Good - I hope this Bastard goes to Jail and is fined the maximum amount

[cyrus buelton]

The bigger issue with Realtors? Getting paid a percentage instead of a flat or hourly rate. Why should a Realtor make 6% or 12K selling a house in 2000 for 200K and make 6% or 30K selling the same house in 2003 for 500K? They don't have to do anything different but get to make 150% more? That's the problem with Realtors.

That really makes no sense.

[dropstharockalot]

Plenty of blame to go around.  The greed of the realtors grossly inflating housing prices beyond their real value and contributing to this problem are getting very little of the heat. 

The realtor can't inflate the value of the house if no one is willing to buy it at the inflated price.

No one will buy it at the inflated price if a bank won't lend the amount needed.

The bank won't lend the amount necessary if an appraiser doesn't issue their professional opinion that the property is worth the amount in question.

This happened in Indy a couple years ago... a couple of bankers and appraisers conspired to over-value an entire neighborhood of ghetto-ass foreclosures and borrow absurd amounts against the properties.  $25,000 homes were being mortgaged for $280,000. 

[Howie]

IMHO the only reason this crisis happened was the banking industry and the gubment, not realtors, not builders and not shady appraisers.

Was it the bankers' fault?  Yes and no.  The US gubment lowered the percentage of assets necessary to secure a loan.  This ratio, when set in favor of more debt, raises the risk of the debt. So the banks started giving loans with lower assets and therefore higher risk.  They could have protected this risk, as credit card companies do, by raising the interest rate.  Instead, they protected this risk by selling it in derivative markets (sort of, but you get the jist).  Could they have said as an industry that they weren't going to use the lower asset threshold? Yes, and some did.  Others counted on derivatives to keep them in a better risk situation than the loans they were writing.

Couple this with interest rates held artificially (IMHO) low by the US Treasury and we had the recipe for the perfect financial storm - one that economist had been talking about and seeing globally for probably 8 years before it happened.

What happened next?  Which chicken?  Who's egg?  That is a little harder to sort out, but I think it goes a little like this: On average, Amerikans are incapable of saving money.  We, as a nation, have actually dipped into negative savings.  With artificially low interest rates and more lax mortgage standards, people that already owned houses borrowed against future appreciation to pay for current consumption.  The gubment pushed and pushed for home ownership, even for those that probably shouldn't own a home.  Why did the government push?  Because they knew that all of the asset bubble was being spent in the economy.  In fact, it was fueling our growth.  So why shouldn't the gubment encourage more deficit spending?  (Because it was TOO RISKY - but nobody pays attention when it is raining money).  Where did the bubble come from? Speculation on unsustainable growth levels spurred to life by this "artificial" injection of cash that was required as asset only a few years before.  So we have a gigantic asset floating out there on bank asset sheets that is worth much less than value on paper.  You can't hedge that sort of risk, at least not for very long.

I'm not saying some realtors didn't give bad advice.  I'm not saying some appraisers inflated appraisals to meet loan needs.  Trouble is, that shit has been happening long before this crisis and will continue.  (I've had my real estate license in several states, so I'm not bashing realtors).  What changed?  The risk buffer, in the form of the debt to asset ratio, was lowered leaving the US banking industry teetering on the brink of melt down.

Great analysis. 

[angler]

Great analysis. 

Thanks.  It's what I do for a living......

[Popeye the Sailor]

Thanks.  It's what I do for a living......

I thought you fished?

[angler]

I thought you fished?

If I could get paid to fish without having to guide dumb rich dudes (and I do mean "dudes" in the classic sense of the word), I would.  Instead I do economics consulting, primarily for policy advocacy, for enviro NGO's and the sporting industry.  I do get paid in fishing tackle sometimes......

[Triple J]

The bigger issue with Realtors? Getting paid a percentage instead of a flat or hourly rate. Why should a Realtor make 6% or 12K selling a house in 2000 for 200K and make 6% or 30K selling the same house in 2003 for 500K? They don't have to do anything different but get to make 150% more? That's the problem with Realtors.

That's not this real issue IMO. I don't mind the flat rate fee...I mind that in many states the minimum rate that realtors charge is set by law, as a result of lobbying by the realtors. This eliminates competition among realtors. As a consumer you should be able to pay someone less if they're willing to take it, and a vendor should be allowed to charge less if they choose. Red Fin was/is in a lawsuit here in WA over this exact issue, as they don't adhere to the minimum % fee.

[ducpainter]

Seems to me that this is one very small fish in a very large murky pond.

[badgalbetty]

seems to me that the thread has been jacked...........I still hope the banker does go to prison and is fined and hopefully the powers that be who investigate this kind of thing bring more charges against more people and throw the lot of them in jail if they are found guilty of improper things. The law is the law and no one is above it. Ever!
Badgalbetty is now off shopping..........oh its so good to be a girl!
Have a happy day!
BGB.

[mdriver]

All this talk about fish is making me hungry.

[Howie]

seems to me that the thread has been jacked...........I still hope the banker does go to prison and is fined and hopefully the powers that be who investigate this kind of thing bring more charges against more people and throw the lot of them in jail if they are found guilty of improper things. The law is the law and no one is above it. Ever!
Badgalbetty is now off shopping..........oh its so good to be a girl!
Have a happy day!
BGB.

Thread get jacked on this board?

[Adamm0621]

I was gonna comment on this topic, but I've seemed to misplace my scapegoat.  Let's just say it was bad decisions all around.

[Monsterlover]

I have to add my two cents on behalf of realtors.

My dad is one, and he's a good one.

You all likely don't realize what goes on behind the scenes and how much most of these men and women work for that 6%

And speaking of 6%, that's not what they get.

Take a 100k house my dad has listed, 6% is $6000.

Another agent brings a buyer.  That 6% get's split.  Now he's down to 3%.  Then that again get's split between him and the realty agency.  Now he's down to 1.5%, or $1500.  Since reatlors are independent contractors, they pay their own taxes.  He'll get the check for $1500, but puts half of it away to cover takes (approx)

So now he's got $750 to work with.  

He works 10-14 hour days, normally 7 days a week.  Many of his listings he goes and sells people on listing with him.  A smaller percentage contact him to list on their own.  Sometimes it takes a long time to get people to list (one instance was years)

The good ones have their CRS and GRI accreditations, which my dad does.  It also takes a lot of time to get those, and it's mixed in with normal work hours.  My dad was doing 14 hour days for a long time to get everything done he needed to get done.

He'll do a market analysis to determin where a house should be priced.  In the end the seller is the one that agrees to that, or doesn't and sets their price.  If a realtor inflates a home's price they're really just shooting themselves in the foot.  A house will sell for somewhere in a range of what the market says it's worth.  An inflated price will leave the house sitting.

So to summarize, they're not all greedy people who don't care about the buyer/seller.  Most of them do what's right for their client (i can't say all because some aren't that great)

BGB- sorry for the jackage

[angler]

OK, OK, I'll bite on the realtor thing.  I'd like to say I'm sorry for the threadjack and thank BGB for starting the thread.

Two points:

1) This relates to the other thread on respecting another profession's right to make a living.  They charge what they charge because people think it is a good value and pay it.  Also, as Monsterlover pointed out, the fee is often (more often than not) negotiated WAY down from the starting place.  I know because I have sold lots of property as a licensed real estate agent (seller's agent).  If you don't like paying the fee, by all means do it yourself.  Studies show that realtors generally earn their keep, but by a thin margin.

2) Realtors are the best example of what economists call the principal/agent problem.  The jist of this issue is that your incentives as the seller of property and the incentives of the real estate agent run opposite of each other.  The realtor's incentive is to earn his commission with the least amount of inputs of his time and materials.  The seller's incentive is to sell the house for as high a price as possible.  Let's say as the seller you want to sell your house for $250k, which is on the high side of your 'hood and the market in general.  The realtor wants to sell it for $230k because he knows it will move quickly.  For the sake of argument lets say the realtor knows that he can sell at $250k, but it will take another 30 days and another open house.  If the seller gets their price, they make $20k more but the real estate agent only makes $1,200 more.  That extra $1,200 is unlikely to cover his time for the additional 30 days.  I'll let you guess what the realtor will advise their client to do.  I'll also let you guess how willing the realtor will be to negotiate the price downward in all situations, particularly as the listing time grows.  Defiinitely not in the seller's best interest.  

[Monsterlover]

I can't agree.

I'd wait 30 days and do an open house for an extra $1200.

The realtor wants the house to sell for as much as possible because they'll make more.  If it's been f/s for a long long while, and they get that offer of $230k, likely they'd advise to seriously consider it.

How long till that next offer comes in?

Also to further support that they likely would wait the extra month for the higher price, keep in mind that the house that's listed for $250k is probably not their only listing.

They have other things to do in that 30 day time span that will pay them.

Hopefully