Beware of Realtors in U. S. Housing Markets
Essay by Frank Zahn
Managed, manipulated, and exploited by real estate companies and their attorneys, swarms of realtors hover over housing markets in search of opportunities to feed off the equity of homeowners. The legitimate tools of the trade are providing information, showing property, resolving conflict between buyers and sellers, and creating paperwork that facilitates exchange. The illegitimate tools are engaging in as much flim-flam, misrepresentation, and lying as necessary to seal the deal and collect the commission.
Examples of the latter abound. In Vancouver, Washington, realtors have been known to inflate a seller’s price expectations so they can obtain the listing, and they are prone to exaggerate market conditions either favorable or unfavorable to buyers and sellers—whatever it takes to entice buyers and sellers to come to an agreement. Realtors are also prone to trick unsuspecting buyers into signing exclusive contracts so that the buyers can only buy through them.
In Camarillo, California, and Henderson, Nevada, most realtors slip a buyer's agreement to pay a commission into the purchase offer. Nothing is said about paying the commission before the buyer is primed and motivated to buy a property. Of course, after the buyer's signature is secured, the realtor collects the commission from the buyer along with the customary commission from the seller.
In Teaneck, New Jersey, and Franklin, Tennessee, the realtors and their attorneys have set up market conditions so that buyers require attorneys to represent them. And realtors and attorneys always make sure their self-interest rules prevail when real estate legislation is proposed in state capitals. Buyers and sellers may be voters, but they are not in a position to bribe state legislators with large campaign contributions, gifts, and other perks, and they do not have lobbyists representing them.
In general, realtors everywhere delight in playing one buyer against others without providing evidence there actually are multiple purchase offers. The higher the price, the higher the commission.
Realtors in most states are prone to provide information about closing costs to buyers and sellers that are lower than they are once title companies become involved. In addition, they are prone to list square footage greater than actual square footage of a property so as to justify higher asking and offer prices. Of course, realtors deny this, saying that listed square footage in county records and other sources are often inaccurate—below actual square footage. It’s interesting to note that realtors never list square footage lower than those in county records and other sources.
All too often, realtors spend more time creating paperwork that absolves them of legal responsibility when engaged in flim-flam, misrepresentation, and lying than they spend creating paperwork that actually facilitates exchange. A buyer's offer can quickly become on balance a realtor's offer, one designed to protect and serve the realtor with the buyer's protection and service secondary. Examples are exclusive contracts between buyer and realtor and statements absolving realtors of responsibility for not telling buyers about inspection contingencies and home warranty insurance. And market conditions are designed by self-serving realtors and their real estate firms so that buyers and sellers have no recourse but to comply.
Of course, realtors argue that all the gamesmanship is justified because it serves the interests of buyers and sellers. Isn’t it odd that in most states, exchange takes place without attorneys, and increasingly, for-sale-by-owner is becoming a preferred means of offering properties for sale? The truth is that buyers and sellers can and do agree on terms without realtor involvement.
The Internet provides useful housing information for buyers and sellers and forms that facilitate offers and counteroffers to purchase. Buyers can and do arrange their own financing. Title companies that handle closings and mortgage lenders that provide financing are sufficient to keep the process of buying and selling housing intact, effective, and legal without realtor involvement.
The threshold for entering the job market for realtors is low, so it attracts people with little education and skill. Only twenty percent of those licensed and employed by real estate firms sell enough property and extract enough equity from homeowners to remain in business. Desperate for sales and commissions, the remaining eighty percent are more prone than the twenty percent to engage in flim-flam, misrepresentation, and lying.
The only way for buyers and sellers to get a fair shake for sure is to become informed about the process of buying and selling property. Realtor information, guidance, and paper shuffling are helpful, but they are all too often biased in favor of realtor self-interest, which is simply not the same as that of buyers or sellers, even though realtors claim to represent them. And good advice is to never sign anything that is designed primarily to protect realtors or that acknowledges forfeiture of legal rights.
Be advised that realtors are required by law to take a buyer’s purchase offer to a seller under terms stipulated by the buyer and a seller’s counteroffer to a buyer under terms stipulated by the seller. Realtors merely provide convenient forms, which may be modified to suit a buyer and a seller, subject to existing real estate law as distinct from the self-serving policies of realtors and their real estate firms.
And let me say that in addition to the adverse effects of realtor flim-flam, misrepresentation, and lying on buyers and sellers of housing, realtors are as much culprits in the recent housing market debacle as overzealous mortgage lending institutions; culpable members of Congress, including former Congressman Barney Frank and former Senator Chris Dodd; government regulatory agencies; and irresponsible borrowers who were ill-equipped to pay for the housing they purchased.
Realtors put buyers in touch with more liberal and perhaps dishonest mortgage lenders. As mentioned earlier, they initiated real and imaginary bidding wars between buyers, and talk up expected increases in housing prices, which urged buyers to buy now before prices climbed higher. As a result, prices, in fact, climb higher, often resulting in inflated housing markets. The worst example of that in recent U. S. history occurred during the housing bubble at the turn of the century, and when the bubble burst, the economy experienced the Great Recession—the greatest downturn since the Great Depression of the 1930s. Realtors helped to create that catastrophe.
The lesson in all this is that although realtors perform a legitimate function in housing markets, their flim-flam, misrepresentation, and lying have been costly to not only buyers and sellers in housing markets but to those in the rest of the economy who as a result of the housing market bubble and burst lost their jobs, their home equity as prices plummeted, and their homes to foreclosure.
Copyright © 2017 Frank Zahn.
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