So I am relaxing and enjoying some quiet time this past Sunday, my wife is reading the Philadelphia Inquirer Sunday edition and the kids are running around all hopped up on sugar.
My wife says hey Hon, check this one out, and she begins to read this article on the subprime / preditory lending epidemic that is just now hitting the front pages of the newspapers across the country and seems to be the lead story on the national news shows across the country. Why all of the sudden? People are just realizing that they can't afford the home they bought last year? Now that the bank is going to take the home because owners can't make their payments anymore someone needs to be held accountable for this atrocity. So you would think that it should be the Bank, the Lender, or maybe even the Buyer, right?
Not even close, columnist Jeff Brown thinks it should be mostly the Real Estate agent that shoulders the blame for allowing buyers to accept such poorly structured loans. Yup, that’s right he said it.
In his article, he wrote... "Most subprime borrowers are ordinary folk with little experience buying houses and shopping for mortgages. Many already are in financial straits, or they wouldn't need to resort to subprime loans. They don't have fallback funds to carry them through a financial setback, such as a job loss or illness.”
Mr. Brown continues…“To make the problem worse, the mortgage broker and real estate agent have no incentive to wave the red flag. They get paid only if the deal goes through - and they don't have any financial stake in what happens later. "
You see, here is where my back arches, the steam whistles blow and the hair on the back of my neck stands straight up in the air. To make a bold statement that the agent or mortgage broker simply sit there and do nothing because we want to get paid is insulting. Obviously it is Mr. Brown’s opinion that we simply quietly sit by and watch another human commit financial suicide with no regards for their future well being. How appalling!
Real Estate is my full time career; it supports my family and if the deal does not go through I don’t get a paycheck. Keeping that in mind, I have talked to buyers about buying a $200,000 townhouse rather than a $400,000 house on an interest only loan because the townhouse was a better financial decision, I have stopped settlements when there were outrageous brokerage charges applied to my buyers that just appeared on the settlement sheet and I have stopped settlement when the lender was imposing a 25% pre payment penalty during the first three years of the loan, just to name a few. Yes, I put my client’s best interest in front of a paycheck despite the fact that my family relied on me to bring it home. So the implication that we don’t care about what financing our clients get is ludicrous.
You see no matter what you write, as long as it’s published, you’ll get paid. So if it is for the real estate professional or against us you will get paid, what do you care? At the end of the day all you have is your subjective article to make a difference. How about the satisfaction that you feel when you have helped a father move his wife, daughters, mother and brother from a neighborhood where every minute of every day he feared his children getting caught in the crossfire of a gun battle to a his ideal home where they all have their own bedroom, a nice yard, a garage to fix the cars after which they can sit on their porch on a quiet street in their single family home in the suburbs and smile knowing they got what he wanted. Was the mortgage rate a bit higher, a little, was his credit score good, not really. Was he happy that he was able to provide a safe shelter for his family, you’re damn right. Does he remember that he paid 1 point on the loan and got an interest rate of 7.25% when rates were 5.5%, do you think he cares? Do you think that at any point during that sale process my commission was the most important part of this transaction? You see not everyone is completely focused on the almighty dollar. If you were faced with this type of gratitude every time you wrote an article you may take a bit more time before you load up the mud and start slinging it around.
I do agree with one small portion of the article which states that there should be “a federally mandated "suitability standard" that would prohibit a lender or broker from selling a loan that's too risky for a particular borrower. Like stockbrokers who already live under a similar rule, violators could be fined, or even kicked out of the business. “
However, to follow that itsy bitsy glimmer of intelligent opinion with such an off base statement that you would …“go a step further and make the real estate agents accountable, as well. How many times has a real estate agent sat silently at a closing table, knowing the buyer she spent days with is walking off a cliff?”… well that is just pure ignorance.
But let’s face it, our Real Estate Associations have contacted Mr. Brown to find out why such animosity towards the real estate industry and he has met with them out of professional courtesy but simply stated that he distrusts any information including statistics the associations would give him because it is just “spin” in his eyes.
That’s ashamed, because if he would have just listened during those meetings and took some time to research his subject matter it would have allowed him to save face in the end rather than to mistakenly quote the laws in Pennsylvania which “make the agent responsible for warning the buyer about flaws in the property, such as leaks, termites or cracks in the foundation.” The agent is not the person obligated to disclose defects in the property, it is the obligation of the seller to comply with the Pennsylvania Real Estate Seller Disclosure Act and the seller must disclose to a buyer all known material defects about property being sold that are not readily observable. Furthermore the agent is only obligated to be sure that this documentation is readily available to any prospective buyer so that at the time when and agreement of sale is submitted to the real estate agent the sellers disclosure document that was prepared by the seller should be acknowledged by the buyer via initials and a signature.
As for the discovery of any additional defects in a property, any educated buyer representative would tell you, simply advise the consumer to seek expert advice on matters about the transaction that are beyond the licensee’s expertise. So be sure to get a professional home inspector, engineer, wood destroying insect specialist and any other professional you may desire to discover the flaws in the property for which you are buying. This would also hold true in the mortgage arena. Always recommend that the buyers speak to an expert regarding any part of the transaction including, mortgages. So as for your statement …“Why shouldn't they (real estate agents) address mortgage flaws, too? I think it is time for you Mr. Brown to consider talking to a professional yourself!