up...although if I hadn't been able to flip, I'd be in the same boat as the rest of them right now. It was all a matter of timing, I guess.

Jan 10, 2009 05:25 AM

Jerry Becker

Jerry Becker and Associates - Littleton, CO

Littleton, Colorado

I'm in the crowd that says everyone is to blame. The government told lenders to loosen their standards, Realtors and lenders told the public about the great loans that were available. People got greedy and bought more home than they could really afford and through common sense out the window. One thing people often forget is that this mess isn't entirely the result of real estate sales. Many of these people that are in trouble never bought anything, they just refinanced to pay off their credit cards so they could then buy some more and run the cards up, again. The thought that a 2% mortgage may be too good to be true never occurred to them, or they just didn't want to know.

Jan 10, 2009 05:43 AM