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Home Publications Blogs Beat the Press The Realtors are Not Always Honest (Round III)

The Realtors are Not Always Honest (Round III)

Thursday, 17 June 2010 05:15

Today, USA Today printed the realtors' story (earlier it had been the Post and then Marketplace radio), so BTP repeats an earlier comment. Btw, kudos to the National Association of Realtors for getting so many news outlets to swallow their story, hook, line, and sinker. You might think that an organization that helped inflate an $8 trillion housing bubble by insisting that nationwide house prices will never fall would have limited credibility at this point, but apparently not.

Marketplace radio repeated the National Association of Realtors' (NAR) nonsense that 180,000 homeowners who purchased homes in April may not be able to qualify for the first-time buyers' credit if the original deadline that requires a closing by the end of June is left in place. The NAR wants the deadline extended to the end of September.

As noted earlier, this claim is absurd on its face. While there was an uptick of homes sales in April, this was from rather depressed levels. The April sales volume did not approach the sales levels at the peak of the boom in 2006. At that time, the vast majority of closings took place within 6 to 8 weeks. Therefore, there is little reason to believe that this should not have been the case with the April sales as well.

This is especially likely to be the case since new contracts plunged (as measured by mortgage applications) immediately after the expiration of the credit. This means that workers would be freed up to handle the contracts signed in April.

The main effect of the extension of the credit being pushed by the NAR is likely to be to promote fraud. Many contracts are likely to be backdated so it appears that they were signed before April 30th and therefore qualify for the credit. The NAR has likely exaggerated the number of people potentially affected by the June deadline by at least an order of magnitude.

Comments (2)Add Comment
written by Queen of Sheba, June 17, 2010 4:30
Dodgey real estate deals accompanied by much whining. We should be used to this by now.

In other, related news, Eric Holder announced today major action against the mortgage fraud that led to thousands of people losing their homes and jobs.

"During the enforcement effort, 1,215 criminal defendants responsible for $2.3 billion in losses faced some type of legal action," according to the statement released today. The crackdown, dubbed Operation Stolen Dreams, also included 191 civil cases resulting in the recovery of more than $147 million.

I hope half the DOJ attoreys are working their way down the food chain to the mortgage brokers and appraisers who contributed to this crisis, and the other half are working their way up the food chain to the bankers who decided to use computer programs to purchase the mortgages sight unseen (no need to actually read the paperwork) and then bundled them up and sold the packages to unsuspecting investors all over the world.

Fie on them all. I hope to see every last one of them parading around for the cameras modeling the latest in orange jumpsuits.
written by Keith, June 19, 2010 1:14
There is absolutely no reason that a closing should take longer than 60 days from contract signing. Any contract for purchase or sale that I've ever signed has closed well within 45 days. 30 to 45 days is the norm unless there is some problem with the buyer's credit or with the property title. Conceivably there could be some sort of repair agreed to that can't be done before 60 days, but that's very rare.

Even so, if you hadn't signed the contract at midnight on April 30th, you would have more than 60 days to close the sale. I can't believe that there are more than a handful of contracts signed by April 30th that won't close by June 30th. And any contract that can't close in 60 days probably won't close, ever.

I can't see any legitimate reason for extending this deadline. I can see at least one illegitimate reason. If you sign the contract May 30th and back-date it to April 30th then you would need the extra time to get everything done before you close.

Congress shouldn't allow the extension. But if they do, they should require the borrower(s)/buyer to have applied for financing prior to May 15th. Then the buyer, his/her realtor, and the head of the financial institution office where they applied would all have to swear that the application was made before May 15th under the penalty of perjury. The application for financing would also have to have been for the purchase of the actual property they close on. It can all be faked if someone wants to badly enough, but at least you have them all for perjury if proof is found later that the financing application was back dated.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.