I had a shocking experience yesterday when I encountered a young real estate investor who had been told a complete pack of lies by a real estate broker. The facts were so twisted and manipulated to make the sale that it gives a bad reputation to the good honest decent brokers out there. Realtors have always been a law onto themselves but it is essential that in the new economy that they are regulated and what they say is accountable.
This realtor stated:
a) a foreclosure had been listed at over $800,000 prior to being foreclosed upon and had had offers in that price range (highest offer on record was $450,000),
b) that a Wyndham was building timeshare units in the development (well known public/ common knowledge they had pulled out),
c) that the golf course associated with the property would not be paid for by HOA dues,
d) that there wasn't plans to build a property immediately adjacent to the home that would obscure most of the views,
e) while he could only get $1500 in rent now next year he would be able to get the $2500 to pay his mortgage easily.
That brokers can lie and not be punishable or in any way held accountable is a travesty, there are few if any professions with so little integrity and accountability. The pressure created by another imminent cash offer, the momentum building that you have to offer over asking or you will never get into this market and it will be priced out of your range.
We should have some kind of law that mitigates the buyer beware clause making Realtors accountable. There should also be some sort of criteria as to listing prices on properties that so often create false precedents in the buyers mind. Finally when appraisers are sent out, they should not be able to use comparables from pre august 07 and the crash to justify values today, they should have to make their valuations current and accurate based on market conditions.
I personally always use a multiple of rental income, as you would with a commercial property, as that takes away alot of the emotion involved in house purchasing. If you work on a 10-20 times multiple of a properties rental income (5-10% yield) you are in a pretty safe zone as to a properties true value. I have seen odd properties such as Via Rodeo in Beverly Hills that are trophy properties sell for 2% but these are exceptions and not the norm.
Again the government should take this opportunity when they are regulating banks and lending brokers to implement a system to protect the consumer from unscrupulous real estate brokers.
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