Realtors and investors Short Selling their own homes and investments

Real Estate Broker/Owner with Mitch Ribak - The Real Estate Success Network

I've been pretty quiet on this subject the past couple of years.  Maybe because up until a year or so ago we hadn't been doing listings.  The past year we started taking listings and have done very well with them.  As with all of us, we do a lot of short sales.  I wanted to share a couple of conversations I have had lately with a few consumers, realtors and investors.

Investor - I got a call yesterday from a guy I know from the golf course.  He is a real estate investor and made a tremendous amount of money in 2004-2005 flpping properties.  He called me to list a condo he bought in 2006 for $480k.  Firstly, let me make something very clear on my position.  I feel that anyone who has invested in property and now expects the bank to eat the loss of the investor is immoral and unethical.  It's not up to the bank or the taxpayer to eat your losses. This one investor, in his words, told me that he hasn't paid the mortgage on this property for almost a year.  However he has been collecting rent, $2,500 a month. 

His attitude was pretty straight forward.  He said he was not going to lose money on this deal and then said that the bank shouldn't have loaned him the money in the first place.  He was actually saying this in a proud manner...have you noticed that these days with people who are giving their homes back to the bank?  I personally would be embarrassed to tell anyone I short sold my home or went to foreclosure...these days people are proud of this action. 

In the end, I told him that he would have to find another Realtor as I wouldn't be a party to fraud.  He can afford to keep the property.  He can afford to pay his mortgage. He made several million in profits.  Do you think if he sold the condo for $800k he would spilt the profits with the bank?

Homeowner - So next was an old customer of mine who paid $320k for their home in 2004 with a 100% (80/20) mortgage.  They owe $320k and the home is currently valued around $260k.  Actually that's pretty good in our area.  She sat down and told me they want to short sale their home.  The first question I always ask is, "what has changed in your income since you bought the home?"  Her answer, like most I hear these days, is "nothing"!  I looked at her and I asked her why she was selling then....did you buy this home as your home I asked? She said that since it has lost $60k they didn't want it anymore.  I then asked her if that was a good reason for her to shirk her moral responsibility to pay her debt.  After about a half hour she realized that what she was thinking about doing was immoral and unethical.  

Realtor - A Realtor from another office (no way he would be able to work for me) bought and sold approximately 100 homes during the build up to the peak of the market.  I have heard that he made upwards to $10 million in profits in the two to three year period.  When the market crashed, he had about 30 properties that he closed on that he could not sell. Last year he came to my office wanting to work for me.  The conversation was disturbing.  He had hidden the money he made and his bank accounts were virtually empty.  He then short sold the 30 homes (all that were rented for $1,000 a month) without every making a payment on these homes.  Basically he took a ton of profit out of these homes through rent and then gave them back to the bank.  I had thought that we were supposed to be held to a higher standard.  

Another Realtor who lives across the street from one of my friends.  They bought a house across the street from his house at a very discounted rate through a foreclosure. Then turned around and did a short sale on his other house that he moved out of.  My friend couldn't believe it and commented on how many sleazy Realtors have been walking away from their investments and homes because they lost value.  NOT, because they couldn't afford them, but because they lost value.  Wouldn't it be nice if you could buy stocks and if they went down you could just walk away without losing any money but you could keep any profits if they made money? 

Last one - A Doctor - A local doctor called me this past week.  He paid $1.9 million for his home that is now worth $800k.  He called me to short sale his home. I went through my usual questioning and believe me, this guy has a ton of money.  He told me that he wasn't going to keep the house because of the value it lost.  I asked, as always, about morals and ethics and he basically said even though nothing has changed and he can easily pay the mortgage, he has no intention of keeping a home that is not valued what he paid.  Again, as always, I asked if he had gained value like he thought it would, if he would give some of his profit to the bank.  No morals and no ethics.  It's rampant right now!

Have people changed the way they feel because our government has made the banks the scape goats and villains in our country right now.  Since when is it ok to not honor your commitments and debts?  Personally I'm embarrassed to even know some of these people.  Worse, to see Realtors who made a fortune and have a bunch of money doing this is even more shameful.  Believe me, if you have lost your job or if things have happened that have financially hurt you bad then that is what short sales are for.  I have no problem with that.  When I see people give up their credibility and think that is ok to screw over the people that in good faith lent them money, I put my foot down.  I won't touch these properties and I'll gladly tell these people, coworkers or not, that they should be ashamed of themselves and the lessons they are passing down to their and our children.

Comments (5)

Chandler Real Estate Liz Harris, MBA
Liz Harris Realty - Chandler, AZ

What I find one of the problems to be is that the more and more giving your house back to the bank seems to be socially "acceptable" we have those strategic defaulters that are profiting on all of this!  Horrible, to say the least.

Feb 03, 2011 04:00 PM
John Michailidis
Real Property Management of Sarasota & Manatee - Sarasota, FL
Real Property Management of Sarasota & M

I think you have a very interesting perspective that is shared by many.

Feb 03, 2011 05:16 PM
Fernando Herboso - Associate Broker MD, & VA
Maxus Realty Group of Samson Properties - Clarksburg, MD
301-246-0001 Serving Maryland, DC and Northern VA

Mitch, I have to respectfully disagreed. It is this self imposed moral obligation that prevents families seeking our help to begin with . .

We are not the jury and their conscience . we are professionals to assist people when they need our help 

AS LONG AS THAT HELP AND THE OUTCOME  IS LEGAL. . .you may have a fiduciary duty to fulfill it. . 

"that they should be ashamed of themselves and the lessons they are passing down to their and our children."  

As a person you have the right to this opinion. .as a Realtor, your judgement from a moral point of view is prevented by your license

No difference if they were fanatically  belonging to another religion that you may disagree with. . still is a religion and it needs to be respected.

Feb 03, 2011 10:57 PM
Samantha Nichols
ERA Belsito and Associates - Plymouth, MA
Massachusetts Real Estate Specialist

Hi Mitch! I'm disappointed to hear that folks seem to be taking advantage of the market and the system. The short sales I have dealt with involved job losses, illness, relocation and even death. People have had had to walk away from their homes, properties that they loved. It's unfortunate that others are able to afford a home but choose to just walk away when so many others have no choice in the matter.

Feb 08, 2011 11:58 AM
Mitch Ribak
Mitch Ribak - The Real Estate Success Network - Melbourne, FL

Fernando - I guess we can agree to disagree.  I have the right to work with who I feel I should work with.  I have made many investment mistakes in my life and I dealt with those mistakes.  I didn't expect anyone else to pay for my mistakes.  When someone takes out a loan and they are able to pay that loan and then don't, that's a moral and ethical issue to me.  My license doesn't say I have to like or work with these people.  I definitely don't have a fiduciary duty to help them.    To me it's not different than when I refuse to work with someone who is a racist.  We all can have our opinion, but there is right and there is wrong.  This is wrong no matter how you cut it.  

With regard to religion, I don't believe that's a real comparison.  I have many comments on this but definitely won't get into that discussion in a forum like this.  

Samantha - Nice to hear from you.  Yes, we are helping a ton of people right now who are financially hurting.  I would do anything in the world to help anyone.  Those who know me know I go above and beyond for anyone...just not those who have no moral or ethical conscience. 

Let's face it. There are people who will take advantage of any opportunity as long as it benefits themselves.  I'm a huge believer in karma and believe that the people who are taking advantage of the system for their own personal gain with no regard to morals and ethics will get payback in the end.  Life has a way of punishing those who should be punished.  All I know is I can look in the mirror every day and know I have done everything in my power to help those who truly need help.  

Feb 08, 2011 12:32 PM