Hovanian, the uber-desperate homebuilder, is now bribing real estate clerks with a sickening 16% co-broke offer (aka 'payoff', 'bribe', 'payola', 'incentive', 'spiff', 'grease', 'commission', 'client-screwing-incentive').
Good god I can't believe this is legal. In addition, this is pure 100% mortgage fraud, as the home is knowingly overvalued and overappraised by 16%, ESPECIALLY if HOV is arranging the financing for the sucker (oops, I mean 'buyer').
So on a $300,000 house, that's a $48,000 cash bribe for the real estate clerk to steer their unsuspecting and trusting sheep to a HOV house vs. one down the street with the standard commission agreement.
This also means the appraisal would be overstated by $48,000, that the buyer missed out on a $48,000 discount, and that real estate clerks truly are whores and will do anything for the money.
This is beyond the pale, disgusting, corrupt and immoral. The Senate hearings and REIC regulation can't come soon enough.
Nice work twist over at HousingDoom.
January 17, 2007
Blatant REIC bribery and corruption at the expense of future homedebtors exposed
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46 comments:
They do this and the incentives because they don't want to lower the price and screw up the comps which would hurt their ability to sell any other homes. It's all about deception.
It's only sickening and disgusting if they don't disclose to the prospective buyer that they would get a fat commission for the sale. But why do I get the feeling that most of them would do just that.
Over 10% in our State and the RE commission wants to know (in writing) the special circumstances involved in the transaction. Meaning, it's normally considered a fraudulent transaction above 10%.
16% compared to a typical new home 2% co-op fee IS odd.
The homeloaner lost more than 48K as they have to finance it over the life of the loan.
This turns my stomach. And Realtors wonder why people are turning against their 'profession'.
Realtors are supposed to be 'agents' with a fiduciary relationship to their clients - they must represent their clients interests above all else. This scam shows that it is perfectly acceptable in their 'profession' for realtors to act against the interests of their clients, buyers. If the NAR had any self-respect they would be putting out a multi-million-dollar national advertising campaign decrying this practice, instead of trying to trick people into wasting their money on their commissions a la 'now is the perfect time to buy or sell a home'.
Scum.
Fight the REIC!
I thought real estate agents were supposed to be little old ladies and doctors wives who had nothing to do all day but show houses, and in reality if none sold or sold very slowly it didn't really matter because the didn't need the money anyway. In my area I think there are more agents than houses on the market(which is a lot). I see agents signs in yards and recognize them because they were somebodies sectetary last week. This profession is doomed, unless you don't need the money.
So KEIF,
I am confused. First you say realtors are starving due to a lack of bidness. Now you bitch like woman and complain they are getting paid too much.
Which is it man?
"The Senate hearings and REIC regulation can't come soon enough."
your faith in congress frightens me.
Find a real estate clerk that only charges a flat fee for representation and put the money back in your own pocket.
I doubt if you showed up at the sales office for the builder that they'll give the money back.
If you have to buy, try getting all the upgrades you can imagine included.
Or, simply offer $48,000 less.
Really, imagine if mutual fund companies offered stock brokers an extra incentive to steer the sheeple-speculators into their particular fund...nevermind, they already do!!!
Or, if 401(k) managers were offered an kickback to funnel the sheeps retirement money into a particular fund...nevermind, they already do!!!
See, Keith, the REIC is just following the lead of Wall Street. These guys aren't stupid; they know a batch of suckers when they see one.
Of course, the final revenge will be that of the class-action lawyers, who will gain hundreds of millions in settlements (for themseleves of course, while the sheeple-homedebtors get a $50 coupon for a free appraisal!) from suing the REIC.
I guess none of you Einsteins on this board ever work in sales and/or on commission huh? Is your job all about deception too?
If I buy a $40K car and a salesperson at the dealer gets a $1500 commission is my new car deceptive? What about if I buy $1M worth of software from Oracle and the sales rep gets $100K commission is my Oracle software a lie?
I don't get it. Real estate agents are just sales people. Why is it at all unethical or immoral to pay sales people a high commission when sales volumes are low? Isn't that expected?
While I always thought RE agents had delusional views of their own field, it seems that many here do too. They're not lawyers, folks. Don't expect an advocate because it's not how they're paid. They're not priests, either. Stop expecting some kind of moral standard.
When you go to buy a car, are you also disgusted and expecting government intervention when you notice the behavior of the sales person? Of course they talk you into the biggest car they can. Of course they rope the poors into paying felonious interest rates on MSRP. That is the nature of their existance. It's amazing that you all expect so much more from a "profession" that can be entered after a weekend home study course. Are they really the delusional ones or are you?
The probablem with the excessive commision is that it becomes a conflict of interest. The agent who gets the 16% co-op, is supposed to be working for you, not the sellers of the home. With these kinds of incentives, do you think your agent is going to steer you to a home down the street that is a better value?
"What about if I buy $1M worth of software from Oracle and the sales rep gets $100K commission is my Oracle software a lie?"
the seller is supposed to work for me and my interests, not the homebuilders. I know that Oracle is selling me oracle software. we don't know who the realtor is selling for.
Althought deception and under table agreements are wrong, if the realtor is looking out for their interests then you have no choice but to look out for yours.
This is more reason to offer 30% below asking for starts. If they say no walk away. Who cares. The seller is obviously desperate with the high incentives. (otherwise the house would have sold)
I personally couldnt care less if the seller offered the agent 100% of the sales price...as long as its a sales price "I" am willing to pay.
If the agent and seller only care about themselves then only care about you and whats good for you, no matter how much you get sweet talked.
Llamafornia said,,,
Good point. I hadn't thought of it that way.
Most agents are totally useless. The numbers don't lie. The top 10% make 95% of the money. Out of the top 10% only maybe 1/3rd actually know what they're doing.
Florida's population is now decreasing due to high housing costs. More people moved out of Florida than moved to the state in 2006. So 1,000 people were moving there a week, but more than 1,000 were moving out. The ones moving out are the middle class families who can no longer afford to live there. Thanks alot housing bubble.
http://tinyurl.com/2p8t4c
You know, Mr. Swann has this ad on his blog as well.
Yesterday.
Just being fair.
devestment sez: "I remember the waves of 1991. First the properties go back to the bank, then to HUD, then to HUD auction. Then for the next several years after that, no one cares about real estate."
Step 4: I step in and buy as many cash flowing properties as I can get my hands on and ride the wave back up.
Be calm when others panic, and panic when others are calm....
Have you people ever actually bought a house? You make it sound like realtor says buy this home and the buyer is like YES SIR!!
Are you clowns that gulible as follow the orders of a salesman like that?
Sadly, that 16% is more than the combined architect & engineering fees for designing the house. The don't get paid 16% and they don't get paid for the land.
Further, that 16% would add a hell of a lot of value if it were invested in quality construction materials.
In any event, it sure as hell doesn't add 16% value to the 'value chain'.
Butch: "Of course, the final revenge will be that of the class-action lawyers, who will gain hundreds of millions in settlements (for themseleves of course, while the sheeple-homedebtors get a $50 coupon for a free appraisal!) from suing the REIC."
Sad, but right on the money.
Lemme see here
An r/e clerk makes $48k for spending a couple of hours showing a client these new homes.
You dimwits make that much in a year if you're lucky.
Looks to me like jealousy is rearing its ugly head yet again.
"Why is it at all unethical or immoral to pay sales people a high commission when sales volumes are low? Isn't that expected?"
Because as a buyer the real estate agent is hired to represent your interests and should have a fiduciary duty to act in the best interests of the buyer above and beyond all else.
Alluding to the purchase of a car, people do not commonly hire representatives to assist them in the purchase of a car; if we did, such individual would have a duty to act in the best interest of their client.
Let's say you were a baseball player, and had an agent.
Your goal would be to get the biggest contract you could, with the team you wanted to play for.
But your agent was getting an under-the-table bribe from the Florida Marlins to play there, and he steered you there, even though it was 100% against your best interests.
Well, that's what's happening now with the corrupted REIC
Since the seller pays the commission the agents working for the seller and the buyer would obviously hope for the highest selling price. This is an inherent problem with real estate commissions. I have used the sellers agent in the past and negotiated a reduced price in lieu of bringing in my own agent to split the commission. In any event the commission is required to be disclosed.
Keith, you are right, that it why it is imperative that one hires the right agent, if one at all.
An agent can do positive things in a transaction that benefit the buyer. While you rage against my profession, what I just wrote is a fact.
It is incumbent on the buyer (or player in your example) to negotiate the rate of commission for the agent up front and sign an agreement for services. This way if the buyer finds out later that the agent collected extra fee's from the other party (seller) that was not in the agreement it becomes much easier to seek damages... and more importantly get rid of unscrupulous agents from the profession.
Negotiate fees with your agent up front if you are seeking representation in purchasing property. If the agent does not like your terms, find one that will. We are all starving anyway, so it shouldn't be that hard to find one... right??
while this is disgusting, i see nothing wrong with it.
is it wrong to assume that a buyer could buy this w/o representation for 16% off? that's how i see it.
the clerk 'looks out for your best interest' as they find something you can afford and they put a roof over your head.
by that logic then, should the clerk not let you buy in an area that has a high crime rate with graffiti on the mailbox, or next to a nuclear plant? after all, they want it to be in your best interest, and it isnt in your best interest to die unnaturally...
if the buyer didnt know of the 16% ahead of time, it would be in the fine print somewhere. here's an idea..dont get emotionally attached to that house and not read the paperwork.
this is why america is being dumbed down. they dont want to do anything like read a document they sign...nope just pay the taxman more so he can cover my rear, eventually.
I don't view real estate agents as representing me unless I am the one paying them. If I am a buyer, I am not their "client" any more than I am a client of the guy who shows me a new couch at the furniture store. Do you really think that, in a business transaction, you can be represented by someone who is paid by the other side? I don't.
When you "hire" an agent to represent your interests, and then compensate them by giving them a percentage of whatever the other guy gets out of the deal, you are deluding yourself if you think that most agents will be honestly be representing you.
Keith...
To use your baseball analogy.... When you hire a baseball agent you pay them to represent you in selling your labor to a buyer. The more you get from the buyer, the more they make (a percentage of the sell price).
Now what if your baseball agent was paid by the team? You still expect the agent to do what's in your best interest if the other side is paying him? Probably not, or you wouldnt hire an agent to begin with.
In RE, the buyer "hires" an agent who is paid by the other side. That buyer has unrealistic expectations if he expects the agent to be on his side in the deal.
Anon said...
Since the seller pays the commission the agents working for the seller and the buyer would obviously hope for the highest selling price. This is an inherent problem with real estate commissions.
This is why one would hopefully take me up on my advice to negotiate with the buyers agent BEFORE such things as writing a contract. I'm telling you that flat fee buyers representation is the ticket to a better representative. It takes the price of the home out of the equation.
I have used the sellers agent in the past and negotiated a reduced price in lieu of bringing in my own agent to split the commission.
That's great and it actually very similar to hiring your own buyers rep for a flat fee. Good on you for doing the deal yourself the way you did. I see nothing wrong with it.
In any event the commission is required to be disclosed.
It sure is, but after the escrow process is opened... not before. Most buyers don't take that step to have an agreement already in place with a buyers rep. However if they did, they'd see on the HUD that the selling broker is paying X% to the buying broker and any amount over the negotiated flat fee would be rebated to the buyer in the transaction.
The agreement is between the client and the representative (broker). It is no business to the seller what that agreement is. So the contract between the buyer and the seller has no bearing on the buyer and buyers rep agreement. The seller is still paying the commission out of his proceeds... but without the agreement to purchase between the buyer and seller, there is no commission dollars to pay anyone (if the seller hired a real estate clerk to help sell the property).
In other words... the buyer is really the party that actually pays the commission. Why wouldn't the buyer want to control how much his agent is getting paid??
The answer is because the buyer never asks (or rarely asks).
If someone overpays for a house (or anything else) they have no one to blame but themselves.
Have you ever seen the advertisement for the Elliot Wave Principle? Learn to think independently.
Do what every good American should do... get educated, don't be bashful, go in and low ball the living hell out of the price and negotiate, negotiate, negotiate with the courage to walk away and find someone else trying to make a sale. If you're renting with no lease commitment, time is on your side, not his. He needs his money NOW. This is America afterall, if this jerkwad won't sell you a house for what you want to pay, another jerkwad down the road who needs the CASH NOW will sell.
Good old American capitalism!
George Washington faught and died for this!
nevermind, they already do!!!
See, Keith, the REIC is just following the lead of Wall Street. These guys aren't stupid; they know a batch of suckers when they see one.
See Keith!!!!! everyone does it!!!! It's ok.
If I was a buyer of one of those boxes I'd expect my broker to kick a lot more then her usual 50% !
Never ever use a Broker unless you get a share of their commission is my advice.
Re: "Since the seller pays the commission"
I always laugh when I hear this. Who is opening their checkbook? Who is putting money on the table? The buyer is the one who is spending money, the seller is receiving money. The buyer is paying for everything... what is so hard about this concept??
iiamafornia and you anons who think that real estate agents are no different from a used car salesman, sadly, are right. But that's why it is so dishonest that they call themselves an 'agent'.
From Wikipedia, the primary duties of an agent are as follows:
The Agent's primary fiduciary duty is to be loyal to the Principal. This involves duties:
not to accept any new obligations that are inconsistent with the duties owed to the Principal. Agents can represent the interests of more than one Principal, conflicting or potentially conflicting, only on the basis of full and timely disclosure or where the different agencies are based on a limited form of authority to prevent a situation where the Agent's loyalty to the any one of the multiple Principals is compromised. For this purpose, express clauses in the agreement signed by each Principal with the Agent may identify specific types or categories of activities that will not breach the duty of loyalty and so long as these exceptions are not unreasonable, they will bind the Principals.
not to make a private profit or unjustly enrich himself from the agency relationship.
Wouldn't it be great if the NAR upheld it's mandate and actually used it's licencing and membership fees to ensure that 'agents' were actually that?
It's only fair if the real estate chick is hot and I get some head under the table.
I don't understand why you people refuse to hold the homeowners 100% responsible for buying too much house.
That's the whole reason we are in this situation. Stupid people are being coddled in this country. They should be exploited vigorously.
Until everyone sees with their own eyes, homeless people in the street, beggars, destitution and poverty caused by stupidity, they'll keep living in a fairyland where mommy and daddy government take care of them.
Seems like a buyers broker contract should be stated more like this:
"If you get them to sell that house for 20% off the price they are asking, I'll pay you 10,000".
In other words, the buyer agent incentive needs to be motivated by the buyer paying LESS, not more.
anon666,
You are exactly right. I'm reading these posts and thinking to myself the same thing. The buyer is the only one bringing their checkbook to the closing. That the seller is said to be "paying" anyones commission is laughable.
JAFO
I can not wait till the class action mass tort lawyers start runing the late night ads on TV to gather plaitiffs together to sue the real estate brokers and mortgage handlers that defruded them into a neg am funded deed of trust backed by an inflated appriasal for an over priced shit box. The asbestos and tobaco lawyers are already reveiwing the possible lawsuits. That will transfer some ill gotten wealth from the bad guys for sure!
As a Realtor, I can certainly understand people's frustration with some in our industry. As a buyer's agent, it's my fiduciary responsibility to represent my client's interest, NOT MINE! Properties shown should be properties that fit the client's budget and needs, not the ones with the highest bonuses etc. By the way, in most states, realtors due have to disclose higher than normal fees or bonuses.
Our profession is not all bad, I assure you. However use a little common sense when choosing a Realtor and it will more benefit than hinder you.
JAFO:
"The buyer is the only one bringing their checkbook to the closing. That the seller is said to be "paying" anyones commission is laughable. "
That is the case in all sales transactions. Do you believe that ALL sales people should represent the buyer?
I guess I pay the comission of the sales person who sells me a car, a gym membership, a magazine subscription, or a set of Ginsu knives. Hey...Im the one bringing the check to the deal...I am the one payng the comission...are these people all working in my best interest?
No? Well then we better get some oversight.
Have some responsibility, people. When you decide to buy something...anything... you are the one in charge. If you hand a salesman a blank check and call him an agent, you're probably also going to buy an expsensive education.
Anyone who buys a Krapnanian Home is Brain Dead.
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