Do you feel Realtors should be held accountable for foreclosures?

Question

Do you feel that Realtors should be held accountable in some way for a foreclosure. Sub-prime lenders may be giving out loans too easily, but who is pushing people into homes they might not be able to afford? In Connecticut, buyer's agents and seller's agents both work for commission and are part of the same Realtor organization, they want the home to sell for the highest amount possible. Should they return the commission or pay a fine if the house goes into foreclosure (within a certain time frame after the sale)?

Answer 1

Maybe I'm biased due to the fact that I am a Realtor, but they really should not be held accountable. A Realtor does not handle the financing part of the transaction. They might refer a client to one, but it is ultimately up to that buyer to make an informed decision, just as they did when they chose that Realtor to work with.

A potential buyer does not have to disclose any personal financial information to me, merely just a pre-approval letter stating that they can obtain a loan for X amount. I have no way of knowing what they can actually afford unless, they allow me to view their information and educate them on how the process works.

I use a lender for first time buyers that literally has told several of my potential clients they cannot afford to buy right now and need to clean up their credit and/or obtain a better income. I might have lost a deal here or there, but am alright with it in hopes they will come back to me a few years from now when they are ready and have a good experience versus the ones scrambling to get into a home they can't afford and end up upside down in it and associate me with a sour deal.

I actually had a 1st time buyer that chose to find their own lender, thought they were getting this great deal on an interest only mortgage and when I heard the terms that were offered I told them don't walk but run away from this lender as fast as you can. I sent them to my guy and he informed them they should wait a year, clean up their credit and be in a better position to buy. They did, we found a home better than the one they originally liked and they couldn't be happier. By the way both homes were priced similar and same down payment - the interest only loan would have been the same payment as their now 30yr fixed payment.

So as you can see, we are not all out there to take advantage of people just to make money. I'm out there to build lasting relationships, repeat business & referrals.

Also please keep in mind trying to get the highest price isn't going to affect how much commission an agent receives by a substantial amount. For every $10,000 the agent might receive only $100-$300 extra (Gross).

Regards,
Southeast MI Realtor

Answer 2

Greed and "Heard Mentality" pushed people into homes they could not afford.

So the mortgage re-sets in 3 years??? Not to worry, we can sell this home for 100,000 more than we bought it for and cash in big time.

Unfortunately, everyone else also was doing the exact same thing.

When everyone gets on one side of the boat, the boat capsizes and everyone is in the water.

The people who can swim (have a cash cusion) make it, everyone else drowns (files for bankruptcy, or does a short sale).

P.S. I blame the Federal Reserve.

This entire mess could have been avoided if the Federal Reserve would have gone to the banks and said "Anyone applying for a Sub-Prime loan is required to qualify NOT at the teaser rate BUT the fully adjusted rate after the 3rd year."

At that point the marginal buyers would have been locked out of the market and we would not be seeing the carnage we're seeing today.

If you think this housing correction is just about over, think again! (I.E. make another wish)

Look at the mortgage resets for the subprime mortgage market next year.

Aug (07) 52 Billion Dollars
Sep 58
Oct 55
Nov 52
Dec 58
Jan (08) 80
Feb 88
Mar 110!!! WOW
Apr 92
May 72
June 75
July 50

Answer 3

There may be a few shady realtors out there, many of whom direct their clients to subprime lenders, but it is ALWAYS the consumer's responsibility to be well informed. There are millions of ways to research buying your home, how to find the amount you can afford, and about the different loan types and the pros and cons of each. When your realtor tells you that you can afford a $2000 mortgage (based on your gross income) and you net $2800 per month, use common sense. Will you be able to buy groceries, pay your utility bills, car payments? On top of that, will you be able to afford entertainment so that you don't go crazy in your new home? Or haircuts and oil changes?

I think there should be some accountability for lenders who prey upon people in bad positions by making promises of loans with low interest rates and cash up front that result in balloon payments or interest rate hikes, but to determine the penalty and to investigate the causes for each individual case of foreclosure would be a very difficult challenge.

Answer 4

The Realtor has ZERO control over what the buyer does AFTER the sale. They know NOTHING of my finances BEFORE the sale except what I tell them. There is NO reason the Realtor (buyer's or seller's agent) should even know any more about your finances than "I am willing to pay $X. The lenders share the blame for making loans that never should have been approved.

Answer 5

When I was last buying a house, I talked with my buyers agent about commission, and pushing for the highest selling price. He said it was a waste of his effort. Get $10,000 more for the home, and he sees about $100 more in commission. Pushing a buyer into buying more house then they can afford will result in the deal falling through more often then it will in additional money for the agent.

He would much rather dedicate his energy to getting buyers into houses they have the easiest time mortgaging. Better to get two sales commissions of $100 less each then to push and get only one sale, but benefit by an additional $100.

Should they return the commission? No. Not the real estate agents responsibility to ensure that the buyer pays the mortgage.

Want to blame someone? Blame the stupid buyer that straps themselves with more house then they can afford, and does not read the details of their mortgage paperwork.

Answer 6

Listen, I understand how you must see things, but let's point the finger in the right place. This is all of our faults! We have all been greedy in wanting and even expecting more and more equity from our homes. This caused prices to go up. Creating a lack of affordable housing. So the mortgage industry was given some latitude in programs which would have helped, but the stretched it a bit by not full qualifying folks. So they put them in these ARM (adjustable rate mortgages) and as the market changed, folks could not afford the higher payments, and the the values declined which forced them to foreclose. Some folks who took out interest only loans, are now upside down and some will lose their homes because it's value has declined but the balance of the mortgage is way high and they can't refinance.

It's a damn mess and I'm not the only responsible! So there!

Answer 7

That's ridiculous. The Realtor may well press a buyer to take on more house than he can afford (although of course most would not), but the ultimate decision is the buyer's, and the failure to pay the mortgage or sell in time to escape foreclosure is entirely on the buyer.

Answer 8

You as the bread winner know your bills and how much you can afford, if you gambled that you would become rich buying more that you could afford and then realize that wait the house did not appreciate as much as I thought it would and I went for the easy payment and now that is going up what am I to do. Everyone wants some else to be responsible for their own stupidity, as they said in the old days you made your bed, you lie in it. These people made a mistake, so they are the ones responsible, I as a taxpayer do not want to bail them out. And I do not feel bad they made the choices of living beyond their means, equity loans to get all these toys etc, about time things returned to reality. No one to blame but themselves.

Answer 9

Geez, whatever happened to taking personal responsibility?! The realtor does not point a gun at a buyers head and force them to buy a house that is too expensive, the buyer decides to make the offer. If the buyer can't afford it, then he should not make the offer. If he buys the place when he can't afford it, then it is his fault, not the realtor's fault, and it becomes an expensive life lesson for the buyer that they must live within their means.

Answer 10

Nope. No one makes the buyer sign the purchase agreement but the buyer.

Why can't the general public, as consumers, ever accept any blame when they get into trouble?

I hate the fact that banks send out billions (yes, billions) of credit card offers every year. I hate even more, though, that people keep taking them, regardless of their ability to repay the debt or even understand the terms they're borrowing against.

Homes are not goldmines. They are a place to live. If you make a little money over time on it, great. But if you bought on a short-term ARM, thinking you'd refi after a couple years, and didn't change your spending patterns, you have to accept the blame yourself.