WBUR / NPR OnPointRadio: Banks and Housing in Crisis
American housing and finance. What went wrong, and how to fix it.
You can join the conversation. What new rules should be in place? Should we make it more difficult to buy a home? Should we stop banks from playing with mortgage securities? Should we put up big firewalls on Wall Street to head off future disasters? Tell us what you think.
MY COMMENT TO WBUR BLOG, yours are welcome as well:
"Speed bumps" to protect the housing market from overheating? That’s the role of a buyer agent in individual real estate transactions. Unfortunately, over the past 15 years, the real estate lobby pushed state legislatures nationwide to remove speed bumps by legalizing conflicts of interest inherent in "designated agency."
BLOG POST: Misleading home buyers: Conflict of Interest? What conflict of interest?
From my day-to-day experience as a buyer agent in Greater Boston, I know there have been countless "bidding wars" over the past decade. Conflicts of interest and manipulative business practices made those bidding wars worse. Now the cost is being passed on to society as this case study demonstrates:
"My so-called buyer’s agent (who promptly switched roles at contract signing without explanation), initially advised me to bid $750,000 for my house of choice, which was listed at $699,900. When I told her that such an offer was beyond my price range, she was quite adamant that I not offer anything under the list price. When I finally backed out the deal because of her bait and switch scam, I later heard that the house in question sold shortly afterwards for $682,000—in other words, nearly $70,000 less than the bid suggested by my so-called buyer agent."
"This type of price inflation (caused by seller’s agents masquerading as buyer’s representatives) must have a very distorting impact on housing costs. The economic fallout is enormous: ordinary citizens are forced to move out farther in search of decent, affordable places to live, which leads to a host of problems connected with traffic congestion, suburban sprawl, etc."
"As I perceive it, the real estate cartel’s use of dual agency [a.k.a. "designated agency"], which works to the detriment of the average consumer while enriching dishonest agents through the practice of double-dipping, contributes significantly to the manifold problems we see in the residential housing market and therefore should be fully exposed."
This case study is an example of what’s wrong with dual agency / designated agency, and why I believe designated agency laws should be repealed and "blind" bidding wars should be managed with regulatory "speed bumps."
So, if Congress, policy makers, and consumers are asking what factors contributed to the overvaluation of housing markets, shouldn’t dual agency and blind bidding wars be included in that investigation? My hope is that others will agree that it’s time to expose systemic flaws and conflicts of interest in the residential brokerage practices, and the cost of blind bidding wars, not just to individual buyers but to tax payers.
This three minute audio post proposes four regulatory reforms to protect consumers — buyers, sellers, and tax payers — in the future. Please listen, comment, and / or join us for a TweetUp in Boston to listen to the rebroadcast of this program, 7-8pm in Boston.
AUDIO BLOG POST: What regulatory reforms are needed to protect real estate consumers?
Thank you WBUR for your continued coverage of this subject!