Everyone has heard the statement "Real estate is the biggest investment of your life!" Well they weren't kidding. Many homeowners are finding out now the hard way they got themselves in big trouble way over their heads. They may not even be able to set themselves financially right in this lifetime they made such a bad mistake. Marraiges have failed, homes have be lost and credit for many will probably be unrepairable for many in their remaining working careers. The fact of the matter is that many persons purchased the wrong homes, in the wrong locations, and overpaid to boot! To make matters worse they put no money down, rolled in the extras, and had the closing costs rolled into the loan. Money was no object especially when it came to granite counter-tops, and stainless appliances especially when it was all done on credit. Then to make matters even worse they borrowed against the already leveraged home's equity. Wasn't this absolute insanity? To the seasoned agent, we asked ourselves, "Who would be so foolish to do this?" "Who is advising them?" Buying a home is too big an investment to be treating the facts so lightly!
You've heard it all before. "Ask your real estate agent for advice!" "Ask your Realtor" However most real estate agents never sold more than 1 home, and many have never sold anything. How could anyone advise a client if they had no experience whatsoever? A few years ago it was very common for a home buyers agent to be their cousin, a handyman they knew, a relative, their hairdresser, a friend from college or just a drinking buddy from the bar. It was a true to life story of the blind leading the blind. The sad thing is that if you never sold a home, you really are not in a position to advise a client. An agent without experience does not have the foresight to warn a their client against buying the most obvious of faulty homes, mold, structural flaws, pending zoning changes, the quality of the product, proximity to roads and power lines etc.
Many times as seasoned agents we are asked to list a properties that we cannot sell. It is not uncommon that good agents will not list a home when they know there is no chance of a sale. They do not need 6 months of aggravation and no chance of ever getting paid by a commission. We are not social workers. The reasons are many and obvious that a home will not sell...the sellers are way upside down, the home is on busy road that is about to be widened, it is under a power-line, the home is in a designated flood zone, there is obvious mold, the home is made of EFIS, they have polybute plumbing, aluminum wiring, have problematic siding issues...or all of the above! To simply put it...we cannot help them. We are not miracle workers. They had little if any advice from their inexperienced agent before they purchased the wrong home, and then overpaid on steroids.
The point is that before persons buy or sell...buyers and sellers need to work with real estate agents and Realtors that do have experience, and extensive knowledge. In the past it was the real estate agent that qualified the buyers first before ever giving the buyer or seller to a loan officer. We were more involved in the practicality of a sale then in "Doing a deal!" There were many times in my own career I advised a client or prospect that the home was not a good deal. The phrase "NEXT!" was a part of my daily dialog. That was just sound advice, and was appreciated. Buyers and sellers must realize that a home is a massive investment, and even though there are many rewards to home ownership, there are also many caveats, and responsibilities. Once the mistake is made, some problems cannot be undone.
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I feel the same way. I would rather have a client purchase a home that fits their needs and financial position then just go for the one quick sale.
Shawn Murray ~ Omaha NE 402-250-7869 ( RE/MAX The Producers) Shawn I think that is smart business, and also shows "substance of charachter!"
Jim, so true. I often pride myself with the fact that I have walked in buyer shoes. Having bought and sold several personal as well as investment properties over the years, I always mention to buyers and seller alike about my experience in these important purchases. All cost need to be inspected and you have to have an exit strategy. What if, well look at the Gulf of Mexico's oil spill....
Have a great weekend.
You ask who was advising the granite, stainless steel junkie who rolled in all the extras, mortgaged himself to the hilt. Maybe no one could and when you crank your head around, the rude awakening, lesson learned is you shoot yourself in the foot and cause economic ruin in your family, cripple your country if not alone. And if the country's federal reserve rallies to get your out of hot water you put yourself in by printing more paper, creating more debt. Have no one to blame but the handcuffs of gold you wore that caused you to need to way way over spend. To over eat, over drink, be over merry. I would ask the question why do you need all the glitz, over extending living? To impress someone? Deeper inner reasons to explore to explain the insane behavior.
Jim I remember my instructor when i was taking my pre-license classes. He said that real estate always went up in value, REALLY?
Frank Rubi | New Orleans LA | Kenner | Real Estate (Frank Rubi Real Estate | Homes for Sale | Lic. in Louisiana ) It is very good to have standards, many in our industry don't. We get to sleep at night with a clean conscience.
Andrew Mooers | Northern Maine Real Estate / Aroostook County Broker (MOOERS REALTY) Perhaps they are missing something spiritually inside. Some persosn look to fill that empty void with "Stuff!"
John Walters (Licensed in Slidell, Louisiana) (Slidell, Pearl River, Lacombe) I hope he did not have all his eggs in one basket in this market downturn.
Jim: Buying a home is a very important decision that must be carefully considered and executed.
Our advice to our buyers, think like you are selling this house. If it has an uncurable defect going in, it will have it when you sell it. Now our market in many cases has dropped 50% off the high so people that bought at or near the high with a nice down payment, who did not refi, are still in a financial mess that was not their making if life events make it necessary to sell. We see it every week. Short sales are basically the only ticket out if they can not bring a bushel basket of money to closing!
Jim, Thanks for the post. It is unfortunate that high risk buyers got a mortgage with no doc loans and cannot afford their homes now.
Jim, I think the issue here is not necessarily whether the agent was experienced or not! There were definitely MANY seasoned agents out there selling overpriced, poorly constructed homes in the "hot" market! And, unfortunately, perhaps because of their added experience and connections, they were able to find financing for people who should never have purchased at that stage in their life! It is saddest to me that people who had substantial downpayments and good incomes are now losing homes, equity and jobs because of this horrid mess! If the seasoned agents were aware of where this was all heading, would it not have been ethical for them to sound the alarm? I am a new agent and, as a consumer, I never heard anything about where the market was heading until it was too late! Please don't classify agents as good or bad based on their years of experience or how many homes they have sold! It would be like rating teachers based on the number of years they have taught . . .and we all know how well that works!
Hi Jim,
Thanks for sharing what so many buyers and sellers need to hear and take into consideration. Our industry has such a bad rap, due to the reasons you mentioned....but buyers and sellers willing to do some due diligence on their own can find many seasoned, competent, helpful and hard-working agents putting their client's best interests ahead of their own.
Character still counts!
~ Barbara Murphy
No Doc Loans?...you gotta be kidding me...I'm a RE contractor/developer/investor first and a RE Broker second...a few years back when a buyer's broker would put together a sale on one of my homes they would often be deals where they rolled an extra 15k into the price to furnish it, no docs, no checking FICO's...nothing...I would have long conversations with my framer about how this had to be the top and to expect things to hit the fan fairly soon...sure enough...there is no free lunch people!...fortunately, up here in Maine we've managed to weather this recession remarkably well and most of the folks who purchased homes from me in 06/07 are still living in them...I wouldn't want to have to carry the nut they have though.
HMMM Reading blog,s on AR it seems nobody 'experienced' had anything to do with what went on to cause this meltdown.
Then who sold these overpriced, low quality OR problem riddled homes to unqualified buyers.
Oh yea it must have been the newbie's? No wait you said most of them never sold a home?
By the way it might be the buyers 'right' to decide when to say 'next' not the REALTORS.
An 'experienced' agent can explain how much smarter they are than the buyer and they are making a big mistake not letting 'experienced agent direct them' to what home they should buy and then pass them off to a newbie; who will sell them the home they want. Newbie is now experienced, buyer is in home they wanted and 'experienced agent' IS still smarter than everyone, so its a win-win situation.
I believe Valerie is on the right track.
Phil
Back when I was in manufacturing, one of my senior guys said "thank goodness Americans buy things they don't need with money they don't have - it keeps the world working".
well, now we are finding out the cost of reckless spending.
Excellent post Jim. Sometimes the correct answer is "No".
I think you need to put in the word "professional" in your post also.
I can tell you their is a-lot of difference between working with an Experienced Professional and some one who is not.
The main difference by that, is someome who treats it like a Career verses someone who treats it like a Job or worse part -time job. (this goes for Lenders also)
If you treat it as a Career, even if you do little volume - at least those Agents try to keep up on things and treat it like a business.
The latter are always playing catch-up; pointing fingers and wouldn't know that a home is underwater and can't be sold yet!
You the man- Jim, a whole post on a subject like this with-out saying anything bad about LO's. Thanks!
Not only were many of these so called "Experienced" agents inexperienced, many of them were basically uneducated in Real Estate. They had the minimum number of hours to become licensed (the lady who did my wifes nails had to complete more training hours in many states than does a Real Estate agent). Quite a few had no college education and unfortunately quite a few didn't complete high school, yet they were selling them selves as being real estate investment experts.
To compound the problem, they were desperate for any money so they were sponsored by brokers whose business model was to sponsor hundreds of agents for a low monthly fee and provide no training, and little to no daily support.
After all of that the end result was predictable, as stated by others, the blind leading the blind over the cliff.
Good post. Any property can be sold, if the price is right.
When you brought up getting advice from agents, I thought you were going to mention the many real estate agents that lost their own home.
Jim, your points are well made and true, but not universal. Valerie Baker, #12, also makes some very good observations. It is easy to reconcile your themes and Valerie's. Your stated attributes of the useful agents are experience, and extensive knowledge and I believe you also implied mental and moral competency. Valerie implied that without mental and moral competency the experience and knowledge may not be enough. There is another attribute that neither of you stated but both probably assumed, courage.
Bill
Thanks Bill, Valerie and Phil, It's easy to make blanket statements. Many of these homes are being lost to people who have paid their mortgages for years, decades even. In case you haven't noticed we are in a recession. I would call it a depression with millions unemployed and under-employed at record numbers, even in the real estate business.The banks have been deregulated for 30 years and this is where it got us. They gambled with our mortgages selling them off to investors like it was Vegas or the wild West.
Our industry really doesn't need us bashing each other. We get enough of that, statistically being right below the status of used-car salesmen. Let's try to uplift ourselves and our industry. If we need to place blame, place it at the feet of bankers and their greed and work toward getting the banks regulated and getting deriviatives outlawed so this doesn't happen again.
#22 is right on the money. There are many agents in that boat.
I think we have to be learning all the time, no matter how experienced we think we're already are. Every deal is different, every client is different and the economy changes constantly, there are always new things to be learned. It's very risky to decide that one has enough experience and call himself a pro. It's safer and better to be humble. When I started my real estate career 10 years ago I bothered my broker and fellow agents with questions all the time, and I was not afraid to tell my clients that I need to check things first, to not let them down. They appreciated that. Now, after many years of "experience" and many successful transactions, I would not let myself to be arrogant; I still ask for advises. I think that most important is to have a right attitude. So, Valerie; go girl; keep up a good work and good attitude and don't worry about the years. There are good new agents out there.
Liked your list of reasons why a home won't sell, as some I've never heard of.
I enjoyed reading your blog and yes, it's a shame that so many homeowners purchased homes that were overpriced without having the proper advise & opinion from a Realtor. An experienced Realtor is worth every penny of their commission! The downturn in the real estate marketplace has weeded out the inexperienced or inefficient Realtors. Active Realtors need to be continually seeking education and technology assistance to thrive in this competitive business.
I find it hard to believe that people agents think because they have sold a few houses or many houses that they are seasoned veterans or better agents than a new agent. I am just short of 2 years in and have sold many homes. Is the better question from a buyer or seller to the agent, how long have you been a Realtor or how well do you know the area and this market? Do you know the ups and downs of the area I am looking to buy or selling a home in? Being a Realtor takes hard work, dedication, honesty and integrity. Don't tell buyers and sellers what they want to hear tell them the truth.
I've been in real estate 17+ years, and consider it my career. I consider myself a professional. I saw what was happening, but was not swept up in the tide. My well-being has never been dependent on one commission alone. However, I think if we're going to start pointing fingers, we all could point them at others and also at ourselves. We're all part of a national and GLOBAL economy that is just beginning to readjust.
One thing life experience has taught me is if I don't learn a lesson first time around, I'll get another opportunity to learn it! I want all of us, REALTORS, Buyers, Sellers, to learn from this, just as I imagine our parents/grandparents did from the Great Depression. And I want to go forward together. Seems to me this is the only way we can survive, much less thrive.
Thanks for such a provocative post!
Jim, wise advice. I think in an up market, location problems are overlooked because of low inventory. The 'location is not that bad' syndrome. Next comes the down market & only the most favorable homes are selling & you have this location lemon? There have been plenty of times when buyers did not listen to my advice.
As a new agent with not as much experience as you have, I believe that someone must give me a chance so I can gain experience. Please, no blanket generalizaitons - none of this can be said about all new agents. Some of this blog can be said for "experienced" agents. I have experience in other areas that is easily transferable to the real estate industry.
Jim,
Good point. If you can't help them because the house is unsellable, its best to be honest and tell them that!
Lori Cofer
Hi Jim,
As a mortgage company that assisted in helping people buy their dream home with NIV, (no income verification) ....believe it or not most of us in the industry still made sure the borrower had income to qualified, in most cases it was easier to process and allowed the borrower to be more responsible. Fannie Mae and Freddie Mac still had qualifying factors to approve these loans. Accelerated pricing was out of control. I remember builder's increasing their sales price by 3-5% in a quarter. Builder's creating their own price and having their own lenders onsite and appraisers confirming it all. There was far more to this debacle than inexperienced realtors. The inexperience Lender's, appraisers, and attorney's confirm the decision for the inexperienced buyer/borrower.
I like what you said about how Realtor used to be able to pre-approve a borrower. Today it takes mortgage expertise, sound knowledge and a touch of artwork. Thanks for sharing.
Matt Grohe Remax Des Moines (RE/MAX Real Estate Concepts) You are so right. It is called being responsible.
Dick and Dixie Sells, Your Tampa Bay Florida Connection (Future Home Realty) I think that is wise to advise to think of resale. There is no free luch in life.
GITA BANTWAL, REALTOR BUCKS COUNTY, PA HOMES (ReMax Centre Realtors) And some agents participated and some did not.
Valerie Baker (Exit Real Estate Professionals) Thank you for your thoughts, and I agree with many of your positions. However I see it from another angle... and I will not change my view. The numbers of new agents during that period tell a different story. In The Atlanta market the numbers of agents increased dramatically over 300% in just a few years. There were many more new agents participating than experienced older agents. The normal agent count for real estate agents in Atlanta was 12500 in 2003 then it climbed to 47000. Soroughly 35,000 new agents with little or no experience at all began calling the shots. This also occurred nationally. They influx of new inexperienced agent exacerbated the problem and infused a dysfunctional component to many markets. Experience, and sage advice was thrown under the bus buy agents advising their clients to "Buy now!" Many new agents remained silent on construction issues because they did not have the background of closed sales to advise a person not to proceed or to seek other professional advice. More experienced agents would avoid the wrong sales because of the liability. There is an old saying that goes "Fools rush in where angels dare tread!" If I paraphrased that...I would say it was "The inexperienced rush in...!"
Barbara Murphy (Tartan Properties, Pensacola~Pace~Milton~Gulf Breeze~FL) Well said. Character will always count!
John V Zappia (Johnson Realty) Maine probably saw a lot less speculation than many areas of the country. Greed ruled the day. The problem is that many will not carry the nut from the bad choice of "No money down!" So they are just walking away form their responsibility, and society will pay for their decision for years to come.
Jesus Sotelo Carrillo (Century 21 Jordan-Link & Co) I know many agents that also made very bad personal choices and lost everything.
PHIL MCGREEVY Thanks for your imput.
Jeanne Dufort (Prudential Parkway Realty) Amen! I agree!
Granger Hodgson (First Nations Home Finance) I agree. Not every deal is a good deal. I often see agents trying to beat a square peg into a round hole. If a person is not qualified by 3 loan officers, why go around until you find the 10th loan officer that will close the deal? 9 other good loan officer told you that the person should not buy a home because....! So when a person like this proceeds forward it is a recipe for disaster. Anyone with experience and common sense could tell you how the story will turn out!
Ben Yost (Castle & Cooke Mortgage) You raise a very valid point. "An experienced professional!" Thank you!
Gary Steuernagel BROKER, ABR, CRB (Delta Realty Group) I agree with your observations. The sad thing was that I personally feel much of this was avoidable. However, it seems greed won out!
Gene Riemenschneider East Contra Costa Home Sales 01492725 (Home Point Real Estate) It seems as though many homes sold even if the wrong price was on it durng the boom!
Joetta Fort - Realtor Denver Colorado Real Estate (The DiGiorgio Group) That was a very common occurance.
William D. Queen, Real Estate Broker, Richmond, Virginia Thank you Bill for your observations. As I mentioned in another response...it was a matter of doing the math. The numbers of newer agents had grown so rapidly both locally and nationally in such a short condensed timeframe...that they started doing a lot more of the business.
Karen Hunt (Hunt Seattle Homes) I cannot say it is all the bankers either. I also believe in the personal character of the individual, and for being a responsible adult. We are charged with keeping out own houses in order.
A loan shark can lend money to anyone at exorbitant rate, but is it smart to seek them out knowing if you can't pay they will break your legs, or harm you? So when a person puts their own family and possibly their marriage at risk by buying a home they cannot afford to ever repay...who is to blame? For many borrowers the math for thier incom / debt would never ba able to own a home yet they moved forward. I personally think the individual borrowing is responsible for their actions. Whatever happened to the buyer that was not sure if something was right before proceeding? They would brink their father, their brother, a friend over to a home. They would have a lawyer read the contract before signing. A buyers agent was supposed to advise a buyer in a deal not forced them into the wrong product! We are supposed to offers sound advice, give them a CMA of comps in a neighborhood etc...then as an informed consumer the buy had the option to more forward, or withdraw from the deal!
Mark Watterson Utah Real Estate (Principle Realty Group, Inc) There are quite a few.
Kasia Zajac, GRI, SFR (Century 21 American Sketchbook) Very well said. We are always learning.
Tina Gleisner (Association of Home Professionals) Thank you so much. Glad you enjoyed.
Amanda Nicodemus (Spring TX Keller Williams Professionals) Amanda thank you so much for such sound advice. Well done and said!
Amanda Nicodemus (Spring TX Keller Williams Professionals) Amanda thank you so much for such sound advice. Well done and said!
Lyn Sims ~ Chicago Northwest Suburbs (Schaumburg Illinois ~ RE/MAX Suburban) I agree, there area market components to buying, and some buyers will just not listed to advice. At many of those I did not proceed forward with them. With others, I always try to make sure they understand what the are buying and know both the positives andthe negatives I see based on my experience. Did I lose some buyers over the years...yes, but that is not a problem. I have a conscience.
Cathleen DeLoach (Long and Foster) Real estate is an industry where the turnover rate is 80% every 2 years. That is in good times. Most will never survive and prosper in our industry because it is not always about the deals closed, it is abouth ethics, honesty, client appreciation, and market knowledge. In the boom years it was a total swell in the numbers of new agents that pushed things forward to levels never seen before. So I am sorry you do not agree with my premise, but also understand that even the most successful agent started off new...they survived by doing things right.
Moscow Idaho Real Estate Lori Cofer, REALTOR (Beasley Realty) Honesty is always the best policy. I totally agree.
Good Friend Mortgage Thanks for your sharing. I interact with agents a lot, and it was interesting to see their behavior to their clients from afar. It was interesting to see what happened after the dust settled.
Jim, Good Post... I agree the buyer needs to interview the agent as well as the other way around. Sometimes I am a miracle worker, but there are times I cannot help someone. But the cream does rise to the top.
I agree with you Jim. A rookie agent may have some sales skills, but it takes experience to give good advice. And with that experience you learn that you cannot help or want to work with everyone. I choose who I want to work with. I passed on a listing last week. The Seller was lying to me. Trust is an important issue.
One of my favorite comments.... " I'm not paying the mortgage;YOU need to be comfortable with your purchase!"
Spokane Washington Real Estate - Ross Quintana 509-362-1966 (Team Quintana Real Estate - Keller Williams Realty Lic#3015) Well said Ross, and I do agree!
Tigard Oregon Homes for Sale, Wayne B. Pruner, Realtor, GRI (Oregon First) Trust on both sides is critical, and performance is the measure of success.
KATHY OPATKA Ocean City, MD Re/Max Premier Properties (Re/Max Premier Properties) GREAT LINE and so true! Thank you for sharing!