What about the good citizens have at least “tried” to save up our hardworking money to do everything is right and sensible, are we going to get lower mortgage rate?

I can’t wait the election day to come, I have seen Bush and the whole administration for 8 years, I can’t stand another minute to watch him on TV or listen to his voice, no more!

And what’s up with the word “nuclear” that all the Republican all of a sudden have trouble to pronounce, are they all born with same genetic tongues? This is a classic example that people follow people blindly even if it’s wrong.

My wife and I have been homeowners since the early 1980’s. . .”

Thanks for the anecdote, Peter, but I don’t think it really addresses my core point. If pme accepts that home prices would continue to increase, or at the very least not decrease, as supposedly sophisticated lenders and brokers represented, it would not necessarily be irrational to spend more on a home than one can afford presently on the assumption that the buyer’s increasing income will eventually make it affordable. The reason that institutionally held misconceptions about future prices were so important is that mortgagees would NOT be inclined to take the chance that their income might NOT rise enough to make the home affordable unless they could rely on the (it turns out utterly faulty) presumption that home values would at least NOT decrease. The use of ARMs rather illustrates my point. Mortgagees were rationally willing to bet that their income would eventually increase enough to cover an eventual fixed rate mortgage because they assumed that if their income did NOT increase enough, they would at least be able to cash out in the event the ARM adjusted to an unaffordable level. Still, congratulations on the good judgment of you and your wife. You are a fine Americans.

Well said, thank you for articulating what I have been wanting to say.

If the answer is NO, I am going to change my principals and morals just to survive in this crazy morality deficiency society! Unbelievable!

“In some pollyanish world where everyone is a boy scout and an altar boy high-sounding mottos and principles might matter, but in the real world you ‘follow the money.’”

Well, if one were accept that line of reasoning, Mr. Nelson, why not just discard all consumer protection codes and statutues regulating the ethical practices of various professions and companies? Why not let drug companies use inferior adulterated products instead of high-quality ingredients, since the patient should have no expectation of an efficacious remedy?
Would you give an untested and unregulated medicine to anyone in your family, Mr. Nelson?

Similarly, would you depend on the advice of a shyster lawyer whose only principle is “follow the money” even if his dishonesty and incompetence are contrary to your interest?

Such examples could be multiplied ad infintum. The brutal truth of the matter is, the principles of predatory unrestrained capitalism that you accept as a “realist” are precisely what have led to the current economic debacle. Unless a certain measure of integrity and competence, enforced by impartial oversight, is restored and vigilantly maintained, the type of fraud that has cost millions of people their homes and life savigns is sure to reoccur. That may not matter in the least to you, Mr. Nelson, but I believe that my viewpoint would be shared by the vast majority of average citizens who do not have access to high-priced lobbyists and lawyers to protect their assets and livelihoods–unlike real estate agents whose incompetence and deceit have harmed their clients in manifold ways.
The real estate cartel is the country’s largest lobby and has the influence in state and federal government, the mass media, so-called regulatory agencies (such as impotent real estate commissions), and other public insttitutions to have laws written in its (not the public’s) interest and clearly regards itself beyond all ethical and legal restraint. My case is a pefect illustration of this. I lost my lawsuit against the Weichert Company for consumer fraud because the Maryland statutes governing disclosure just happened to be written the attorney (Alvin Monshower) whose law firm represents Weichert and other major real estate companies in Maryland. In my view, anyone who passively accepts such blatant conflict of interest and the consequent defenselessness of average citizens to uphold their legitimate consumer rights as an inevitable, if not totally desirable state of affairs, and regards any attemtpt to rectify this situation as “pollyannish” and utopian, is morally obtuse and, to use Eugene Deb’s felicitous phrase, a “Mammon worshipper.”

I saw things and heard things in conversations that were completely screwed up. Small 850 sq foot two bedroom flats going for almost half a million. That is absurd as these things were built for low wage workers in the early part of the 20th century. In fact most of this housing stock was not built to last this long.

Now those same flats are still expensive, around 320k.

They should be about 150 to 180k.

We should set up nationwide investigations to get the money back so as to infuse it into the economy, and to reimburse those that have been stolen from.

I was going to sit on the sidelines and let this conversation unfold without posting anything that sounds self-promotional but the misinformation in recent posts demands a response.

First, there is some truth to your assertion that the current two-sided real estate commission does not align buyer agent compensation with performance. That’s why some in the industry offer rebates and others are calling for commissions to be divorced. If that single reform came out of this crisis, conflicts of interest would be reduced, competitive options would increase, and consumers would save billions of dollars. For more information, see post above regarding “designated agency” and blog posts written 2-3 years ago below:

$60 Billion question: How do consumers uncouple real estate commissions?
http://tinyurl.com/68nlae

10 Mega-tends push real estate commissions to a tipping point
http://tinyurl.com/r2nnd

Contrary to both of your statements, some real buyer agents, not counterfeit buyer agents or “designated agents,” actually do save their clients money by (1) rebating some or all of the buyer agency fee built into sales prices, and (2) by helping their clients shop wisely, time the market, and negotiating aggressively on their behalf. For tangible evidence, see Wall Street Journal article on our 100% commission rebate, our menu of fees & rebates, and map of client savings totally over $1 million during a twelve month period:
http://tinyurl.com/5po4pd

I know of at least one other buyer agent in Chicago who has helped clients save more than $1 million in a single twelve month period and there are probably others. More importantly, new referral sites like http://www.ProOffer.com and conversations like this could bring performance based compensation into the real estate industry.

My guess is that both Peter and Jeff would agree that reform is long overdue!

Your right about that. I had a separate lawyer, my mistake was using the recommended home inspection company.

Look Peter your coming across as snob and a no it all.
But behind this vale of oneupmanship are some plain truths. Be educated, take a real estate course.
find a good lawyer.

I did some of what you did but I also used a real estate agent because I was selling my condo to buy up as they say to a house. Boy was I wrong, my old 2 bedroom 850 square foot condo is worth the same today as my 3 bedroom 1.5 bathroom house.

From my experience I have learned a few things:
1- never trust your real estate agent they are only out for them selves.
2- Don’t use home inspectors, instead find good electricians, plumbers and engineers to inspect the house. It will cost a few hundred more to do this but your spending a huge amount anyway and they will do a better job. Home inspectors are not trained well enough in my state (Massachusetts) to do a proper job.

I told you why I didn’t think it was reasonable – because the incentives are not structured to reward that behavior.

In some polyannish world where everyone is a boy scout and an altar boy hight-sounding mottos and principles might matter, but in the real world you “follow the money”.

If the buyers agent–whose advice is sought and relied upon by his cliet and can have very important financial and legal consequences in the real world–cannot be held to the same minimum standards of competence and integrity as an accountant, tax preparer, physician, car mechanic, or other licensee, what on earth is his purpose

Again, Joel, it comes down to how they are incentivized. The way the “buyer’s broker” gets paid does not incentivize them to work in your best interest. Also, the work of those other professions can be checked by a third party, whereas “negotiations” are subjective. And buyer’s agents don’t have to worry about losing your business because how often does one buy a house?

In the investment world it is common knowledge that if you hire an investment advisor she needs to be fee-only. If you hire one who makes money on commissions, transaction fees, or anything else they have an incentive OTHER than your best interest. In fact even the commission-based investment advisor is better incentivized than the buyer’s broker because hopefully, if they do well by you, they’ll get your ongoing business. But how often do you buy a house?

So really Joel, while I hope you win your case, I still think your expectation that high-falutin’ principles provide an adequate reward system for good results is naive. The ONLY way the concept of a buyer’s broker makes sense is if she is paid directly by the buyer, either with a flat fee or a free structure that rewards a successful negotiation.

My wife and I have never used a buyer’s agent for all the above reasons. We deal with the seller’s agent. Sure, it’s an adversarial relationship because they are incentivized to get the highest price they can, but at least it’s a direct relationship and everyone knows exactly where everyone stands and whose side they’re on.

The “buyer’s agent” concept simply doesn’t make sense the way it’s currently set up.

The moral outrage expressed by many regarding the housing crisis at the Main Street level is misguided or irrelevant in many cases,

A personal situation: I am recently married, and my husband and I (separately, before we knew each other) bought our homes 2 years ago, in 2 adjacent states. We both have good jobs, graduate degrees, and excellent credit, and yet now we are in a very tough spot with no good solution. We haven’t been able to sell our homes, and now that we are living together in mine, he found a new job that is 2 hours from his old home, so we can’t live in his home. We also can’t live in my 500-sq-foot condo much longer, because we now have a baby on the way. Even with 2 good incomes, we can’t afford to pay for 3 places. Our situations changed more than we could possibly have imagined when we bought our homes. Yes, we could have stayed unmarried and postponed having a baby, but at age 39, I don’t know anyone who would make that choice for financial reasons.

So the housing crisis is not just about personal fiscal responsibility or victims of predatory lending. Situations can change drastically, and I think that the entrapment of many Americans in their homes (unable to take a new job, move to another city or state, etc.) has largely gone ignored and will have a substantial impact on the economy.

We obviusly have dismetrically different points of view regarding the role of the buyers agent.
I believe it is ENTIRELY reasonable for a person untutored in real estate law and other intricacies of the home purchase and selling practices to rely on the advice of a licensed professional who, morever. boasted of 20 years’ experience as an agent, just as it is reasonable for a person who is unfamiliar with convoluted tax laws to expect a minimum level of competence from his accountant, or for a plaintiff or defendent in a lawsuit to expect a certain basic integrity and competence on the part of his attorney.
In case you are not aware, Mr. Nelson, negotiation IS one of the essential and integral duties of a buyers agent in my understanding. This is particularly true for a client who has moved into an area from a different city, state, or even a foreign country and who may be totally unfamiliar with the housing prices or general real estate market trends in that area. I conside it quite logical and eminently reasonable for such a person to seek the assistance of a licensed, experienced, competent, and honest professional not only to find a suitable property within his financial range but to represent him in negotiations. Nor do I think it untoward for a client who engages the services of a buyers agent–who by state law and the NAR’s own ethical code has a fiduciary OBLIGATION to place his client’s interest before his own (consult the NAR code is you don’t believe me)to rely on the agent’s guidance when seeking the most appropriate title company, appraiser, mortgage lender, and home inspector. That is PRECISELY the role that the buyers agent is obligated to perform. This role is especially crucial, I reiterate, when the client is unfamiliar with local market conditions.
If the buyers agent–whose advice is sought and relied upon by his cliet and can have very important financial and legal consequences in the real world–cannot be held to the same minimum standards of competence and integrity as an accountant, tax preparer, physician, car mechanic, or other licensee, what on earth is his purpose? To show houses and then let his client sink or swim according to the latter’s knowledge of obscure consumer protection statutes and hidden conflict so interest that may cost him a small fortune later on?
I suggest you read the article that nationally syndicated columnist Ken Harney wrote about my lawsuit against Weichert (March 18, 2006; it can still be found on Gooogle by typing in my name, then “Weichert”). Harney correctly points out the crucial fiduciary role played by buyers agents in the negotiating process. If you have any further doubts on that score, Mr. Nelson, I suggest you get in touch with some of the countless people who have been shafted over the past two decades by incompentent or fraudulent agents acting contrary to the best interests of their “naive” clients.
With all due respect, the problem lies not so much with the ignorance, gullibility, or naivete of consumers in the housing market as with the lack of accountability of agents who, through gross incompetence or willful deceit, betray their clients’ trust. Harney’s 2005 article on the shocking findings of the NAR survey, and reporter Susan Wornick’s 1997 article in the Boston Globe regarding widespread flouting of consumer protection statutes by real estate agents in that city, are just two of the many studies you can find to corroborate my argument.
Either buyers agents should perform the statutory tasks assigned to them, or suffer the consequences of dismissal for incompetence or prosecution for breach of fiduciary trust.

1) Blaming the the Community Reinvestment Act for our current situation is ridiculous. Apparently this is now the Republican’s main talking point as I’ve seen it regurgitated in various media by various “experts”.

I am not a big fan of the government telling businesses to whom to lend, but (as Republicans like to point out in other contexts) if you don’t like the rules, then don’t play the game. If the banks didn’t want to lend to them, then stay out of their neighborhoods or forego FDIC.

I’d love to see numbers on how many loans that banks claimed to be making for CRA compliance went bad. This is totally absurd.

2) These people who are saying that now is not the time for blame have something to hide. Now is exactly the time to figure out what went wrong and who is responsible otherwise you can’t fix the problems. We need to hold those politicians who were not doing their jobs accountable.

The Republican party is not doing itself any favors by blaming the poor and trying to dodge accountability in the eyes of fiscally conservative, independent voters or for that matter Reagan Democrats. It seems they are so out of touch with the rest of America that they can only say things that make sense to their base. To the rest of us they sound like lying cowards.