Are There Moral Implications For Selling At The Top?
Several readers suggested a topic on selling a home. “Are there any moral implications for selling your home at the top to someone who can’t afford it? Are there any moral implications for selling your home at the top to someone who can afford it?”
“Did you warn the person you sold your house to about the housing bubble or the disadvantages of too much leverage? My scenario is not that the buyer is not some flipper, but is a younger couple with kids who were scared by the rising costs of RE and bought.”
A reply, “It is your duty to sell to the least qualified buyer. Why wouldn’t you want to be the smartest person at the table?”
Another, “The very fact that you are willing to sell a house for X number of dollars shows that you believe X dollars is worth more than the house, any analysis beyond this is the responsibility of the buyer.’
A perspective from Australia, “Why do you need to know? In 5 transactions outside my own family, I’ve only once met the people I’ve either bought from or sold to. Things might be different in the US, but in Australia the Real Estate Agents make sure the sellers are absent when they conduct open houses.”
“The one time I did meet the buyers. Now this was in 1992, which was in my (correct) opinion indeed a market peak in my area. So did I feel guilty? Not at all; the young couple were burningly eager to buy in that specific area for family reasons, and had in fact been outbid at above my selling price twice in the previous fortnight.”
Another looked at the time-frame. “I don’t know how to answer this. I would have felt HORRIBLE to sell to an underqualified buyer in 2003 when I really felt the market was going to collapse. I would have cost them two years of incredible gains. So was I moral or not?”
“As a buyer I really don’t think it’s the seller’s right to know anything about me except whether my offer is legit or not. As a seller I don’t want to know anything but can the person keep the contract.”
“I’m a bleeding heart who paid too much for my last two houses because I wanted to help out the sellers. And I know that if a young couple like the one described tried to buy a house from me now I would try to discourage them, just for sound financial reasons if nothing else.”
“There’s no easy answer. I’m not sure it’s even legal to refuse to sell to a qualified buyer no matter how moral the reasons. On the other hand, if I owned a house right now it would be priced to move and even 10% below comps someone is going to get screwed somehow. Guess that makes me a happy renter!”
Another points to the anonymity, “Maybe why we have ‘arm’s-length transactions,’ Has a particularly ugly ring to it now, don’t you think? Is anyone in charge? Does anyone really care? You do, I do, my wife does, most of us on this blog do. Must we mandate education in home economics or finance in high school? Maybe not a bad place to start.”
Another said, “How many of us in a selling position nowadays would ask that the squirrels be cared for, right to approve paint colors, etc.? Presently, IMHO, sellers are lucky to get out at a reasonable price including roof and carpet or flooring allowances, and covering closing costs. If they were a young couple with kids, I’d probably advise them to rent for a while.”
One had a short answer, “For peace of mind, let them know you are selling because, ‘in your opinion,’ prices are heading south…from that point, it’s their responsibility.”
these are big boys and girls,and as long as there is no misrepresentaion,there is no moral problem
To a point, I agree with Tom.
However, even in the bond market, there is a big boy letter sent when a bond issue has particularly bad fundamentals.
That is one legitimate function of Realtors. They provide an arms length transaction distance for the seller so that messy discussions like this don’t arise and moral dilemmas like this never surface.
That being said, implicit in any market is a difference of opinion about the future value of a/any asset.
I sold twice (once with realtor, once FSBO) during this bubble and didn’t mention any forward looking view, after all they are buying shelter and not an investment.
Exactly. Absent fraud or misrepresentation, dragging issues of morality into business transactions is a slipperly slope. Turn the scenario around—what if you, by pricing your house 10% under the last sale to “help” the buyers, cost your neighbor (who needs to sell due to health reasons) thousands of dollars of potential profit because your sale lowered the comps? He MIGHT have found a GF to pay his inflated price, but now even the GF will see that the house right next door sold for less and offer accordingly. The moral problem lies not with sellers or buyers, but with the various shady realtors, mortgage brokers, and appraisers who facilitated this whole mess.
This argument doesn’t work for me. If someone wants to price 10% under comps for a sure, quick sale - that’s their right. I could care less about what happens to the next neighbor who needs to sell. And in this current market, we NEED more sellers to price under comps for that sure, quick sale. Bring it down!!
“dragging issues of morality into business transactions is a slipperly slope.”
Maybe not exactly what you mean, but I think this is exactly the problem with this country. I’m not exactly old and bitter, but I’m quite jaded with how vicious and selfish business has become. There are no gentlemen anymore.
Americans are closet Malthusians (life is short, brutish and nasty) with the way we have been behaving for the last 15 yrs.
That would actually be Hobbes . . .
Reminds me of the opening line from Annie Hall:
Correct. It is the buyer’s responsibility to understand the product and the market - period.
I once sold a 40 yr old house that I had been in for 4 years (SELLING AT THE PEAK IN EARLY ‘90 IN LA). The roof didn’t leak. However, it was apparent just by looking at it that it was getting to be that time… where it might need to be replaced.
A buyer made an offer after 1 price reduction and 2mo on the market (this was when the slide was becoming apparent with inventory jumping but no real big price declines yet), 10% below and we settled on a price 8% below. They conducted their own inspection using the buyer’s brother, a contractor, and signed off.
8 mos later, well after the $$$$$ was comfortably tucked away in CDs and we were renting, I get a registered letter in the state that I moved away to. It was an attorney drawn up letter demanding $3500 for roof replacement.
After the laughter subsided, I called the RE agent that I used, faxed her a copy of the letter and instructed her to contact them and for the buyer to leave me alone for good. She let me know that she had all of the signatures releasing on the inspection. Case closed and I just slept fine that night - no worries. Strictly business. The buyer were 50% upside down by the time the crash was all over…
Yeah, thinking about the morality of the present situation would make your head spin around and around and I think the range of opinions and the openness of the question and the debate in all directions were well summarized above.
Put simply, it would only be possibly immoral if the buyers couldn’t afford it–and even then any immorality is questionable– and the responsibility of knowing that is on the shoulders of the mortgage broker. I think there IS a paucity of ethics among mortgage brokers and in the financial industry in general.
Just follow the lead of the oil companies. 40 billion in profits, but if you ask them to price the gas a little lower, and make a little less profit, they are unsulted that in a Free market economy someone would ask them not to be greedy
Unless there’s evidence of price fixing, there’s nothing illegal or unethical about the pricing of fuel. As you should know, the oil companies don’t establish price for oil. Global exchanges (NYMEX and others) establish prices along with cartels. If you have a gripe it should be directed at the cartels since they are engaged in anti-competitive measures that sorely need to be addressed.
The difference in gas prices from $2 to $3 is about .08 cents per gallon profit for the oil companies. I guess they could help us lower gas prices from 3.19 to 3.08
However, the government gets about .70 cents per gallon in taxes.
%$^*#@! them all and let God sort them out….
It’s a free market..
no fraud, no foul.
i sold my 3 homes to the bank who gave the loans.they are the ones who shouldnt sleep at night.
“these are big boys and girls,and as long as there is no misrepresentaion,there is no moral problem”
Agreed. No more moral implications of selling at the top than buying at the bottom. Those who invest by emotion (”I NEED to OWN a house”) usually end up paying through the nose. If the last 10 years should have taught Americans one lesson, it should have taught them to diversify across all assets. My own rule of thumb on real estate is not for the impatient typical sheople: Never take a real estate loan out on more than 1/5 of your net worth. Right now, 1/5 of my n.w. may buy me a dump in Texas, but my net worth is building up fast, thanks to the “d” word (diversification). I buy gold, stocks, platinum, municipal bonds, savings bonds, and Treasuries.
Hell no! No moral problems here! Most of these clowns will spend 3 days researching the type of digital camera they are going to buy. When it comes to the largest financial decision of their lives, these same clown are often all too willing to offload the due diligence reponsiblity to the realtor which is akin to walking into the vampire’s lair and expecting to leave without bite marks. Screw ‘em!
Usually these transactions involve Reators® working on commission. Nuff said!
There is a lot of unethical lending around the suicide loans, I have no doubt about that, and realtors® were certainly complicit. So any lack of ethics a seller might have is such a small drop in such a big bucket that it is hardly worth mentioning and distracts from the real concerns at hand.
I don’t think there are any moral implications as long as you aren’t lying on the disclosure statement. It might be a good idea to let them know about the roof leak you fixed, but there is NO WAY I would mention the good chance that their home might not go up in value for quite some time.
“what the wise do early, the foolish do late”
Have you noticed that when money is involved and there is little chance of being caught, americans will lie and cheat their way into or out of anything. A good example: when people list their car for sale. The vast majority, (it seems) will cover up anything that happened to that car to make the sale.
What really should be in question is the ethics of realtors. I believe that in order to be effective in sales, you must believe in your product. How can the informed realtor truly be looking out for the best interests of their clients unless they inform them of the market situation?
The truth is, in general, the vast majority of realtors only care about one thing. Selling the house, no matter what. In 17 years, I’ve never come across a realtor that was advocating anything other than their own self interest. A housing bubble is an inconvenient truth for realtors, so it’s more likely that they just don’t choose to believe that it’s happening.
But hey, that’s the american way.
And you know how Americans just love inconvience and truth.
The market was overvalued in ‘02 in many bubble areas. I hardly think a realtor is in any position to predict when a market will decline or by how much. Even economists’ models vary widely and have huge margins for error. If a buyer is after a roof over their head and feel comfortable with the price and can afford the payment - IN THEIR OPINION - then it’s a perfectly ethical deal. The same is true if the deal is an investment. It’s a matter of opinion on the part of the buyer. No one ever forces a buyer to take out a loan or sign a purchase agreement (other than perhaps the wife & realtor that pulled the guilt card on her brow-beated husband/man in the NAR commercial a couple of months back… she researched it)…
My first involvement with real estate started back in the eighties with that downturn. What I have found is that most agents are just salespeople, with all that implies, but some are good salespeople. Good salespeople care to set up good transactions because they want referrals and return business and tend to be the ones that can last through downturns. In my opinion people railing on about realtors and morality have zero clue about capitalism. Realtors are salespeople, and if you cannot get a reference for a good one that must because you are no good at negotiating for professional services which is sad and must be a huge limiting factor in our society.
And what if the buyer is getting the deal. Bailing out someone in over their head and doing it for below market comps.
Does he/she have a moral obligation to notify the seller?
When we sold our house last July, I had a serious crisis of conscience. I wanted to write up another sheet to be signed at closing: “Buyer understands that the purchase of real estate has inherent risks.” etc., but I didn’t do it. The buyers were lower-middle class (teacher & truck driver), and I knew they couldn’t really afford it–100% financing, etc. At one point in the negotiations I wanted to call them directly and tell them not to buy the house (there were other offers) but my wife talked me out of it. She said it’s not our place.
Later, when their Realtwhore tried to get us to credit or replace a 3-year-old roof (oh HELL no) that she said was incorrectly installed (by the previous owners), I didn’t feel so bad.
Did you ever drive by to see if they replaced the roof?
BayQT~
“Are There Moral Implications For Selling At The Top?”
Huh? You must be joking.
When people are spending hundreds of thousands of dollars, money it would take them years to earn working, it’s their responsibility to do a little research and see if they are getting a good deal. It’s not like there isn’t plenty of information available at any given time about the state of the market.
Yes, there are moral implications.
Try not to chuckle as you drive away. Really, that’s just not ok.
My house sold last year for 100K over our asking price. How is this a moral issue? They bid up the price, and the bank approved their mortgage application with the higher numbers.
Neither buyer nor seller has any moral obligation to each other when it comes to the price. The only obligations are disclosures.
However, if a seller feels sorry for a nice, young family about to overspend for their home, and if their sympathy is so strong they feel they must speak out - so be it. But as for being morally obligated to do so - nope.
As a hopeful future buyer who is a single mom, I will not (cannot) allow myself to overspend. If I can afford $XXX,000 and a seller accepts my offer - even if the value drops from that point I will not feel that I overspent. (Of course I’ll be buying for the long haul - not for a short stay of a few years - so even if the market does dip further, I will come out ok later on.) Point being, I’m not going to make a stupid mistake in the present. If someone else does, that’s their right but it doesn’t make the seller at all responsible.
I appreciate what you are saying. It would seem like discrimination for the seller to say to the potential buyer that they aren’t qualified when the lender has already said that they are. I can’t know for sure if the house will appreciate or depreciate so I might just give a “word to the wise” and take the offer. Who can say if it might go up? I am such a bear these days it has warped my thinking a little. I hope you do find the right house for you and yours.
What I would do has nothing to do with it. There are a lot of unscrupulous people in the world and if people aren’t smart enough to watch out for their own best interest then they are going to get their plow cleaned sooner or later. I personally fix things right when they break and don’t take advantage of people ever. Does this help the average Sally Sixpack when she takes bad advice and overpays for a piece of crap chitbox or borrows more than she can repay? Not one bit.
Agree, but Sally Sixpack got her bad advice from “professionals” in the field - not from the seller looking to maximize his/her profits.
If the question posted was, “Are there any moral implications for a realtor convincing a buyer to buy at the top when they clearly can’t afford it?” then I think we all can agree on the answer to that.
Conversely, if the question was, “Are there any moral implications for a realtor convincing a buyer to buy at the top when they clearly CAN afford it?” I’d have to say no.
Agreed.
Although I feel there is a moral imperative to discuss Bubble economics with family, friends and even acquintances, there is none whatsover towards a stranger buying your house. The world is chock of information and background (including this blog) on housing, housing Bubbles, etc. Further each individual assumes responsibility for being knowledgeable and seeking information on his or her own. And really so does the financial institution that gives Bully his loan. Be a school marm towards your friends on this, but just allow Bully to hand over his (I mean, his bank’s) check. F**k em I say!
Are there any moral implications for a realtor convincing a buyer to buy at the top when they clearly can’t afford it?
Of course, does this question need to be asked? That is why some of them have the reputation they currently enjoy. Chris Szabo comes to mind. You think he gives a rat’s a$$ about his clients? Is it illegal to sell to people who clearly can’t afford it? No. Is it unethical? Of course.
Of course one has a moral obligation to advise buyers if one believes prices are going to collapse. Buyers, in general, are not well-informed. The general public knows nothing about real estate bubbles.
Whatever happened to the Golden Rule?
If a buyer chooses to go ahead, knowing he or she is buying in at the top of a bubble, then so be it. But, at least the seller who has advised him of the fact has done the right thing.
I can’t imagine a seller doing this. How’s that work? Put a blurb in the listing that says, “3BR, 2BA, charming colonial on .25 acres. Asking $500,000. Seller notes that this is likely market peak and buyer will see the value drop from here on.” Besides, my hunch is many sellers are unaware (or refuse to believe) that home values will drop.
But how about this spin on it - as a buyer I submit a letter with my (low) offer stating, “This offer is based on the pretty rock-solid fact that home values are going to be declining from here on.” Wonder how that would be received…
It wouldn’t stop the maniacs that are “buying” these days. For the average Joe who owns one house the direction of the market is not that big a problem if he is not overextended. Would I feel bad if I sold one acre of swamp to Bill Gates for $1 billion? Hell no! He’s a big boy, he can make his own decisions. Would I sell my house to someone knowing they were paying 9X earnings for it? Probably not.
Being that I’ve never been on either end of a real estate transaction, how would you know how many times earnings a buyer is spending to purchase your home? I’m assuming I get pre-qualified for X amount from a mortgage lender and that’s pretty much all the seller needs to see - whether or not I’m qualified to buy at a certain price. Is this incorrect?
Yes, likely I would not know this tidbit, but if I did…
“Would I sell my house to someone knowing they were paying 9X earnings for it? Probably not.”
Yeah, well, what if that person were a minority or something, then you would probably end up being sued for discrimination. Fools are meant to part with their money.
Possibly - see my final reply to eastcoaster at 10:13:17 above.
Yeah, well, what if that person were a minority or something, then you would probably end up being sued for discrimination.
____________________
This was the problem when I sold my house. The buyer was a single mom who was supporting her son and her elderly mother. She arrived in a very old car which looked about to break down. She had to borrow the 5% she put down, and her payments were such that even we (over $100K income) could not afford it. I felt awful, but she was Latino, and I worried about a lawsuit if I tried to discourage her from buying. I did ask her Realtor, repeatedly, if she thought the buyer could afford it, and she insisted she could.
During escrow, I decided to give her a year’s worth of gardening service, carpet allowance ($500) and had her tour the house and tell me what she wanted to keep of our furniture/appliances that we otherwise would have donated. The house was priced below market (sold within an hour), and we didn’t play any “bid for it” games. She offered our price, and we accepted. We also maintained everything while we owned it and fixed **everything** which was mentioned during the inspection (not necessary at that time). We also had the house professionally cleaned for her after we moved out. We did the best we could, but I still felt guilty.
Definitely won’t be able to keep the house over the long term, IMHO. And that is very sad.
This sounds like a lot of nanny-state bs. Those of us who sold near the peak didn’t know it was the top - we just suspected. We thought the buyer was dumb for paying so much, and the buyer thought we were dumb for missing out on a money making opportunity. We now have the benefit of hindsight and can babble about moral obligations but the fact is no one KNEW what the future held. The nanny stuff just irritates people and sometimes they have to learn their lessons the hard way - those are the lessons you remember the best.
would anyone sell their house to a good friend or relative knowing that they would probably go into foreclosure in a few years? would you feel any remorse if you lived next to your old house?
Good point.
As the Australian poster mentioned, I would have been quite comfortable living next door to my old house.
The buyers were increasing their income and loan affordability by buying in that particular area (because they could utilise family as child minders so the wife could go back to part time work). And while prices were peaking, I wasn’t expecting more than about a 10% decline.
However I might have felt differently if I thought I was condemning the purchasers to serious pain and potential bankruptcy.
We all think we know what’s going to happen to the housing market, but no one knows for sure. Maybe the powers that be can find a way to orchestrate a soft landing, even with another year or two of 8-10% gains. So no one can say with certainty that they’re sticking it to the buyers today.
So no one can say with certainty that they’re sticking it to the buyers today.
Bingo. Another major implication of bringing “morals” to the marketplace. Marketplace morality is based on knowing what’s going to happen. Insider trading? No, morally wrong. But if you know for sure what the general marketplace is going to do, then you can easily become a billionaire and engage your philanthropy that way.
Otherwise, STFU and leave me alone.
Not really, I try to seek information, but please don’t moralize with a gun to my head… ie… legislate.
My husband and his brothers inherited a house. I asked them to cut the price 10-15%. It was perfectly fine with my husband but some of the others scoffed when
I said it would create some good karma. One brother said he was not aiming to be a philanthropist.
Well guess what, now it has to be done anyway because it did not sell.
John Law - good points.
I have friends who bought in 2002. They paid a fairly reasonable price for their home while the run up was going on. The sellers priced it fairly and weren’t looking to gouge. When they moved in, the next door neighbor came to them, introduced herself, told them she was a realtor, and - knowing what they’d paid - asked them in a seemingly joking manner (though it was anything but a joke), “What are you trying to do to the neighborhood - bring all our home values down?!”
Anyway, point of the story is that I’m sure the nice couple who sold to my friends sleep well at night. I think that rather than disclosing to a buyer that it’s likely values will drop, sellers should just price lower to begin with (good karma as piti-parti said).
To be honest I’m a little surprised to see that everyone thinks there is no moral issue.
This is aside from fraud of course, but we’ve been railing against mortgage brokers and realtors for a long time.
“It’s not my responsibility as the seller. The buyer should know what they can afford and how much the house is worth.”
“It’s not my responsibility as the broker. I give them all the documentation and the buyer signs it. They have the information.”
“It’s not my responsibility as the realtor. I just bring the buyer and seller together and smooth the process. The buyers were engaging in the bidding wars.”
To be honest, I feel there is a little bit of duplicity in disparaging the realtor and the brokers but not the sellers. On the other hand, a lot of people sold at what they THOUGHT was the top of the market (2002/3) so it isn’t as if we have a crystal ball.
I think the only real intellectually honest answer is not to hold anyone responsible except the signer of the documents. Yes, there are slimy mortgage brokers and realtors, but they, like us, are people who find themselves strangely able to be a part of the process without being “responsible”. A common and unfortunate human condition.
This is why personal responsibility is such an important part of society and why it’s so sad we seem to have lost so much of it and become such a nation of victims.
Ditto! Anything people can do to shirk responsibility will be done.
We’re talking about sellers, and you are generalizing to realtors and mortgage brokers, lumping them all into the same pile.
Posters here have cited many reasonable problems with sellers not selling to certain people because they don’t think they can afford it or “know” for sure prices will be dropping.
Sorry for posting so much, but I just can’t get out of my head the logical problems of holding sellers responsible for selling at high prices. During the housing runup in San Francisco, I blamed a whole lot of things, but not once did I blame the seller for accepting the maximum price of what they were putting on the market.
Furthermore, if all sellers/specuvestors/whatever read this page and say, “hmmmm… maybe it is wrong of me to sell while prices are so high,” and everybody seller in America develops a moral streak and takes their property off the market, then inventory will shrink to almost nothing and prices will skyrocket again.
…okay, one more logical problem I’ve though of. Say you bought six months ago with an interest only ARM, and you are trying to sell now to avoid foreclosure. Foreclosing benefits nobody. You are probably selling at a loss in the 10-50k range, all things considered. Mainly, you have basic financial survival in mind. How can this be consider immoral?
Maybe this could be made a little bit clearer if we look at the stock market. If you sell a stock, it’s because you think it’s not a good investment going forward (or you have more important things to do with the money). The buyer, on the other hand, think’s it is a good investment going foreward. Isn’t that pretty obvious? I mean do stock brokers need to tell buyers, “The guy you’re buying this stock doesn’t think it’s worth holding?”.
It’s the same with any market. The seller wants out, the buyer wants in. All the sellers and buyers collectively determine the price. Not you. It’s they buyer’s responsibility to make a prudent purchase. The seller’s only responsibility is correctly represent the material facts of the property.
Feepness,
You’re confusing the issue, IMHO, because sellers have NO FIDUCIARY DUTY (or any duty other than not engaging in fraud) toward the buyer. Realtors and lenders, who profess to help buyers — and claim to know more than the average person — DO have a duty, IMHO, even if it is implied, and not officially contracted.
We are responsible and accountable for our own decisions, not the decisions of others. Caveat Emptor!
I would not be able to sell homes or make loans right now ,so I’m glad I’m not in the business . In the last 30 years I can’t tell you how many times I talked people out of buying something or talked someone out a loan . I have busted fraud a number of times . I saved a retarded man from being swindled by some realtors once by just coming along at the right time .I have screwed up so many bad deals in my lifetime I’m dangerous to crooks .Just recently I was sucessfull in helping a friend get his money back from a mortgage company that tried to cheat him for thousands on his interest rate .
It’s just been my bad luck that I run into this bad shit and than I have to act to try to save someone. I’m getting old and tired and I don’t have much fight left in me . I just hope that once in a while I might post something on this blog that might help someone .In fact , I have to thank this blog and posters for the vast amounts of information given along with giving me alot of laughs in the process .
But , its up to the buyers to look out for themselves ,don’t count on someone doing it for you . If you think something doesn’t look right or sound right ,have the balls to dispute it or walk away . If people have a willing horse they ride it ,( its the nature of the beast ).
So , BUYER BEWARE AND SELLER BEWARE .
A hypothetical question. A pre-qualified buyer makes an offer on your house, and you see that the poor young buyers with kids (or whatever buyers) will be underwater immediately. You talk them out of buying your house, and you talk them into renting.
Can the RE broker, agent, and motgage broker sue you for killing the deal?
Not possessing powers of prescience, I wouldn’t know for sure if prices are going to fall or rise further. Opinions aren’t facts.
No kidding. This very question of whether selling “at the top” is immoral or not contains the basic flawed assumption that it is even possible to KNOW exactly when a top exists. Most of us who have been following the market would agree that a mammoth bubble exists and that most houses are absurdly overpriced. But none of us has the power to call an exact top, and many of us were too early in guesstimating it was in 1, 2 or even 3 years ago.
If I had such amazing powers of prediction, what would I be doing reading this blog?
We sold a house in the Bay Area in February ‘06. It was priced at the lower end of the then-current asking prices, and exactly at the median in terms of $/sf for sales in summer ‘05. In two weeks, we had 4 offers, 1 slightly below asking, 2 that were 4% above, and 1 at 7% above asking. The top bidder fell through, but the backup offer closed within 60 days of the original listing, for about 6% above asking (slight credit given for misc repairs). We felt that we were being relatively fair (market-wise) with the price, but the sale price determines the value of it. I personally thought the place was worth *maybe* 1/3 the sale price. But around here, that means mid-90s prices. Unreal. But they now have a prestigious zip code to append to their mortgage payment letters. The bidders all claimed that they would put 20% down (except the low bidder, who said they would put 25% down), so maybe they could afford the house.
We think it sold near the top, and we have no moral dilemma.
Those buyers you describe are still around… heck, I could easily have been one of them. I was still hopefully viewing properties as late a January, though no offers since December. But I bet they are not going to be around for much longer.
I should note that it was not our house we sold, but an estate sale.
People in our circumstance come along all the time with property that needs to be sold. I would not worry too much about the “priced out forever” issue. If that does happen, trust me, you don’t want to live here. The demographics are already beginning to show that the Bay Area is stagnating and starting to backslide toward old and unemployed. I bet the people who got in at the top of Detroit’s real estate value aren’t considering themselves shrewd land barons today.
The Bay Area will always be nice, but I doubt there is another grass roots boom coming. The vacant office space is there for a boom, but the housing is not. Look at Japan if you want a high tech analogy. Or Southern California aerospace.
Renting here is (as the Lennox Financial snake says) a no-brainer. It’s hard to beat the upside leverage in home equity, but you’d be surprised how much the savings can earn in investments. I made myself a spreadsheet and saw renting as a pretty safe bet in this market. So far, I know I’m no worse than break-even. If RE stays flat, I gain on buying. If it declines, I win big (remember equity leverage).
Comment by SoldAtThePeak
2006-06-24 08:10:23
When we sold our house last July, I had a serious crisis of conscience. I wanted to write up another sheet to be signed at closing: “Buyer understands that the purchase of real estate has inherent risks.” etc., but I didn’t do it. The buyers were lower-middle class (teacher & truck driver), and I knew they couldn’t really afford it–100% financing, etc. At one point in the negotiations I wanted to call them directly and tell them not to buy the house (there were other offers) but my wife talked me out of it. She said it’s not our place.
SoldAtThePeak. You’re wife was right.
Also it’s really incumbent upon those arranging financing to provide good sound advice.
SoldAtThePeak. The truck driver and and teacher might have had more financial wherewithawl than it appeared. Also your good deed could have been misinterpreted as some kind of descrimination.
“Nasty, brutish, and short.” was Hobbes, not Malthus.
As for the moral question, you’ll know you have a principle when it costs you something. Most Americans like to make profit their only moral compass.
You are correct, should have been Hobbesian worldview.
Either way a competition for scarce resources with definitive winners and losers.
I struggled with this question when we sold our house last July. At the same time, however, friends and family in whom I confided my belief in the coming demise of housing prices dismissed my concerns.
Why, then, could I have a realistic expectation that someone with whom I have no credibility or association would listen to me? I could not. People who were convinced to buy would buy. I simply made my home available to them as did many others.
My conviction, strongly held as it may have been, was at that point judged to be “speculative in nature.” Manias turn conventional, empirical wisdom on its head. Fiscal conservatism is thereby viewed as abhorrent. The suggestion of a reversion to the historical mean becomes, to the masses, “speculation.”
this is the most insane question ever! the job of real estate and finance professionals is to keep their client out of hot water–it is not the job of the seller to encourage the seller to pay a lower price.
The whole corporate world that we live in today is based on fundamentally unethical and psychopathic behavior. Rent or Buy “The Corporation”. A fascinating documentary that paints a very disturbing picture of corporations, greed, etc.
Then rent/buy “Yes Men” for a lighter look at the corporate forces behind globalization.
Both videos are HIGHLY recommended.
I got to say I’m amazed. For the one’s in the U.S. this country was built on greed theft and capitalism from day one to sit here and ponder whether someone is morally corrupt because they sold at the top is for lack of a better total insanity. Then on the other end you have folks trying to make the sellers look like victims because of unscrupulous activities by mortgage brokers. Have you lost your friggin minds. The market bubble or no bubble was xyz for whatever reason greed relocation or death the seller sold for whatever reason the buyer bought end of story. Period. Seller Morality?!?! give me a break.
Some of you sound like you need to check Realtor.com for a cheap listing with a little fire damage in Waco, Tx and contact the kool-aid broker in Guyana.
Morality?? Unbelievable
Your post sums up concisely the “hey it’s just business so anything goes” attitude. This attitude reflects an individual who can no longer associate their own views and actions with the overall lack of accountability in the world today. The whole is just the sum of the parts.
We are not living in Mayberry. In fact, Mayberry only existed in certain pockets A LONG time ago.
By the very nature of the transaction, the buyer and seller are at odds. Sellers who are bleeding hearts or feel sorry for buyers should take that $$$ they are thinking of pissing away and send a check to charity (tax deduction).
Some people are too stupid to live. And if you know such a person, THEN it is your obligation to inform them on the real deal - really just to satisfy your conscience. Then, when they do not listen to the great advice you gave them and take on an interest only loan at the peak of the bubble, you can feel good that you tried.
I am stupified at some of the responses here. It is not as if there isn’t tons of information out there for buyers. They are the ones parting with the $$$. They are the ones who ultimately can walk out. They can and should do so, but if they do not, why should you lose sleep over it as a seller? No gun to their head! And tons of OTHER houses they can buy!
At the microlevel, there is no fraud here. As a seller, just make sure you disclose anything. As a buyer, be cynical and do your homework and do not get emotionally involved in the deal. Walk away if there are signs you should.
However, at the macrolevel, it is completely screwed up. There are so many people involved in the industry who are against you as the buyer, you should ONLY LISTEN TO YOURSELF, or close, smart, friends and family. Realtwhores and brokers are just there to take their cut (if I ever sell, it is defintely FSBO).
I am sick of the attitude that we have to “save” the idiots from their own undoing. First, THEY DON’T WANT YOU TO! Go ahead. Try it. Give advice to the borderline dull. See if they take it. Second, not everyone can end up on top. Stupid, dull people generally stay at the bottom rungs. But that doesn’t mean that they don’t LOVE to play victim of the big, bad, establishment. Third, stupidity generally goes hand in hand with lazy. If you KNOW you are kind of stupid, all you need to be is smart enough to get someone who is informed as your advocate. Stupid people do not necessarily need to sink to the bottow as long as they are realistic as to where they are deficient. The problem with the stupid and lazy is that they rarely would admit to it, thus the bonehead deals they accept.
I have said it before: free will is a bitch for the ill informed. They would do best under communist rule.
Does anyone know a great country where taxes are almost nil, but there is great quality of life? You know we are ALL going to be paying for these stupid a$$holes for the next decade or more. It makes my BP go up 100 points even thinking of all of their stupidity. Ugh!
Laughed so hard at this one, almost fell off the chair.
A fool and his money are soon parted.
Economic systems are no more predictable or controllable than the weather. Just as you would never assign an ethical quotient to a storm, it is foolish to assign one to a sale.
Some links:
Serious:
http://www.drozur.com/victimhood.html
Humorous but telling:
http://www.stellaawards.com/2005.html
I really like the suggestion that, just for peace of mind, you mention to that you’re selling because you think “prices may go down”.
Let’s face it, people who are buying right now do not believe that or they would not be buying at these whopping 10% “discounts”. So you’d more than likely make the sale anyway.
But! Most sellers and buyers never speak with each other. So it’s a nice idea but probably won’t have much use in the real world.
Buyer Beware as usual. But I would not sell to a friend or acquaintance right now . And I’d be careful if I was selling in the neighborhood I was intending to live in long term.
Tricky time to sell a house. If you’re going for the gold, best to sell and get out of town!
I sold my house because I was transferred. It was only when we were getting ready to move that we started looking around the area that we lived in for some 18yrs and started to notice how the demographics were changing. Am I supposed to point that out to new buyers? If there was no job change we’d still be in that house for another 20 or 30 yrs because we would just have been jaded by our routine. That house was build better than houses are today and I wish we could have moved it here with us.
Try this on for size!
Are there moral implications for buying at the bottom? (when/if it comes)
Should I feel pity for the seller and offer a higher price in anticipation of eventual appreciation…
I believe that 99% of people are “good” in the core of their being. Therefore, I think the reason the RE folks always try to put a positive spin on things is so they can fool themselves into doing something unethical without being guilty about it.
It is no different than making the “enemy” into monsters during a war so you can kill another human being. You fool yourself into thinking that somehow killing is good so the act can be carried out.
It is just a psychological trick to allow good people to do bad things.
Dude, Rehab is in your future.
lol
Seattle Moose , actually I agree with you .Usually humans wouldn’t sell a overpriced house to friend or family , but in business it seems to be ok .It’s rare that business is a win/win situation and usually someone takes the short end of the stick ,( which can only be determined by a rear view mirror ).
I use to know a real estate investor who said to me that he “always sold before a peak because he believed in leaving a little bit for the next guy.”
Look at the sellers right now that are reducing prices who feel they have been cheated out of last years peak ,(in spite of those sellers coming out good in terms of where real estate will be in a year ).
So it’s all perception . Your post is true and this” psychological trick ” has been studied by the psych world forever . Since your post addressed the long term human struggle between the “Id” and the “super ego ” , I felt it had merit .
Same question can be asked about buying at the bottom.
Is “sell high” immoral ?
Is “buy low” unethical ?
What if both parties are willing, and happy to carry out the transaction?
I felt a bit odd that I was selling my home in 2003 to a mexican construction worker on an 100% IO loan. I felt the 2003 price was outrageous, but prices are 50% higher today. I suppose I could feel very “moral” now, though the wife would use a word like “stupid”.
Stupid in ‘03, but he is an God in ‘06.
The real estate industry holds themselves up as being “experts” , in the field of real estate ,and contract wise they have a duty to act in the best interest of the client. So, agents and lenders morally must be held to a high standard IMHO.
Disclose what? That you THINK the market has peaked? How could anyone know with any certainty that the market doesn’t have another run or 2 left in it?
I thought it peaked a couple of years ago, but I was wrong. Selling at the peak would be a great feat, not a human flaw, inho.
A agent just shouldn’t tell a buyer that the market will go up 20% a year. I agree that nobody really knows for sure what a market will do so thats what a agent should say . The NAR and the realtor cheerleaders were making future predictions while suggesting they were “experts” in real estate .
I sold FSBO to a supposedly savvy buyer in Jan 06 and to be honest, my family benefitted from the inflated price so morally I feel kinda good, but I know this guy will be out of the money for the next 5 yrs. He owns tons of properties which shows you that the bubble has infected even intelligent people.