A recent article on Co-Star's web site argues that the real estate brokerage community is partially to blame for the current sub-prime loan debacle. Realtors, the theory goes, pushed unqualified buyers to buy homes they could not afford. These brokers and agents, who knew, or should have known, that their prospects were unqualified, referred those prospects to mortgage brokers, with the understanding that the mortgage brokers would sell the unwitting prospects on loans they could not afford.
I don't buy it. At least not entirely. Sure, there are unethical real estate brokers out there, just like there are unethical doctors and pilots. If real estate brokers are guilty of anything wrong, I submit that their (our) crime is putting stars in sellers' eyes. I have known lots of brokers who were great at convincing sellers that their homes were worth excessive amounts.
Some say that's just part of the broker's obligation to represent the seller's interest. I say that it's not always in a seller's interest to get the last dollar out of the buyer. Of course we try to maximize the seller's gain, but we also have to balance the asking price against factors such as market reality, time on market, and probability of closing. Sometimes a seller is better served by presenting a lower offer from a buyer who is more likely to close, and who can do so more quickly and with fewer problems.
In any event, whatever happened to caveat emptor? Are we so deeply in a welfare/nanny-state, glory-to-the-victim mentality that we are willing to completely relieve buyers of all responsibility for their own decisions? The one thing I have not yet heard from any talking head is that maybe- just maybe - sometimes it is a buyer's own wishful thinking that gets him or her into financial trouble.
If you earn $40,000 a year, you ought to think twice about buying four multiple dwellings, needing work, in a burned-out neighborhood, with variable-rate loans, and without a lawyer. I am not making this up.
I'm not saying that all buyers who get in trouble should have known better and tough on them. Every day I see several who genuinely were victims of mortgage fraud, or fraud by their sellers. I have seen, and continue to see, situations that reek of conspiracy among sellers, builders, appraisers and others. A big part of my practice right now is to actively work with the victims of mortgage and real estate scams to help them out of their situations.
In short, are real estate brokers partially to blame for the sub-prime troubles? Certainly, in part. Their part is pretty small, however, compared to all the other players.
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