Are Real Estate Agents Partly Responsible for this Housing Mess?

Real Estate Agent with S & L Properties

Houses at the BeachI was invited to a cookout this afternoon and I decided to go early to assist my friend to get everything ready.  When I arrived, it seems my other girlfriends had decided to do the same.  As I walked in the kitchen door, I was "shushed" so they could finish the HGTV show featuring a first time home buyer.  I had seen this one before so I was content to wait the last few minutes of this segment.  Immediately, one of my friends (really she is) turns around and says, "Agents are going to have to accept responsibility for some of this housing market slump."  Of course, I promptly responded with a negative and for about 15 minutes, it was a cat fight.  The husbands came in and it started all over again and ended with everybody laughing and shouting.  It was all good natured but I am sure there are people who feel that way.

Today's segment was about a young couple with two little girls who wanted to move from an apartment to a home because the Mother wanted her children to have memories of playing in a yard and she wanted them to have a sense of community.  They looked at over 100 house but couldn't find the right one.  Father worked; Mom stayed at home.  Enter the real estate agent who eventually finds them a house that has everything they wanted but it was about $30,000 above their top price.  Her ace in the hole was a ten year tax abatement which would make the home within reach but you learn at the very end (where I came in) that they could only afford it if the builder would accept their $25,000-$30,000 price reduction plus $7,000 closing cost assist, and another $1,000 for appliances.  The builder accepted but when the inspector noted there was no central heat & air unit outside...the deal almost fell apart because the buyer didn't have the few thousand to install it..  The property closed when the builder installed the unit.  He had not installed it before for fear of theft. Everyone was happy.

My friends didn't see that agent as a good buyer's agent getting the house of their dreams for her client but they saw her as someone who sold them up to a home they really could not afford.  I won't bore you with all the specific arguments but later when I was home, I thought about what a fine line we walk as agents to help clients achieve their goal.  I asked my friends how they would feel, if when they bought their last home, the agent had asked them if they really could afford the house.  What if your husband loses his job, can you afford to make payments?  Do you have a rainy day fund?  What if the bread winner of the family gets you have the money to make the payments?  We laughed but it is food for thought.

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Comments (10)

Karen Crowson
Coldwell Banker Residential Brokerage - Rancho Bernardo, CA
Your Agent for Change

It's human nature I'm afraid. Find someone to blame if things don't turn out the way you wanted them to.

Aug 08, 2010 02:54 PM
Dagny Eason
Dagny's Real Estate - Wilton, CT
Fairfield County CT, CDPE Homes For Sale and Condo

That doesn't sound like a lot of fun!    No, seriously, I have never had anyone insinuate that any part of the housing bubble was the agents' fault.     I think folks know me to be extremely careful with the dollar, and I talk the talk and walk the walk, so maybe that's why ...

Aug 08, 2010 02:55 PM
John MacArthur
Century 21 Redwood - Washington, DC
Licensed Maryland/DC Realtor, Metro DC Homes

Those are interesting questions. The answers should be considered when showing homes. Agents that did not care about the real affordability involved in home purchases can hide behind as many glass walls as they like...the bottom line is they were commission driven. If we have not learned anything in the last two or three years, we should have learned that taking buyers to the limit and beyond is wrong. WRONG.

Any agent that took part in a transaction that involved a 2/28 loan (that has since collapsed because the buyer could not pay the rate when it adjusted) did not do their job. It is two or three or four years later and the dream is dead. The buyers are upside down. The agent got paid and moved on long ago.

Yeah, we are to blame for every buyer we aided and abetted in moving into a home they could not afford.

Our job was to represent them. 

Aug 08, 2010 02:58 PM
Linda Hinson
S & L Properties - Calabash, NC

Karen, you are right...they finally admitted that it is not the agent's job to review their finances.

Dagny, I had nothing to do with any of their purchases so I don't know what their experiences with their past agents were.

Aug 08, 2010 03:00 PM
Paige Walker
Paige Walker - Pineville, LA
Real Estate Guru - Alexandria Pineville LA

I hate when that kind of situation happens! Sounds like you handled it well. Sounds to me like the buyers agent did pretty well.

Aug 08, 2010 03:04 PM
Linda Hinson
S & L Properties - Calabash, NC

John, long before the housing bubble, when you could buy rental property and the IRS would allow an investor to write off 100% of expenses, my real estate agent constantly pushed me to buy junk property because of the write-offs.  Thank heavens, I didn't listen to her because a few years later the law changed and many investors were stuck with sub-standard property that they had a difficult time selling.  I try very hard to assist my clients to make the right decisions or I send them to the appropriate advisors.

Aug 08, 2010 03:06 PM
Keisha Hosea-
KASI Homes - Chino Hills, CA
Real Estate Solutions For Real People

Linda, I think everyone is trying to make sense of this market. Blaming everyone and pointing fingers does not change where we sit today. We must all figure out how to get out of this mess and never re-visit it! Sounds like it was an interesting get together.

Aug 08, 2010 03:14 PM
Lisa Orme
The Master's Key Realty LLC -Windsor, CT - HARTFORD COUNTY - Windsor, CT
Broker/Realtor, ABR, CRS,GRI, PSCS, SFR, Notary Pu

I know today's market conditions are difficult, and with the declining values we've seen in most areas of the country, there are lots of buyers who want to blame anyone but themselves for their difficult situation, especially if they are now upside-down in their house.  While it's not my job to grill buyers about their finances and the "what ifs", as a trusted real estate counselor, I would feel remiss if I didn't make sure they were well educated about what some homeowners are dealing with, and to encourage them to really take a look at the long term and the short term consequences if their situation were to change. 

Aug 08, 2010 03:40 PM
Linda Hinson
S & L Properties - Calabash, NC

I wonder if lenders should require 1st time homebuyers to attend classes like Habitat for Humanity before they approve a loan?  That might be a whole new industry!

Aug 08, 2010 03:46 PM
Matt Grohe
RE/MAX Concepts - Des Moines, IA
Serving the metro since 2003

Linda; I've found its profeesional suicide to try to give too much perspective on a buyers purchase. The buyer will just find someone else who might not do as good a job.

Aug 08, 2010 04:57 PM