Who is at fault

We have all heard a lot about the economy in the past few months. The crash of the financial system, the downfall of the auto industry, and the disaster in the mortgage and real estate industry. Who really is at fault in all this? I am sure the answer many years from now will say the fault is many things that combined to cause the crash.

Let me suggest just one thing that caused it - Greed. It does not matter what area you are looking at, whether it is the financial institutions, the stock market, the mortgage industry, or the real estate industry - the answer is greed. Everyone wants to make as much money as possible as quickly as possible.

Let me give you one of many examples:

- a man is from a third world country (he does speak English).

- he wants part of the "Great American Dream" to own his own home.

- his income is $1500 month and will not change much.

- he has a little money saved up.

- he wants a home even though he has a place to live provided by his employer.

- oh yes, he is single and will always be single (part of his job description).

- he finds a 6 bedroom house for a reasonable price.

- he makes an offer through a real estate agent who knows what his income is.

- a mortgage agent gets him a loan (how I do not know).

- his payment on the mortgage is $500 more that his income.

- he allows relatives to use the house as a type of group home - against zoning codes.

- all works out fine for a while.

- he gets greedy and buys another home for even more money - his income has not changed.

- now, he has over $500,000 of mortgage with an income of $1500 per month.

- his relatives move out leaving him with the 1st house.

- he is renting the 2nd house - unknown the income from it.

- he rents the 1st house to someone who runs group homes.

- the rent on the 1st house is less than his monthly payments.

- the utilities stay in his name.

- eventually the city tells him to stop the illegal group home.

- now he finds out the utilities have not been paid for some time.

- he now owes the mortgage, the back utilities, and is way over his head.

- he is about to loose the house and more.

Observation one - he should have never been given the original mortgage for the home. It appears that the real estate agent and mortgage agent just wanted their commission.

Observation two - he did not know or understand what he was doing when he purchased the two homes.

Observation three - he does not understand the landlord tenant laws of the State of Washington and how much trouble he can get into by doing things wrong.

Who do we put the blame on: the home owner? the real estate agent? the mortgage agent?

Well, I have to put the blame on all three but mostly on the real estate agent and the mortgage agent. They both should have told him that he could not afford the home or the mortgage.

The outcome was very predictable - even without the current economic crash.

Yes, I know there are good mortgage agents and good real estate agents out there. Unfortunately, we do not hear a lot about them. It is the greedy ones we hear the most about.

Some of my fellow real estate agents will not like what I have said. Unfortunately, in the recent real estate boom, it created a lot of greedy agents.