One in Four Borrowers Is Underwater - the role of realtors

I'm not in the real estate industry and I've only dealt with one real estate broker, but I would say no. I can't see blaming real estate agents for people purchasing properties that either they can't afford or properties that have lost value in recent years. I would place more blame on those people who gave them themortgages in excess of what the person could afford underlike their regular circumstances (absent illness, job loss). I was always raised to live below my means, but perhaps some buyers purchased homes beyond their means. A real estate broker shouldn't be someone's financial advisor. It's kind of like saying that if I go to Bergdorf Goodman and spend $20,000 on my credit card that the salesperson who helped me pick out clothes contributed to getting me into debt. I applaud your courage in starting a new thread after yesterday's discussion.

lobster, certain real estate brokers had relationships with mortgage brokers. they worked in tandem to get those who shouldn't have been buying buying.

they very well knew what they were doing, and you're absolutely right it shouldn't have been a determining factor, but certainly it played a part. the banker should have been, to some extent, the financial advisor as they had always before played the role of limiting access to excessive cash (with the exception of some governmental programs designed to assist certain groups, lord the CYA necessary is amazing).

and sjtmd, i also applaud you. discussions can get ugly, and we may get frustrated, but the last thing we want is for conversation to be repressed because i get too emotional, cc gets a bit angry, or hfs is just useless. all of those are reasons to roll your eyes and move on occasionally, or even use the ignore function, but there is no reason not to express any opinion.

what thread from yesterday are you referring to?

i think it was the food stamps thread?

thanks aboutready for the explanation. I obviously missed the point that sjtmd was making.

Yes, it was the food stamp thread.

As it relates to the food stamps - I was really astounded by the sheer fact that so many Americans are on such assistance. At the same time, there seems to be inordinate time and energy parsing the subtle differences between the floor plan of this two million coop and the one two flights down. I was wondering what impact this might have on others. As for this thread - I always questioned the role of a "buyer's agent" - I had another thread on this about a month ago. It is the NAR website that uses the nebulous term "encourage" as it relates to the practice "smart home financing". I guess, in this case, neither the buyer nor society as a whole, got its' 3% worth.

buy now or be priced out forever

Yes, it is both sad and astonishing that so many Americans need food stamps today in order to survive. It is incredible that many people's lives revolve around having enough food to eat while other people have so much material wealth. And how easily most middle class people's lives can fall apart if they lose their job or become very ill. I thought that you started a very important discussion and I was interested to hear how posters viewed that issue. To change topics, I've been working with a buyer's broker which I'm learning from you and aboutready is clearly different from a buyer's agent and I'll be interested to see what others write.

Sad to think of how many of those food stamp cases came about from moron brokers trying to make a quick buck.

boy, I'm really putting my foot in my mouth tonight. I just looked at your previous question. I'll tell you why I use a buyer's broker and then I'll stop talking. Our broker is very knowledgeable about the buildings in the area where I'm looking and she tells us as much as she knows about the various buildings. Sometimes I learn from her things that I probably couldn't discover otherwise. But I do think that it's very important to do your own independent financial analysis of what you can afford and what amount you are comfortable with spending on an apartment and having for a mortgage if you need one.

I blame realtors more at the national level based on the policies that the NAR lobbies for(and quite effectively).

I would like to know the percentage of underwater homeowners who ended up that way due to excessive tapping of home equity lines of credit. Everyone likes to demonize the rich banks, and indeed they are guilty of throwing out lending standards in exchange for short-term profits. But I wonder how many housewives in Orange County got their boob jobs and Escalades funded via tapping the housing ATM... These are the people that we should not be saving.

being underwater in and of itself does not appear to affect default rates that significantly. people are not just walking away from their homes blithely.

http://blogs.reuters.com/felix-salmon/2009/11/30/the-worlds-largest-guilt-trip/

"The result is a system tilted enormously in favor of institutional lenders who exist in a world of morality-free contracts, and who conspire to lay the world’s largest-ever guilt trip on any borrower who might think about joining them in that world. It’s asymmetrical, it’s unfair, and it’s about time that homeowners started being informed that a ding to their credit score is not the end of the world; that no one would expect a capitalist company to behave in the way that individuals are being told to behave; and that their options are in fact broader than they might believe. White’s paper is the perfect place for them to start their reading."

Strategic defaults are a very real and growing phenomenon. The research so far is that there is no effect for laons udner water by less than 10%. There's also research that suggests that if the house has been occupied for more than five years, the owner/occupant becomes more attached to it(intuitively this makes sense as well.. you get attached to community,schools, etc)

sjtmd, I think the answer to your original question is yes.

Brokers are involved in several, albeit perhaps relatively minor, ways. One, they have continually beaten the drum of ownership above renting for all comers. This was always bad financial planning for some people but in this financial crisis it has turned catastrophic.

Not everyone should own their own home, in my view. Our society already allows mortgage interest rate deductions (Canada for example does not) which is a huge subsidy to ownership, and makes renting comparatively less attractive.

So brokers, especially the national associations, have contributed by encouraging inappropriate ownership.

Also, brokers contribute because they charge so much for their labor--even though the average annual income of a real estate agent nationwide is around $36,000, and I know some in Manhattan who would love to be making that much in 2009.

Every time a property changes hands, the broker's commission gets factored into the price. The more flipping that goes on, the more the price is inflated by this transaction cost.

Certain people will always, always hire brokers, for the same kind of reasons some people still use actual travel agents. I think we need a new compensation model and I think technology will make it inevitable, but that's a separate subject.

The role of real estate brokers is surely less than that of those who handed out NINA and liar's loans, however.

{Manhattan real estate agent.}

hejiranyc - If you saw Frontline last week the point was made that credit card abuse by consumers, and punitive interest rate gouging by banks, drove consumers to consolidate debts through home equity loans.

Even responsible consumers were blindsided by arbitrary hikes in credit card interest rates because their buying patterns suggested to the banks that they may be a greater risk. People with the least headroom to absorb higher rates received the highest rates, which then drove them to seek solutions through home equity.

All roads seem to lead back to the banks. Behind every irresponsible consumer is a banker feeding out more rope.

http://www.pbs.org/wgbh/pages/frontline/creditcards/view/

The role of NAR In creating the LAX lending standards and oversight cannot be discounted.

In the end, it's the home buyers who are the headlining stars of this horror flick.

NAR, banks, law makers, regulators, home builders and HGTV played supporting roles.

hejiranyc
"I would like to know the percentage of underwater homeowners who ended up that way due to excessive tapping of home equity lines of credit."
It's a fair point to bring up, it seems like at least half of the apartments of interest to me have had '07/'08 action on them in acris when I searched. And half of those are refis.
Though I'd split the blame on both, I'm sure half of those were for funding lifestyle and the other half were just looking to lower their interest rates on their mortgage.

(wow, a lot of "halves" in my post)

Fluter and spinny, I agree. Though I'd like to add alot alot of brokers pretend that they are 'professionals', and with most other professions (doctors, lawyers, structural engineers) etc there is a tried and true educational ladder, levels of intellignce that can be 'judged' thru tests (standardized) and a self regulating body.

The re exams are a joke, and I've yet to see the nar kick out any members, even th ones convicted of fraud.

Wow, W67 - glad to know that I am on a pedestal bcs of my prof. qualifications. Though I have met a lot of dumb doctors, lawyers and engineers...

Some realtors were like the bartenders that fill the glass eagerly in spite of the drinker`s evident dizzines. The drunks were not underaged, though.

10023. Do you think for a moment that I don't think there is a normal bell curve in any profession? I don't remember he last time I used a doctor from Honduras, but if he a us md, then at a min. He can give me an pig flu shot. ; )

There was a story about a year ago about some senior citizen - no mental issues, just age. He gave some 20 year old girl all his money in furs, aand cars, and rent.

Then he sued because he said the government shouldn't have allowed him to do it.

Let me start by saying my personal interaction with brokers, in buy transactions here and in VA, has been nothing but postive, credible and totally without any pressure to buy/finance more than I could comfortably afford. I suspect that most of the brokers I have "met" on SE take the same attitude with their Clients. However, one of my closest friends was a realtor in Central NJ, working with one of the big firms, for a while during the height of the boom. She told me that the agents were flat out being instructed to encourage people to use exotic financing instruments to buy more house than they really should. There was signficant pressure to "upsell" through creative financing rather than put people in more modest homes they could afford with 20% down and a 30 year fixed mortgage. My friend left after a couple of years, in part because she felt increasinly uncomortable selling people on what she herself would never do.