Housing Bubble Help For Victims Of Greedy Real Estate Agents

If you were buying or selling a house (or in my case, both) in the last few years, you are familiar with the term ‘housing bubble’. If you are trying to sell a house today, you are most likely feeling the effects of its ‘burst’. When you do a Google search (i.e. “define: housing bubble”), the resultant page points you to a wiki page that says that "it is often claimed that a real estate bubble is difficult for many to identify except in hindsight". Wow.

American homeowners are feeling the effects of a housing bubble burst now, but the concept that the bubble would not last forever has been out there at least since May 31, 2005, when we were warned of the housing bubble's potential collapse (or 'burst') on The NBC Nightly News with Brian Williams in a story by Chief Environmental Correspondent, Anne Thompson. The concept that it would not last forever was broadcast to tens of millions of households in America, yet in the wiki definition, it is difficult to identify except in hindsight.

So who, or what, is responsible for the housing bubble? Why did it occur? I did a web search to see what other people were thinking about the subject. I found that people are talking about the housing bubble burst blaming the lending industry, the Federal Reserve, the government, zoning laws, teacher’s unions, and even the weather. But I found little discussion about what caused the actual housing bubble itself in the first place. And so I ponder…

The first time I heard the term “housing bubble” was from a real estate agent in early 2004 as I inquired about purchasing an investment home. At that time mortgage interest rates were low, mortgage brokers could create special programs to fund mortgages, and much of the real estate around me was being listed at continuously higher prices. Real estate investors were in a house flipping craze and new homebuyers were qualifying for home loans at record rates. The housing market was a real estate agent’s dream. My real estate agent, anxious to make a quick sale, told me that I better not wait too long before I decided whether or not I was going to purchase the property I was interested in. She told me “the housing bubble has been blowing up for a couple of years and it won’t be long before it bursts.” I gave her a slightly confused look as she continued, “If you got in when the getting was good, you invested in property between 2002 and 2003. Investments were cheap to buy and easy to sell. The appraisers are helping us out with home values and the lenders are funding the loans. Homes are being sold at good prices today, but they are not going to hold their value for too much longer. The bubble is bound to burst. All good things must come to an end.”

A real estate agent is the first to introduce me the ‘housing bubble’ term. So is it possible that real estate agents also had some hand in causing the whole housing bubble effect in the first place? When real estate agents sell homes, they are paid a commission. Although the average commission is currently 5%, it is down from 6% which was the average rate from 2002 through 2005. The higher the price of the home that sells, the more the commission that is paid. According to a recent study by Standard and Poors, home prices increased the most between January 2004 and December 2005. Now remember, lenders are lending more money to more people. A 6% commission for a home priced at $249,000 is $14,940. A 6% commission for the same home priced at $279,000 is $16,740. The difference is an additional $1,800. If loan funding is not an obstacle, and the sale requires the same amount of paperwork, why wouldn’t real estate agents advise sellers to sell high in order to make more commissions?

If you think about it, real estate agents always advise sellers of listing prices, and most times those listing prices are based on the current state of the lending industry. If agents are noticing that more borrowers are being approved to borrow more money, they are going to encourage sellers to sell high. Of course, they will tell the seller that they can “take advantage of all the equity in the home” by selling high, but in the end, the higher the sales price, the higher the commission. Do you remember between 2003 and 2005 when becoming a real estate agent was a booming career? Now many licensed real estate agents that were being greedy are forced to find “day jobs” because homes are not selling as frequently, or for as high a price as they used to. I believe greedy real estate agents definitely contributed in a big way to the whole housing bubble, and now they too are feeling the effects of it's 'burst'.

Fortunately, home loan interest rates have returned to low, “pre-bubble” levels and home prices are not as high as they used to be. It is a good time for new homeowners to take advantage of low loan rates coupled with lower home prices. It is also a good time for current homeowners to save money each month a loan modification, or by refinancing their mortgage for a lower rate or better terms. And finally, if your home is valued at a lower price than what you paid for it and you are not ready to move, get your home reassessed. You may be entitled to a reduction in your property taxes based on value of the new assessment.

For help refinancing your mortgage, visit http://www.lowratesearch.com/low_refinance_rates.html.

For help getting a mortgage loan modification, visit http://www.lowratesearch.com/loan_modification.htm

I'm Ken and I'm here to help.