March 15, 2007
Ides of March: Beware mortgage meltdown & counterfeit buyer agents
Tuesday's announcement that "lenders began
foreclosure against more than one of every 200 U.S. mortgage borrowers
in the fourth quarter," has the media tracking the "Mortgage Meltdown" and record number of foreclosures, and industry pundits predicting widespread ripple effects from the "Subprime Panic."
Steven Pearlstein of the Washington Post estimates that "...1.5 million Americans may lose their homes to foreclosure and ...hundreds of thousands of homes could be dumped on an already glutted market." Pearlstein concludes, "What we have here is a failure of common sense. ...It's not a whole lot more complicated than that."
real estate consumer advocates say the story is more complex. They're calling for the media and regulators to investigate the role dual agents (a.k.a. designated agents) played in creating the real estate bubble and the growing foreclosure problem. During the housing boom, little attention was paid to the conflicts of
interest which occur when large real estate agencies try to represent both home buyers and sellers in the same transaction. But one leading consumer advocate predicts homebuyers will take legal action when they realize they have been betrayed by counterfeit buyer agents:
As some home owners get "upside down" on their equity, or lose their homes by foreclosure, you may start to see a rash of litigation against the real estate "agents" who sold them their homes. Probably the vast majority of real estate agents acted as "buyer's agents" in the transactions, so there is likely the possibility some of these "buyer's agents" didn't really perform up to their expectation of "protecting" the interests of their "buyer clients."
In coming days, we'll expose the conflicts of interest designated agents would prefer to paper over and the heartbreaking failure of the real estate regulatory system to protect ordinary homebuyers and sellers. If you've been a victim of dual agency, designated agency, or other deceptive real estate practice, or know someone who is writing about the same subjects, please let us know. If you are in the housing market now, BEWARE designated agents; and demand a real buyer agent, like The Real Estate Cafe, who can help you save tens of thousands of dollars.
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Tracked on Mar 16, 2007 11:17:10 AM
"Counterfeit buyer agents," as you put, are certainly to blame for many consumers getting in over their head; however, it is amazing how many otherwise intelligent individuals will simply ignore advice when it comes to dealing with mortgage brokers and lenders and make poor decisions.
Posted by: Rich Rosa | Mar 15, 2007 9:11:58 PM
Nice to see a fellow buyer agent in Massachusetts with a blog. More importantly, I'm very pleased to know that you are both a buyer agent and attorney. That's the kind of "added value" that will become increasingly important as the industry transitions away from traditional two-sided real estate commissions to fee-for-service compensation.
It will be interesting to see if the DOJ requires separate fees for buyer and seller agents as part of the anti-trust actions against the industry.
If regulators dismantle the "double dip," do you think the greed factor that drives designated dual agency will disappear too?
I look forward to meeting you.
The Real Estate Cafe
Posted by: RealEstateCafe | Mar 15, 2007 11:23:38 PM
I'm not sure I really see the connection between coutnerfeit buyer agents and the current sub-prime situation. I appreciate that the dual roles of agents is at best a conflict of interest and at worst fraud, but it's been going on for a long time, no? The sub-prime problems seem mostly due to funky lending practices.
Posted by: ed | Mar 16, 2007 3:32:31 PM
Thanks for your comment. Did you get a chance to read today's blog post? We've added a hyperlink to the word "victim" above, so you and other readers can see a case study which addresses your question. The blog post is entitled:
"Double Bubble: How counterfeit buyer agents inflated the housing bubble"
Your continued feedback is welcome.
The Real Estate Cafe
Posted by: RealEstateCafe | Mar 16, 2007 3:45:51 PM
I am a realtor in San Francisco... I agree that Dual Agents are traitors to either the seller or buyer... as they lust over the double payday...
...but ...a buyer's agent (called the "selling agent", as they make the sale, by landing the buyer to the signing table)...also have it in their interest to get you, the buyer, to overpay, if need be, to avoid them getting no commission, if there is no deal.
Better to pay a buyer's agent by the hour.
WHAT the hell is Massachusetts doing, in the way that it does not require Full Disclosure.? I am buying a Cambridge condo, and it has been tough. The seller's agent had to complete ZERO Disclosure Documents. She only has to disclose Known Defects, but has NO duty to inspect the property for same, and can play ostrich, and does so very well.
Posted by: jack barry | Apr 23, 2007 4:52:28 AM
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