The “F” Word in Real Estate – Part 1 (2013)
The “F” word?” He said. “You can’t publish that.”
“Fiduciary,” I replied.
“Fiduciary? What’s that?” he said.
“Fiduciary duty of utmost care, integrity, honesty and loyalty…” Remember that line? Lost in the small print in the agency disclosure? Maybe some of us remember; we certainly have forgotten what it means. We have forgotten who we work for.
The U.S. financial structure has become a hierarchy of scandals. Real estate agents marched buyers into houses well beyond their means. Loan brokers used the house price to determine the income stated on the loan application, and white-out for the rest. Appraisers fabricated their “opinion of value.” We joked that M.A.I. meant “made as instructed.” Mortgage companies bundled these toxic loans. Wall Street packaged the bundles in confusing investments like derivatives, manipulated ratings and investment insurance, and swindled the world. And everyone relied the fact that ‘U.S. real estate values always goes up.’ The “F” word had become “fraud.” The rich get richer, the poor go homeless, and everyone in between picks up the tab for both ends.
Blame the government. Our government was originally set up with a system of checks and balances. Sure. Our tax payment checks going into the balances of Big Money. Did anyone see what was going on? Sure, they all did. But they were too busy playing games of lobbyists, pork barrel, and ear marks. TARP, HAMP, HAFA? The government is smoking HEMP and making me LAFA.
Our judicial system is supposed to protect us. The “justice” system is a game of interpretation, manipulation, and exploitation. A game played by attorneys, overseen by judges (attorneys), and the rules are made by politicians (attorneys), and all simply work for the highest bidder. There is no justice in the justice system. No fairness. No right or wrong, truth or integrity, just a war zone for professional soldiers with no accountability. Shouldn’t the truth simply be the truth?
The banks will sort things out. Banks are hording bail-out money to pay their own salaries and bonuses. Banks are no longer in the banking business. They buy and sell paper, gobble up smaller bankrupt banks at cents on the dollars, then get reimbursed from the FDIC–all in the name of “keeping people in their homes.” They bundle up loans and homes and sell them off with inside deals to their buddies at huge discounts for them to flip for a profit.
“The market will regulate itself,” Alan Greenspan. Read Michael Lewis’s latest book “The Big Put” on how some clever bonds traders smoked the engine in the world economy. You won’t feel so bad about yourself next time you blow a couple billion in cash.
DRE will regulate us. ATTENTION REALTORS: DRE HAS LEFT THE BUILDING. I recently took my 45 hours of continuing education online. It took me, in all, about 45 minutes. When I exposed this to other agents, they didn’t moan at the demise of our profession, they asked me for the website address. To test this, I took a friend’s license number, my visa card, and my email address, went through the test, and handed him his continuing education credits.
Agents are professionals. Agents take listings completely out of their area of knowledge. Offers for buyers are written on property the agent has never seen. Agents choose between getting paid and integrity daily.
Certifications. Being enticed to (1) gain entrance into the cult of REO agents, I took the foreclosure specialist and short sale expert courses. (2) I didn’t expect to learn anything. (3) I knew I could greatly cut the time with the online course over the normal 2 day courses. Two out of three ain’t bad: I didn’t learn anything; the internet courses took only a couple hours; I didn’t get any REO leads.
Let buyers and sellers beware. We already let them search our big treasure box: the MLS. We bury them in disclosures to limit our liability. Buyers rode the wave of real estate speculation with no ‘skin in the game.’ They took cash advances on their credit cards to pay their mortgages. Then they took out equity lines to pay off their credit cards. But, bless their hearts, people still need the help of a real estate professional. We better have something to offer besides a lock box key and a tank of gas.
But what can we do? If we want things to work, fixing them is not enough. We need to stop breaking them. The problem started with us. Without sub-prime deals, there would have been no subprime loans. We need to start the solution. Tune in next month to find out how to save the world in 9 easy steps that you can do at home.
Michael Williamsen is a real estate broker and free-lance writer in Marin County California, on the “Golden side of the Gate Bridge.” Michael is often radio talk shows’ guest for his over-the-top direct approach to current real estate issues. This article comes in response to the “Real Estate Hangover of 2009.”