Do people who lie, cheat, and steal always do better than the rest of us? Apparently in some professions they do. Obviously, in criminal professions, the people who get ahead are the ones most willing and able to violate the rules. In professions with shades of gray, and real estate sales has some dark fringes, living on the dark side of the shades of gray has financial rewards that seduce many. Real estate sales offers a chance for quick riches with little or no accountability and few educational hurdles to overcome. The profession does attract some good people, but it shouldn’t be surprising that such circumstances also attracts the dregs of society.
The most odious characteristic of the National Association of realtors is how they seek to legitimize bad and unethical behavior by labeling it “sales,” or as I prefer to call it, “bullshit.” To the NAr and many of the agents who adhere to their marketing tactics, the truth has no meaning. There is a narrative, somewhat loosely tethered to reality, that is designed to create false urgency among buyers in order to generate sales commissions. realtors simultaneously want to be recognized as experts yet held harmless when their expert advice is revealed as bullshit, often with costly implications for the buyer who relied on the inappropriate expert advice.
Acting badly in your name
Many people employ obnoxious real estate agents because they know that agent will do and say things the client would never do or say. People want the advantages of bad behavior but none of the responsibility or guilt for it. People will conveniently ignore the lies agents tell in their name because they want the extra money they believe this atrocious behavior will get them. What most fail to realize — mostly through willful ignorance — is that anything an agent says on their behalf is a reflection on them. Lying through a surrogate is still lying. Think about it, if you hire a hit man to kill someone, aren’t you still guilty of murder?
The agency relationship creates responsibilities on both parties. Clients need to know and take responsibility for what the agent says and does, and clients also need to take responsibility for knowing when their own agent is lying to them as well. Many people trust real estate agents far too much to their own detriment. Some of this is foolish gullibility, but some of it is willful ignorance as many people want to be flattered. The agent needs to take responsibility for the veracity of the information given to their clients as well as statements they make to the general public. Most don’t.
I described the dilemma this way in Urgency Versus Reality: realtors Win, Buyers Lose:
With Expertise comes Responsibility
Bad realtors want to have their cake and eat it too; they want to be recognized as experts on real estate and real estate markets, but they want no responsibility when their expertise is confirmed as chicanery, a conundrum with no resolution. realtors are responsible for their representations that buyers rely on. If they say prices are going to the moon, then who is to blame when that doesn’t happen? Buyers for relying on the experts? Or the experts for making stuff up that people rely on?
Does this make my butt look fat?
Perhaps this analogy is politically incorrect, but… Imagine you are shopping for clothes in a high-end retail outlet. You are trying on an outfit, and you are concerned about its appearance, so you ask the salesperson, “Does this make my butt look fat?” What is the salesperson to do?
If the salesperson responds, “Yes, that is not flattering to your shape,” they fear they will not close the sale, so even if the garment does, in fact, make your butt look fat, the salesperson is probably not going to tell you. As a customer, you asked a question hoping for accurate information to help you make a purchase decision. What you are likely to get is a self-serving answer that makes the salesperson money.
If a buyer walks out of the store with ill-fitting or unflattering clothes, who is to blame? Is the buyer responsible for failing to see the conflict of interest, or is the salesperson at fault for dissembling for dollars?
Unfortunately, in the world we live in, agents who act irresponsibly and even nefariously often get rewarded. As the story below explains, realtors who are assholes sell more homes. This is either a sign that unethical behavior is the best way to accomplish the task, or its a sign that far too many unethical realtors dominate the field. You can tell me which one you think it is.
Home-Selling Tips From Machiavelli
By SANETTE TANAKA — October 11, 2012
Real-estate agents, take note: It’s better to be feared than loved.
Research led by a professor at Morgan State University has found that brokers who score high in Machiavellian personality tests sell more real estate than their kinder, gentler colleagues.
The advice given to agents today: be an asshole.
Abdul Aziz, associate professor of management at the Baltimore school, and Jim Meeks, a senior at the time at the College of Charleston, devised a “Mach-B scale” to measure Machiavellian behavior in people across various occupations. The personality test looks for traits described in the writings of Niccolò Machiavelli, a 15th-century Italian diplomat. A Machiavellian person, Prof. Aziz explains, is emotionally detached, prone to deceive and believes that the end justifies the means, even if it is not morally right.
Doesn’t that aptly describe many realtors? If there is one philosophy that best describes how realtors operate its the idea that the end justifies the means. That’s why they find bullshit perfectly acceptable. The end they want is a real estate commission. Telling people what they want to hear is a means to that end. Even through many find this behavior immoral, they see no problem with it because the end justifies the means.
“Machiavelli believed in using dirty tricks in order to succeed,” says Harvey Mansfield, professor of government at Harvard University and author of numerous books on Machiavelli.
“The key word in Machiavellian is manipulation,” Prof. Aziz says. “It’s a dirty word, but in our average daily life, we always manipulate information.” Machiavellian people are very good in business situations and are astute at reading others, Mr. Aziz says. “They need to understand the needs of other people and gain their trust,” he says.
Once realtors gain the trust of their clients victims, only their personal ethical standards limit what they do. Unfortunately, some realtors have very low personal ethical standards.
For the Mach-B test, people from various occupations were asked how much they approved or disapproved of seven scenarios: for example, how they would judge a person who took a prime parking spot on a stormy night that someone else was waiting for. The answers were graded on a scale from 7 to 28, with 7 indicating the least Machiavellian personalities. Real-estate agents came in at an average of 14.8, which Mr. Aziz categorizes as a moderate score. The number falls below those of automobile salespeople, stockbrokers, health-care employees and timeshare sales agents.
realtors have the same personal standards as used-car salespeople.
Real-estate agents who exhibited more Machiavellian traits tended to see higher sales, meaning Machiavellian behavior and performance were found to be highly correlated. Automobile salespeople and stockbrokers with higher Mach-B scores also saw increased performance.
It shouldn’t be terribly surprising that the most manipulative realtors also have high sales. They put their nefarious talents to work for their own personal ends, and some are successful at it. However, and this is a big caveat, not all real estate agents succeed by manipulating their clients. Bullshit and manipulation is a short-term strategy that’s most effective in high-pressure sales environments like car lots, new home sales, or timeshare sales offices. Those salespeople often only get one chance to convert a customer, so they aren’t focused on building a relationship of trust over time. Ethical sales takes more time and effort, and many agents don’t survive long enough to build a successful and ethical business. And unfortunately, many others don’t see the need.
Of course, not all real-estate agents have Machiavellian personalities, says James Larsen, a professor of finance at Wright State University who has studied ethics in real estate.
“In general, anyone in real estate is likely to be dependent on repeat business. If you take a Machiavellian approach, then that would hurt your long-run prospects.”
Perhaps assholes in real estate do generate more sales. That says less about the efficacy of their methods than it does about the people drawn into the profession. The dark path may be quicker, but the success is fleeting and always limited by the ability of the realtor to find new gullible marks. The agents who prosper in the long run are those that treat clients with respect and earn referrals and repeat business.
There must be a better way. Although I’m not sure love is the answer either…
Twenty years and $317,000 later…
The former owners of today’s featured property bought it twenty years ago. Instead of selling it today for a $325,000 profit, the former owners already stripped the property of all its equity leaving them with nothing besides their bad credit.
- This property was purchased on 7/31/1992 for $210,000.
- On 10/1/1997 they obtained a $43,000 stand-alone second.
- On 10/30/2003 they refinanced with a $285,000 first mortgage.
- On 7/29/2005 they refinanced with a $375,000 first mortgage.
- On 12/29/2006 they refinanced with a $412,000 first mortgage.
- On 8/6/2007 they opened a $125,000 HELOC.
- Total debt was $527,000 assuming they maxed out the HELOC.
- Total mortgage equity withdrawal was $317,000 plus their down payment.
Wouldn't you be embarrassed to overpay by $100,000? Only fools buy houses without knowing neighborhood values. Don't be a fool. Don't suffer the pain of an underwater mortgage. The surest way to lose your house is to overpay for it. Our reports identify overvalued and undervalued neighborhoods. Use it to broaden or narrow your search area. Savvy buyers work with us to find bargains. We've saved thousands from financial ruin. Let us save you too. If you want peace of mind while shopping for your next home, sign up for our monthly market newsletter.
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Proprietary OC Housing News home purchase analysis
1733 North SHAFFER St Orange, CA 92865
$499,900 …….. Asking Price
$210,000 ………. Purchase Price
7/31/1992 ………. Purchase Date
$289,900 ………. Gross Gain (Loss)
($16,800) ………… Commissions and Costs at 8%
============================================
$273,100 ………. Net Gain (Loss)
============================================
138.0% ………. Gross Percent Change
130.0% ………. Net Percent Change
4.2% ………… Annual Appreciation
Cost of Home Ownership
——————————————————————————
$499,900 …….. Asking Price
$17,497 ………… 3.5% Down FHA Financing
3.46% …………. Mortgage Interest Rate
30 ……………… Number of Years
$482,404 …….. Mortgage
$124,497 ………. Income Requirement
$2,155 ………… Monthly Mortgage Payment
$433 ………… Property Tax at 1.04%
$0 ………… Mello Roos & Special Taxes
$125 ………… Homeowners Insurance at 0.3%
$503 ………… Private Mortgage Insurance
$0 ………… Homeowners Association Fees
============================================
$3,216 ………. Monthly Cash Outlays
($319) ………. Tax Savings
($765) ………. Equity Hidden in Payment
$19 ………….. Lost Income to Down Payment
$145 ………….. Maintenance and Replacement Reserves
============================================
$2,296 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$6,499 ………… Furnishing and Move In at 1% + $1,500
$6,499 ………… Closing Costs at 1% + $1,500
$4,824 ………… Interest Points
$17,497 ………… Down Payment
============================================
$35,319 ………. Total Cash Costs
$35,200 ………. Emergency Cash Reserves
============================================
$70,519 ………. Total Savings Needed
The property above is available for sale on the MLS.
Contact us for a comparative market analysis, a cost of ownership analysis, or information on how you can make an offer today!
30 Responses to “realtors who are assholes sell more homes”
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Let’s face it….. as technology continues to advance, the need for over-paid ‘middlemen’ diminishes accordingly. That means the sooner an exhorbitant, out-dated commission-based model is replaced with a flat-fee model; (ie., $3500 to $5000max per closed deal), the better, as more sellers will decide to keep them around.
In other news….
Despite 15yr money available @ 2.96 and 30yr @ 3.41 and jumbo’s @ 3.85, the SA MBA purchase index decreased 8.3% from a week earlier
“…exorbitant, out-dated commission-based model is replaced with a flat-fee model…”
My across the street neighbor from 20 years ago was a rep for a company which I believe was called “Help U Sell”, which offered vastly reduced selling costs. (I believe they were flat fee based).
Don’t see them around anymore.
As noted, technology can/has replaced much of the value added by Realtors of 30 years ago.
Having said that, why do they [Realtors] even exist in the present form?
Does the NaR, CaR have a death grip on R/E transactions?
To me [as a R/E outsider who just wants to buy a reasonably priced new home], the Nar, Car seems to operate like some sort of legal mafia operating on the cusp of extortion. Am I wrong?
The Internet will cause realtors to lose their grip on the industry, but the fact that they survive at all shows they are adding some value to some transactions. The real estate sale is still a complex transaction, and so far, nobody has developed a viable business model to make the transaction easier at much lower cost. When that happens, agents will find it much more difficult to make a living.
“The real estate sale is still a complex transaction”
Boy, that’s an accurate statement. There are some many more disclosures that 20 years ago. Meth labs? pot houses? Hazardous and flood zones? military zones? high fire zones? high equity withdrawal zones (just kidding) Now, if you are a seller and don’t disclose the buyer can turn around a sue the seller. I even know of a few agents that gave up listings, because the seller was lying the conditions of the house.
Now, I don’t know if “Help you sell” provides these discloses you can give it to the buyer. So, it might not be as bad.
I really believe the ultimate goal is not to protect the public, but job security.
Since NAr lobbying expenditures run about $17-22mil per year, the first flat-fee based firm that is able to ‘pony-up’ will be allowed to exist/maintain.
They control the MLS (which all the RE websites pull info from).
If you are a broker or agent, you need MLS access because everyone uses it.
If you want MLS access, but dont want to become a Realtor, the fee to do this is much higher (and they make you pay for the other helpful services) than getting the “Realtor Discount Package”.
That’s how they keep agents signed up as realtors. they do offer valuable service, but they are full of BS when it comes to price predictions.
I pay the premium to get MLS access to avoid joining their organization.
Sorry brochacho, but you need to read beyond the headline.
If you remove the adjustment for Columbus Day, purchase applications INCREASED by 2% over the previous week and a mere 7% over last year.
LMAO!
Despite the fact that we’re 7 long years out from the previous peak + $trillions in subsidies-(welfare) + fed now spends $45bil per month buying down rates + fed spends $40bil per month buying mis-priced MBS + accounting fraud + bank/lender fraud + 3 buyer tax credits + principle reductions + 14 different loan mod schemes + an REO to rental scheme-(FHA denied LOL) + a rent to buy scheme + a massive banker-fabricated supply squeeze…. yet the MBA’s purchase-app index remains in the toilet. See for yourself……
http://confoundedinterest.files.wordpress.com/2012/10/mbapurch102412.png
Happy Trails
In the toilet is relative. You’re comparing to the largest RE bubble of our lifetimes. Interestingly, the demand has been steady for 2 years according to your chart, which doesn’t fit with your narative that applications are in secular decline. If you can’t win, spin.
Restricting inventory continues to work well for the banks.
Nine Out of 10 ‘Turnaround Towns’ Located West: NAR
The West is leading the nation’s housing recovery, according to a recent study from the National Association of Realtors’ Realtor.com.
When identifying the “Top 10 Turnaround Towns” for the third quarter of 2012, the association found nine of the top 10 are located in the West, and seven are located in California.
NAR considered changes in median list price, median age of inventory, size of inventory, and unemployment rate when determining the Top 10 Turnaround Towns.
The Top Turnaround Town in the third quarter was Oakland, California, up from the No. 2 spot in the second quarter. This is the first time Oakland has taken the lead.
The No. 2, 3, and 4 spots were also taken by California metros: Sacramento, San Jose, and San Francisco, respectively.
Seattle-Bellevue-Everett, Washington took the No. 5 spot with a 13 percent year-over-year rise in prices and reductions in inventory and age of inventory.
The bottom of the Top 10 list was rounded out by Bakersfield, California; Phoenix-Mesa, Arizona; Fresno, California; and the one metro outside the Western region, Miami.
Miami slipped from the No. 3 spot in the second quarter to the No. 10 spot in the third quarter.
Median listing prices in Miami increased 14.57 percent from the third quarter 2011 to the third quarter 2012. At the same time, inventory in Miami dropped 22.37 percent.
House flipping is increasing in Miami, contributing to its recovery. The number of houses flipped in the first half of this year is up 25 percent over the first half of last year.
The average profit for individual house flipping in Miami is $38,943, according to NAR’s research.
While foreclosures are falling in most of the Top 10 Turnaround Towns identified by Realtor.com, Miami continues to see high foreclosure rates, with one in every 229 homes facing foreclosure in Miami-Dade County in September.
There they go again with the word ‘recovery’. I think it was a typo for ‘re-inflation of a bubble via market manipulation.’
Since I started checking the Oakland numbers a few months ago (at Realtytrac and Redfin), here’s what I’ve found (for SFRs only, all price ranges)
REOs: approximately 1,100 – 1,200
REOs for sale: approx 40-80
Preforeclosures: approx 1,100 – 1,200
Scheduled for auction: approx 800 – 1,000
Except for a few blips here and there, the inventory of SFRs for sale has been declining for the past year and a half, and is now more than 50 percent below last year.
Call that a turn-around?
Your definition of recovery is closer to reality. Frankly, I am amazed at how successful lenders have been as a cartel. Most cartels simply aren’t successful at restricting supply because there is too much incentive to cheat. Perhaps now that prices are heading back up, we will see more cheating as cartel members step up their liquidations. That’s the only way I see more product coming to the market any time soon.
The real cartel is the Obama administration, the CFPB, and the 50 state AG’s. This is why you aren’t seeing any “slip ups” by the lenders.
Interesting thought. If the government is behind the cartel, that would explain why they have been so successful at controlling supply.
Banks are starting to whine about the consequences of the federal reserve actions designed to bail them out.
Low Rates Pummel Banks
Superlow U.S. interest rates are squeezing bank profits, complicating the industry’s nascent recovery from the financial crisis.
An important gauge of lending profitability, known as net interest margin, has dropped to its lowest level in three years. The measure tracks how much banks earn when they borrow from depositors and then lend or invest those funds.
The squeeze is the flip side of the Federal Reserve Board’s four-year effort to revive the sluggish U.S. economy, with near-zero short-term interest rates and repeated rounds of bond purchases that aim to reduce long-term rates as well. Ten-year U.S. Treasury yields hit 1.43% in July, their lowest level since World War II.
Banks will be forced to consider new ways to make money by changing the services they offer, industry observers said. At the same time, higher costs for banking services could push more Americans out of the financial system altogether, adding to the millions of customers viewed by regulators as under-banked, or lacking access to affordable financial services.
“The prolonged low-interest rate environment is transforming the banking industry from savings and loans to service and loans,” said Dan Geller, executive vice president of research firm Market Rates Insight in San Anselmo, Calif.
Banks are getting very whiny. The Too Big To Fail banks are the only industry not allowed to have loses. How stressful can it be?
I guess once you can’t lose money, they stress about how much they are making. Next we will hear them whine about the tightening margins. They currently enjoy fat margins on loans because treasury rates are very low relative to mortgage rates. At some point, that will tighten, and bank profits will fall further.
Zillow: We’re likely seeing home values fall back into the negative range in some markets
National home values in the third quarter experienced their biggest increase in more than half a decade, according to Zillow.
Home values in the United States rose 1.3 percent from the second to the third quarter, marking the fourth straight quarter of increases, Zillow reported. The quarterly rise is the biggest increase since March 2006, when home values rose 1.5 percent.
In addition, the Zillow Home Value Index (ZHVI) rose year-over-year, increasing 3.2 percent to $153,800, according to Zillow’s third-quarter Real Estate Market Reports. The last time national prices were at a comparable level was in January 2011.
Zillow’s Home Value Forecast predicts more growth, albeit at a slower pace. National values are projected to increase 1.7 percent by the third quarter of 2013. Of the 253 markets covered by the forecast, 183 are believed to have hit bottom, giving them nowhere to go but up. An additional 41 markets are expected to hit a bottom in the next year.
The recovery pace has been uneven across markets, however. As the summer buying season ended, many metro areas reported decreasing quarterly values.
For example, while Phoenix reported a banner quarter-seeing values rise 5.9 percent quarter-to-quarter and 20.4 percent year over year-the Atlanta metro didn’t fare as well, with values declining 2.2 percent from Q2 and 4.8 percent year-over-year.
“We’re likely seeing home values fall back into the negative range in some markets due to the close of the traditional home-buying season,” said Zillow chief economist Dr. Stan Humphries. “While that doesn’t mean the recovery has come off the rails-in fact, most markets have hit bottom-it does present a confusing environment for customers. Looking forward, we expect to see home values bump along the bottom for some time, before increasing at a slow and steady pace.”
Zillow reported that overall, more metro areas experienced home value declines in the third quarter than in the second, with 52 percent showing declines (compared to 34 percent in Q2). Based on this data, Zillow forecasts a “saw-toothed bottom to the housing market, in which home values will log smile rises and falls before returning to consistent monthly home value appreciation closer to the long-term historical average.”
On a state level, 17 of the 41 states covered by Zillow showed home value declines from the last quarter. Their ranks include New Hampshire, North Carolina, Ohio, Virginia, and Wisconsin-all battleground states the upcoming presidential election.
“The positive news on a national level is dominating headlines, and perhaps that is why we haven’t heard either presidential candidate talk in-depth about housing,” Humphries said.
“However, despite the national recovery, we are still seeing significant polarization among markets, and more than half of battleground states are still experiencing home value declines. This demonstrates that for many pivotal voters who will decide the upcoming election, housing is still a key issue, and one that should be addressed by the candidates.”
Some RE agents off real services such as disclouses, pricing the property correctly to sell, open house, showing, screening of houses, neighborhood analysis, moving the transaction along. I’ve had Realtors show said “this is a nice looking home, but it ‘s not in the right school district for your son. Look elsewhere.” A few have gotten to know me and what I was looking for and made the sale. Had some bad ones too which resulted in no sale. Not to defend them all, but there are some good, average and bad. Too many of the sell by owner had pie in the sky prices. Each of the agent usually gets 2%, 1% goes to each brokerage house. The agent also needs to pay for monthly fees to the brokerage house. I think the fees are too high in the high priced area and about right for the mid-west where house move slower and takes more work to sell.
IR, I would disagree that the “owner” would of been financially better off not taking the loans. The equity withdraw was tax-free profits in non-inflated money. The value of free squatter’s housing was also not taken into consideration nor the cost of continued loan, upkeep and tax payments. If they saved the equity withdraw and what would of been payments, they could do a cash purchase of another house in more in-land areas of CA. Or they can use the cash to rent for 4 years, then use the balance for a 20%+ downpayment house loan.
Sign,
Another Wage Slave working to payoff squatters’ and banksters’ debts.
There are good agents, but they are harder to find because the profession is overrun with bad agents with no ethics.
You’re probably right about the previous owner. He was certainly rewarded while he owned the property. Unfortunately, like most Ponzis, he likely blew it all and has nothing to show for it today other than bad credit and a burning desire for another home ATM machine.
He must not be like the shuttle bus driver who was bragging that with the cash from the equility withdraw, his wife purchased the house as a short sale (possible via a middle man). Total out of pocket cost for the house was $50,000 on a $300,000 house. Bank should not allow such a sale to a close relative.
[...] writes: The most odious characteristic of the National Association of realtors is how they seek to [...]
These are the stereotypical realtor qualities:
Fancy car (showing “success”), good looking, able to squeeze the other party for an extra $20K, agressive, etc.
These are crap. Most of these agents are windbags with zero understanding of what is driving prices. Most of them are leveraged to the hilt (personal/business/real estate”investments”) and their leased mercedes hides their dire financial position. John McMonigle would be the extreme example of this. He is good at selling/marketing/networking/bullshitting; but is a complete idiot when it comes to speculating/investing/economics (unless he has hidden his true assets and they are producing enough cashflow for him to no longer need to work).
A professional real estate agent helps a client realize the difference between speculation and investing. A real pro can call the client and say, “Bob, the appreciation has just about topped. Any properties you are holding for speculation should be sold in the next 6 months, pay your taxes and take your profits. If you hold on to your speculative properties, the poor cash flow position is going to eat you alive.”
or “Better to buy a 4unit with 30yr fixed financing than a 5unit with 5-10yr fixed financing because you take on unneccesary risk of refinancing into a high interest rate environment and decimating your cash flow.”
A pro can tell a client, “this is a huge mistake, if you do this, you are going to get smoked.” because the long term success of the client is in the agent’s best interest.
A professional will not let a rookie buyer use interest only or neg am financing.
A pro will tell the client “a house is a liability until it produces income or is owned outright. ”
Setting realistic expectations and educating clients while helping them avoid bad deals or the tricks/pitfalls of shady real estate agents/sellers are worth every penny of commission to a true expert and professional.
My $.02.
my friend’s mother is a long time realtor. she grosses $700K/yr and i like to pick her brain everytime we hang out.
She has ZERO understanding of mark-to-fantasy accounting, the unintended consequences of all the subsidies, or what is driving this lie of a “recovery”.
She is too busy selling to even care.
These are the type of people advising our society on their RE decisions.
This same situation can be applied to the stock market, economy and politics. Our situation is dire because of this.
You have a keen insight on the deeper workings of our economy and human nature. I always appreciate your comments.
FHFA is trying to reconcile Fannie and Freddie disparate treatment of strategic defaulters:
FHFA IG Raises Issue of Freddie Mac and Strategic Defaulters
The report, posted on the IG’s website Wednesday, notes that Fannie “has articulated its intention to focus on strategic defaulters” while Freddie has yet to establish a policy “with regard to pursuing deficiency collections” from such mortgagors.
A strategic defaulter refers to a borrower who has the financial wherewithal to keep paying his mortgage but has decided not to because the property is so far underwater that he fears the value will never return. This class of borrowers can include real estate investors and vacation homeowners.
About two years ago Fannie Mae signaled its intention to take legal action against borrowers to recoup the outstanding mortgage debt from borrowers who strategically default.
At deadline a Freddie Mac spokesman had not returned a telephone call about the topic.
The IG report is not on strategic defaulters per se but focuses on the Federal Housing Finance Agency’s oversight of GSE efforts to recover losses from foreclosure sales. The study notes that losses suffered by Fannie and Freddie on deficiencies “may potentially be offset by, among other things, repurchases and mortgage insurance.”
In 2011, vendors working for the two pursued 35,231 deficiency accounts, with a combined value of about $2.1 billion. “Of this amount, vendors recouped approximately $4.7 million—about 0.22%,” inspectors concluded.
“In a future audit, FHFA-OIG plans to assess the enterprises’ different practices and their relative effectiveness in recovering deficiencies,” the IG notes.
The IG says the regulator can “better supervise” the GSE’s deficiency management by obtaining “data and providing guidance.” It adds, “The enterprises manage their foreclosure deficiencies in a challenging environment. For example, the enterprises must navigate diverse legal regimes to pursue deficiencies. Although borrowers make contractual commitments to repay their mortgage loans, individual state laws can diminish or effectively eliminate the enterprises’ ability to recover any shortfalls arising from such commitments, even when borrowers can repay the balance of their mortgage loans.”
“This class of borrowers can include real estate investors and vacation homeowners.”
If they go after everyone who walked from a vacation property, a lot of people are going to get crushed. Every once in a while I go look at real estate in Wisconsin Dells. There is a glut of overpriced condos on the market, and none of them are selling. By the time they clear out the debris in vacation home communities, prices will be 60% to 80% off the peak. Most of these properties should never have been built.
They really should be pursuing deficiencies against all defaults, not just what they believe to be strategic defaults. After all, that is our money sitting out there. Anything they do collect can be used to repay the bailouts that much quicker. BTW, their recovery amounts seem small but that is about par for this type of debt collection. If they were to pursue deficiencies on a larger chunk of their defaults, it would recover some serious dollars. 35,000 accounts isn’t very many for entities as large as the GSE’s.
Right now I believe it’s .22% on the collection of bad debts. I need to find the Housingwire article.