It’s sad to hear about anyone losing a home to foreclosure.  And right now, there is a lot of the “Who’s to blame” talk in the media.  While I think the homeowner takes the greater part of the responsibility and suffers the most serious consequences, they do have a lot of help getting them into the situation.  Behind every new homeowner, there is a cast of real estate agents, lenders, appraisers and settlement attorneys.  And, except for the appraisers, most of these buyers’ helpers don’t get paid unless the transaction is settled.

One thing I haven’t heard is criticism of the real estate agents who represented them as buyers in their transactions – not that I think agents are really responsible for their clients’ bill paying habits.  And even though short sales and foreclosures are rare in the market I deal with, this crisis had helped me to rethink my role in counseling clients, especially first time buyers.

Most of the buyers I represent are friends and family members.  I want
to know as little as possible about their personal business.  So I
start off by asking them what they feel comfortable spending for their
monthly housing costs.  I also ask how much they want to invest in the
down payment and closing costs.  Then, I give them my list of trusted
loan officers who take it from there to work out the details.  And
virtually every time, the number the buyers give me is way lower than
the number the lender gives them.

Once we find Dream House, I see my role as doing whatever it takes to
make it happen.  And that might include advising the buyers to stretch
financially – which could involve their taking out a loan with payments
that increase over the years.

So, the decision has to be the buyers’, not mine.  And my job is to
help them understand the pros and cons, as well as the best and
worst-case scenarios – and the consequences.  I won’t sell them
anything, but will instead help them make an informed buying decision.

In the old days when I got my license, we were truly sales people.  We
represented the sellers, even if we’d never laid eyes on them and our
buyers were best buddies.  But I’ve found that the sales paradigm
doesn’t fit when I’m a buyer broker. 

So, here are my rules in dealing with my buyer clients:

Pay attention to what they tell you about their comfort level, and show
them homes that are a good financial match – even if they have to
compromise a bit on location or amenities.

If the mortgage product will involve large payment increases, will the
clients be able to pay them?  Are they on career paths that will
involve salary increases?  If they have to eat soy beans for a few
month or years, will they mind? 

How long do they plan to be in the house?   Help them evaluate the
costs of buying down a mortgage vs. the time it will take to absorb the
costs of the up-front points.

Are they planning anything that will change their earning situation,
from starting a family to retirement?  Help them figure these factors
into their buying scenario.

If they choose an adjustable loan, work out the worst-case monthly
payments after the increases go into effect.   (Maybe I’m a little
jaded here – I got my license and bought my first place when interest
rates were beginning to creep down from 18%, so I’ve seen worst-case
first hand.)

Yes, it’s important to help them get the house they want.  Yes, there
are always risks involved that we can’t protect them against.  But it’s
going to be their house and their risk, and I think it’s the agent’s
role to educate buyers on the risks, not sell them on the possible
benefits taking them.