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Honesty Is the Best Policy

For years, many buyers weren’t honest about their income and some loan officers didn’t care. The loans were bundled by Wall Street and sold to investors who were told anything but the truth about their value. For years, some real estate professionals prodded appraisers to move that appraisal up ‘just a bit’ and most sellers thanked them for it. The housing bubble was created on a bed of dishonesty. I’m not saying that any group was malicious in their intent. Everyone probably believed that it would all work out in the end. But, it didn’t. Instead, we were faced with the largest housing collapse since the Great Depression.

A market built on so many half-truths couldn’t continue to grow. Its foundation was rotten. Governmental regulation has forced most parties to rethink the way the housing industry can survive. A person given a mortgage must now prove they have the capability to repay it. An appraiser is held to a higher standard as they determine values. Has the pendulum swung too far? Perhaps. But, something needed to be done.

That brings us to today. Let’s make sure that we demand honesty from real estate professionals in everything we ask them to do. Buyers must insist that the loan officer determines the amount of mortgage they can actually afford. Sellers must make sure they are given an honest estimate of their home’s value in today’s market when listing. Remember to reward the person who has the courage to tell you what you need to know not the one who is telling you what you want to hear.

Honesty is the only thing that will bring back the housing market.


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5 replies
  1. Philip
    Philip says:

    I disagree with what you wrote or at least the way turned a phrase. You said “Buyers must insist that the loan officer determines the amount of mortgage they can actually afford. ” This is not a lenders job. The lenders job is to determine the amount of money they wish to lend and the risk they wish to take. I have always put a budget into the hands of my clients with the simple explanation that the lender will determine your buying power, you will determine what you want to spend and what you feel you can afford. Your post makes it sound as though the principals in these transactions weren’t complicit in the problem. Further you suggest that a lender act as a financial planner. Buyers took huge risks, buying properties they thought they could sell in 2 years for big profit. Many times with the help of my real estate peers.

    Yes as real estate agents we all found our buyers “creative solutions” when asked, but I always challenged my clients to ask themselves if this really is a worthwhile risk.

    It’s time to properly mete out blame. I tire of hearing people demonize one specific group related to the housing industry. Let’s face it greed doesn’t recognize job title.

    Reply
  2. Evelene Thayer
    Evelene Thayer says:

    Your profile is very inspiring. I am not in Real Estate myself (my daughter is) but I am venturing on a new course of “Inspirations” for seniors. My daughter Cher Brundage Realty USA (former owner of American Country Realty) is my inspiration. When it comes to integrity and knowledge she is beyond reproach. I know that I may sound prejudiced but that is also the way she is preceived by most. I personally think she would make a great motivational speaker. At 78 I have been crowned Ms Texas Senior Classic 2010. Our motto is “Changing the image of ageing”. As one to another, I would like to the opportunity to meet you if you are ever in the Dallas area.
    Sincerely,
    Evelene Thayer

    Reply
  3. Steve Harney
    Steve Harney says:

    @ Philip,

    Great points! I should have been more specific in my comment about lenders. What I meant to say is that buyers should demand that the lenders let them know what they are truly qualified to borrow. Then, it is up to the buyer to determine how much they can afford. As I travel the country speaking to thousands of agents each month, more and more are telling be that they put a deal together on a pre approval from a lender and later find out the buyer isn’t fully qualified.

    As far as your comment that I “demonized one particular group”, I can’t agree. I said buyers lied, loan officers looked the other way, agents tried to influence appraisals, sometimes appraisers were influenced and that sellers were happy about it. I’m not sure who I missed.

    Thanks for caring enough to comment and for being passionate about our industry.

    Reply
  4. Sam Calvert
    Sam Calvert says:

    Great post! Honesty has to be at the core of how Realtors do business, in all aspects concerning the conveyance of real property. Lending, due diligence, property disclosures, information on HOA’s, etc. Truth is the must that builds trust.

    Reply

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