Sloppy real estate deals surge in hot market
|June 30, 2004|
New agents, lenders, appraisers all blamed
By Samantha Peterson
Real estate professionals are seeing more sloppy deals in this hot housing market than in the past, according to the overwhelming majority of respondents in an informal Inman News poll.
The latest tally of survey results found 86 percent of respondents said they'd seen sloppy business practices increase. But their ideas about whom to blame for such dealings varied widely, and they pointed fingers at everyone from newbie agents to lenders to appraisers.
Some didn't try to place blame, and instead simply warned that the current situation smacks of a boom-and-bust cycle.
"House prices have been going up $10,000 a month in New Jersey," wrote one person. "I sold a home three years ago for $109,000, it was just resold for $320,000!!! Talk about inflated home prices! As a real estate broker for the last 20 years, it reminds me of what happened in 1989 and 1990…for those who can remember, it was a crash."
"I've been a real estate appraiser for the past 29 years and I can feel the sky is just about to fall," wrote another person. "It's just a matter of time before the bottom drops out again. It happened in the late '70s, the late '80s, but we missed the late '90s."
Laura Turner, operations manager of Alliance Title Management, put it this way: "It doesn't take a true expert to discern where all this is heading and heading fast."
Several blamed untrained newcomers for much of the shady dealing out there now.
"Ease of entry into the business and lack of training and management are the big problems," wrote one respondent.
Another, with 32 years' experience, wrote, "The good agents with longevity in the business are following the right business practices. I do see many agents that are so hungry to get the commissions that they are willing to do questionable business practice." Another's response to the main question of whether there are more sloppy deals out there now was simply, "And many more newer agents are making them."
Deirdre Felgar, broker of Realty America wrote: "As the real estate market here in Las Vegas has boomed, everyone and his brother got a real estate license… and since, in Nevada, it does not even require a first-grade education, there are some real shenanigans going on with folks who only got their license to make a 'fast buck'…they do not care about the industry and even more so do not care about the public…it is horrible! In many cases, the public cannot distinguish the real professionals from the bad agents, and since real estate agents deal with the largest investment most people make and in some cases with their life savings it is a real shame to see this happening!"
Others saw lenders as the culprit. As one person stated, "banks have closed their eyes."
"I am seeing more mortgage lenders encourage real estate agents, buyers and sellers to engage in double contracting," another wrote. "Greed and ignorance are only part of the problem. Federal politicians continue to pass laws claiming to protect the public, but in fact are not enforced, such as RESPA (Real Estate Settlement Procedures Act). In addition, the federal government encourages lenders to ignore required underwriting standards in order to increase home ownership among minorities."
Tari Jacobs with CRS Prudential Select Properties in Columbia, Ill., wrote: "We are worried about the 100 percent loans and the refis that appraised for more than the house is worth. We feel there is a great chance of a large amount of people will lose their homes. I have been a Realtor for 27 plus years and am worried about the rising interest rates and the deflation of property especially in the less expensive areas."
Ken Fisher with Ken Fisher & Associates spared no one, including home buyers, in his response.
"Property flipping, poor appraisals, stupid buyers, aggressive lenders, extremely poor rehabs, more stupid buyers, overpriced new construction, builders who own their own appraisers and mortgage companies (are) screwing everyone. The beat goes on in Indianapolis, Ind.," Fisher wrote.
He wasn't the only one to mention home buyers.
A real estate investor from Virginia wrote: "I see buyers foregoing important home inspections, appraisals, loan contingencies. Bidding wars, greed of the sellers. To me, this is so similar to the stock market behavior in the 90s. Real estate agents and other related companies like settlement companies, appraisers, etc., are lacking common courtesy. It's all about the money now. They all have so much business they don't care if you are happy or not. I relish the day when the market changes and Realtors return your calls and e-mail. Inspectors, title companies, loan officers give you the service they should."
And many mentioned property flipping as a serious problem they believe has increased in frequency recently.
Jim McGee with Keller Williams Executives in Highlands Ranch, Colo. wrote: "There are many investor/speculators in the market who want to flip without adding to value in any way. When these properties are held for very long in a slowing market there will be a problem because many of these "investors" are grossly undercapitalized."
Appraisers and title companies didn't escape notice either.
"I am a newcomer, but concerned as I hear on a regular basis that buyers are willing to pay over and above appraised values. Likewise when lenders promote 125 percent loans," wrote Phyllis Borchardt with ZipRealty. "Appraisals also concern me. I get the impression that appraisers too many times work with the Realtor, not the market. It sounds like we are headed in the wrong direction."
Turner, who works for ATM, which forms and manages other title companies, wrote that she has seen many changes in the real estate closing field over the past 17 years. But, she wrote, "I, nor my colleagues, have ever witnessed anything like the free-for-all that has occurred over the last five-plus years." She said she has witnessed many errors due to lack of experience or overworked staff members and "fly-by-night" title companies.
"To make a bad situation worse," she continued, "the seemingly vertical rise of equity in real property, the much higher loan-to-value ratios, which can exceed the appraised value of a home …and the gap period of recording instruments all combine to create a market teetering on the brink."
Copyright: Inman News Features