‘Tis the Season Not to Lie.

This housing market is tough.  No doubt about it.  In speaking with a broker friend of mine he stated, ” What other profession takes a direct pay cut based on the economy? If the market drops 40% , so does my pay check.”  Although the reality of that stinks, I can deal with that fact.  What I am having a hard time dealing with is the lack of honesty on all parties involved in a real estate transaction.  Many have talked about the old saying, “Buyers are liars and sellers are too.”.  But let me just say this market is pushing the limits of dishonesty.  Desperation is clear on so many fronts of the real estate transaction that quite honestly, (pun intended) it is really beginning to irritate me.

If you are a buyer, do not lie on your loan application.  If you can not afford a house without deceiving the lender, simply do not buy a house.  I recently had a situation where the buyer forgot they had a bankruptcy on their credit history.  This was not, “I forgot to mention it.” because the loan application has a specific question about whether or not the applicant has ever had a bankruptcy.

When buyers find themselves in a pool of multiple offers, they seem to be willing to say anything.  I recently had a buyer state they had all cash to purchase.  And they did have all cash to purchase.  But once in contract decided they wanted to get a loan.  Then it was found out they were self-employed and actually could not qualify for the loan.  They canceled their contract because they did not want to use their cash.  Within their rights? Yes.  But that wasted nearly 3 weeks of time and placed a lot of stress on my client, the seller.

The purchase contract should represent your intentions, not simply what you think will get your offer accepted.  If there are going to be two borrowers, both borrowers need to sign the purchase offer and both names should be on the pre-approval letter.  This is particularly an issue on short sales.  If you change the borrower or add a borrower, the short sale lender has to be informed and can choose to deny the request if they believe a “straw” buyer is in place.  It is deceitful and a waste of time.  Not to mention the added stress on the seller who has no idea when they will actually have to move or whether or not a sheriff will show up on their door with a two hour notice to move out.

If you are a seller,  understand that anything you know about your home that worries you, will almost certainly worry the buyer.  If possible, fix it.  If you don’t fix it, be up front about it.  You want a buyer that knows the issue but still wants the home. Ordering inspections before going on the market provides the owner the opportunity to fix items before a buyer writes an offer.  It  can show a conscientious seller and build confidence with the buyer.  Recognize, that any issue called out on the inspection chips away at value.  Shore up as much value as you can.  Buyers in this market, need every penny for a down payment.  Having a list of repairs will be deducted off of the price no matter how minor, or how long the seller has lived with said issue.   Simple repairs that are not taken care of show to the buyer that the seller is “cheap” or “irresponsible” and will taint the entire transaction.

Non-permitted work is becoming a bigger and bigger deal.  No matter what was cool in the 1940’s when the valley was full of orchards and there was only one home inspector for the entire state, having non-permitted work will impact value.  There are many home owners that decided not to obtain a permit because they did not want their property taxes to increase.  So the obvious discussion the seller should have with themselves is how much money did they save in taxes over the years verses how much value will they lose when they go to sell the home?  Don’t forget, if the seller decides to permit work after the fact, penalties can be applied for all those years the work was not permitted.  Of course, an inspector can require non-permitted work to be “returned to its original state or use”.    Realize an inspector can not see how wiring was completed without opening the dry wall.  Add in repairs to the value or loss thereof.

If you are a seller who is not making mortgage payments on your home, yet charging tenants rent: Shame on you.  That is all I am going to say.

Of course, real estate agents sincerely need to help guide their clients in the most ethical and truthful way.  Don’t expect me to lie for you.  Don’t expect me to cover up the fact that you decided to do the loan for your buyer and showed up at the appraisal attempting to influence the appraiser to lower the value so you could come back on the seller and re-negotiate.  Don’t think I won’t call your lender and ask if the file is complete for the loan applicant and whether or not a credit report has been reviewed and employment confirmed.

If you are a listing agent and not returning calls on a short sale because you are simply stalling the lender in hopes they will not foreclose on your client, you are sacrificing your reputation.  Once I know your tactics, I share those with my buying clients and pretty soon, they won’t look at your listings.  Also, if you are not familiar with the MLS rules that state, accepting an offer and submitting the offer to the bank requires a status change to the listing on MLS to pending, catch up.  The days of saying, “The contract is not ratified and therefore we can keep it as an active listing” are long gone.  Seriously.

I pride myself on high ethics.  I pride myself on working with other agents, loan professionals, inspectors, and of course clients in the most upfront, win-win way.  The stress that comes from dealing with un-truths, deception, game playing, is simply not necessary.  What has happened in the real estate market within the last 10 years with sub prime lending, corporate fraud, false stated income applications, should have generated a new interest in truth and fair dealings.  It is a sad commentary that many have not realized the very point.   I am hoping this post, and the timing of this post, will  jostle the consciousness of everyone participating in the market place of real estate and 2011 will bring sunshine and butterflies to this industry and the world.  Happy Holidays.  Truthfully.

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  1. Chris Jones says:

    I’m retweeting this and referencing it. PERFECTLY stated.

    In the end, trust is the only currency. If we lose the ability to trust one another, no amount of contract law or fines or regulation will keep this whole thing together.

    From one CJ to another, if I’m ever doing business in San Jose, I’m calling you first.

  2. This is a really good article and I will Tweet it for you. I hope that one of these days you and I can have a transaction together – I love the way you think and work!

  3. Oh my God I could go on all day on this subject. I think I’d be hard pressed to not keep the EMD on the guy who wrote cash and then decided he didn’t want to use his cash.

    Now more than ever people need to be painfully honest. I tell people “Don’t fudge!” It always blows up and wastes a bunch of everybody’s time.

  4. Kathryn says:

    You are good people, CJ. Truthfully. 🙂 May this message get through to those who need it!

  5. CJ Brasiel says:

    Thanks everyone for taking time out of your day to read the post and comment! I greatly appreciate you!

  6. CJ, thanks for the post. I am a loan officer in Boise and we hear all the same stuff you. It is sometimes amazing how potential home buyers attempt to explain away their credit issues thinking that will some how make things better. Have a happy holiday season

  7. CJ Brasiel says:

    Thanks for reading and posting a comment! Free, flowing, creative writing on credit applications are a thing of the past. Much like bell bottoms. Oh no… don’t tell me they are back! Have a great holiday!