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Agents: What is Their Role?

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Posted On: 05/02/2012

QUESTION:

In your comments regarding strategic walkaways you say that a contract is a contract, the collateral is the property, and if a borrower does not pay, the lender can get back the house. What has been the role of real estate brokers and salespeople in the mortgage meltdown?

ANSWER:

Let’s look at the role of real estate brokers in a model transaction.

First we have the “listing” broker, who represents the seller. The seller wants as much as possible from the transaction. If Smith offers $300,000, and Jones offers $325,000, all things being equal, which offer would you take? In terms of financing, the listing broker represents the seller, not the buyer, and only wants to assure that the purchaser can actually go through with the deal. How the property is financed is determined by the purchaser and lender.

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Second, with a “buyer broker” the client is the purchaser and the broker is required to get the best price and terms for the buyer client. A buyer broker also wants the purchaser to get a pre-approval or pre-qualification from a mortgage lender to assure that the buyer will not make an offer on a property that cannot be closed because of insufficient finances. As to how a property should be financed, which loan to prefer, that continues to be a matter between purchasers and lenders.

I would like to see the system changed by expanding buyer broker obligations.

In a 2006 speech to the nation’s real estate regulators, I said the scope of engagement for a buyer broker should be expanded to include a strong explanation of the lending system, especially toxic mortgages and their potential for default. “Consumers,” I said, “should be plainly told that interest rates can rise, that increases in home values cannot be guaranteed, that past performance does not assure future results and that information provided for stated-income (no doc) loans must be verifiable.”

Peter G. Miller is the author of The Common-Sense Mortgage and a veteran real estate columnist. Have a question? Please write to peter@ctwfeatures.com.

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