Is Barry Ritholtz Right About Realtors?

“$#@%&realtors . . .%&*!! NAR . . !!#%@!! . . David Lereah . . .$#%&! . . . NAR . . . %&!!@realtors . . .%&*!! NAR.”
–“Former NAR Economist David Lereah is a Jackass,” Barry Ritholtz; The Big Picture blog (1/6/09)

As a real estate agent active in the Twin Cities housing market, I find Barry Ritholtz’s latest anti-realtor rant to be offensive. Perhaps more to the point, Ritholtz is also fundamentally wrong — and more than a little unfair (if not unjust).

Blaming realtors for the direction of housing prices is like blaming physicists for gravity, or weathermen for . . the weather.

Of course, the housing and credit debacle wasn’t an act of God, but very much man-made. Which men?

Let’s see . . .

–Who designed the securitized debt juggernaut that rained hundreds of billions in phony profits on Wall Street firms and their extravagantly paid leaders?

–Who rated trillions in such securities “Triple-A,” making them palatable to investors and banks world-wide?

–Who led Wall Street’s effort to get the SEC to relax leverage limits on investment banks, allowing them to bet $30, $40 or more for every $1 they put up? (Hint: his name rhymes with “Schmaulson,” and as Treasury Secretary he’s been using A LOT of your money to plug holes in his former company’s balance sheet.)

–Who dropped interest rates to near-zero in 2002, then dismissed concerns about the consequences of easy money and excessive debt?

–Who put millions of marginal borrowers into nothing-down, toxic mortgages that acted as kindling to Wall Street’s conflagration?

Unlike Ritholtz, I don’t see realtors‘ fingerprints on any of the above.

If Ritholtz is right that realtors somehow enabled the housing market bubble, how does he explain housing’s relatively modest appreciation the preceding 20 years?

What caused realtors to suddenly become Pied Pipers beginning in 2002, seemingly able to convince Buyers to throw caution to the wind and load up on real estate, no matter the price?

Maybe there was something else afoot. Hmm, I wonder . .

Shill or Schlimazel?

From my vantage point, realtors look a lot less like culprits or even accomplices in the housing mess, and more like something else: “schlimazels.”

For the uninitiated, a “schlemiel” is traditionally defined as the guy who trips carrying a bowl of soup back to his table; the “schlimazel” is the hapless guy whose lap it falls into.

When it comes to Wall Street and the current financial melt-down, we’re all schlimazels.

To date, millions of Americans have lost a big chunk of their retirement savings, their home equity (if not homes), and now possibly their jobs.

Professionally, however, realtors not only are the group suffering the most financially, but the ones bearing the brunt of the clean-up.


•At the market peak, in 2006, the average realtor made less in a year — about $35,000 — than some investment bankers made in a day. Of course, since then housing sales volume and prices have spiraled downward nationally, reducing realtor income by almost 50%. In the worst economy in decades, realtors by the tens of thousands are being forced to look for jobs in other fields.

•The housing deals that are being done now are disproportionately “lender-mediated,” i.e., foreclosures and short sales.

Cleaning up a spilt bowl of soup is a snap compared to cutting the Gordian knot that these deals present. In the case of short sales, getting the mortgage holder’s assent to reduce the principal owed can require getting approvals from no fewer than 15-20 lenders, who all took a thinly sliced piece of the deal (thanks, Wall Street).

That’s just one reason such deals are slow, complicated, and, for realtors, anything but lucrative (see, “Foreclosure Headache #7“; “Short Sale Hurdles”).

Personally, I think of handling short sales and foreclosures as the realtor equivalent of combat pay — minus the pay. Yet until millions of these homes are absorbed, the real estate market is unlikely to stabilize and eventually recover. And until that happens, neither will the economy.

Maybe someone should put out a bumper sticker reading, “Be Nice to Your Realtor.”

•So how are Wall Street’s schlemiels faring? Very nicely, thank you.

To pick just one, especially incendiary example: the $10 billion in TARP money handed to a single firm, Goldman Sachs, comes to about $10 million per partner. Aside from the bailout money, Wall Street stands to collect billions in fees helping Washington fix the mess it made. Schlemiels, indeed.

While many realtors are maxing out their credit cards or looking for new jobs, Wall Street’s unwise men are anything but broke. As Michael Lewis puts it, “why on earth should Stan O’Neal (Merrill Lynch), Chuck Prince (Citigroup), and Jimmy Cayne (Bear Stearns) still be walking around with billions of dollars that they never should have been paid in the first place?”

The criticisms lodged by Ritholtz and others at realtors are hardly new (“Do Realtors Really Add Value?“). But they do beg the question: if realtors are nothing more than shills or hustlers, as Ritholtz asserts, why do consumers trust (and pay!) them to handle almost 90% of all residential housing transactions?

That seems especially perplexing in an age when information about homes is both ubiquitous and free, and advancing technology has not exactly been kind to other middlemen (travel agents, stock brokers, bank tellers, etc.).

Perplexing, of course, unless realtors actually add value.

If only the same could be said of Wall Street . . .

About the author

Ross Kaplan has 19+ years experience selling real estate all over the Twin Cities. He is also a 12-time consecutive "Super Real Estate Agent," as determined by Mpls. - St. Paul Magazine and Twin Cities Business Magazine. Prior to becoming a Realtor, Ross was an attorney (corporate law), CPA, and entrepreneur. He holds an economics degree from Stanford.
7 Responses
  1. Alex Stenback

    I have been reading Barry daily since 2004. When he goes "crazy uncle" like that I just mostly ignore it. I think many others do the same.

    More importantly, for the first time in my 37 years, I now understand the opening ditty from Laverne & Shirley. For that I thank you.


    I was researching a real estate question and stumbled upon this site. I have a few VERY simple questions and can’t find the answers. I am not a Realtor, but am a prospective buyer burned out by the uninformed or the cheaters in the real estate profession.

    Can you comment on these REAL WORLD questions? My so-called Buyers agent has been lying to me.

    1) Lets say I make an offer on a house through my agent. He returns my call excitedly telling me that there are seven “hot” offers on the house and suggests that I put in another bid but higher.

    A) what if he is lying? How would I know? If he is lying, why isn’t this fraud? he only mnakes an income when the house is sold and the deal is closed. he has no incentive to tell the truth. In our state (Calif) lying is THE way to sell Real Estate.

    B) Can I subpoena the other so-called offers if I “win” the bid? I would give a high bid just to see the broker go to jail!

    2) A very close friend made a poor decision. they decided to sell their house in the terrible local market and buy a larger house that is also overpriced.

    Here is what their selling broker did. Tell me if its legal. Its a very common practice in California. if this were any ither transaction it would be am,ajpr fraud. But its real estate and Realtors have their own way of defining fraud statutes.

    The house for sale is a tract house exactly identical to most every house on the block. Two other houses, the same age and condition on the same block are for sale. This house has an asking price of $30,000 above all comparable sales within 3 months. Its asking price is also $30,000 above a house two doors over which is also for sale. The other house has a better curb appeal, fresh paint and green lawn in front.

    Guess what happened? The higher price sold! Evn though it was priced above comps and identical floorplan houses that were a better deal.

    How did they sell the house?
    The listing agent had friends put offers on the house with “subject to’s, that they could never meet—such as subject to qualifying for a loan etc. They set up a phoney bidding war between straw buyers -that only existed on paper. The only different feature was built-in appliances that were purchased through a second mortgage just before the seller filed for bankruptcy, which was months before selling the house. Luckily the materialmans lien on the appliances was never filed. The listing agent knew this, the seller knew this, and with a little digging, it was all in the public record.

    Several bad results.

    1) The multiple offers (through the listing agent) were used to justify a higher loan amount from the mortgage company.

    2) The appliance installer still has 60 days to place a lien on the house, even if title was cleared through title insurance!

    3) The comps in the area are now increasing because of the fraud involved. This increases prices for everyone in the area.

    4) In this area ZILLOW is extremely accurate and is relied upon for running about 50K too high. If you want to know what to bid, look at the Zillow price and drop the offer 50K. It won’t get bids unless you do this. The house that sold was only 25 K below the Zestimate.

    Is this ethical?

    Is it legal?

    Why doesn’t the FBI go after this freaud. The “other bidder” did not exist!

    I complained to the NAR—NOTHING

    I complained to the CAR—NOTHING

    I complained to the LOCAL association of Realtors—NOTHING

    I complained to the CAL state DRE—nothing

    The concensus was—this is Real Estate!

    Please explain how this is honest?

    A good friend made an offer on a house and is getting the same razzle dazzle treatment from his buyers agent. He asked my opinion and is madder than hell.

    by the way—in my area—thousands of houses are for sale. One in 10 houses is in foreclosure or bank owned. The only people buying are Realtors and their friends. Most everything listed on the multiple listing service is junk. Most of the available houses are not listed but vacant in an attempt to keep the inventory low.

    Eca,mple—houses in this area are listing for 480-650K on small lots. But EMPTY 7,000 sq ft lots are listed for $299. Please explain (they were originaly 30K lots in 2000)

  3. Ross Kaplan


    I’ve got a post coming on multiple offers that will address many of your questions. Also, take a look at this post (from March), which discusses Realtors who lie:

    Sorry you’ve had such a miserable, awful, experience.

    I do see “bad behavior” occasionally, but in MN I’d say it’s less than 5% of the time (it might have been 10% when the market was superheated earlier).

    Can’t speak to CA, but I’m not surprised it’s more prevalent there.

    It’s small consolation, but I do think that the relatively few scummy Realtors get busted . . .eventually.

    In MN, I served two terms on the Professional Standards board that hears these kinds of disputes, and when this kind of B.S. is alleged and proved, the realtor involved loses their license.

    The multiple offer games you reported would also seem to be a case of intent to defraud.

    The problems for a plaintiff pursuing a remedy would seem to be: 1) proof; 2) relatively small dollars involved; and 3) judgment-proof defendant.

    Say all the new appliances are $10k. Hiring an attorney to pursue a case might easily eat up most of that. Then, even if you get a judgment, you won’t collect unless the defendant has the money, or assets you can put a lien on.

    In this case, small claims court might be a good alternative — no attorney needed, and jurisdiction up to $10k.

    There are reputable Realtors out there. If you get references and interview, you’ll find a couple . . .

  4. Anonymous

    Thanks for the reply. But this is very important to me for Three reasons:

    1) The buyers agent is the husband of a woman I have known for many years and trust her.

    2) The prospective buyer is a client of mine. He is probably the most honest person I have met in years. He is scrupulously honest. He posed the question to me because although I am not a Realtor, I have been burned so many times, he trusts me. I won’t play “nice nice” like most victims. I will do what it takes to make things “right” in my own way.

    3) I have heard Realtors bragging about suckers like typical consumers, they have tried to make me the patsy several times in the past, both as a seller and as a buyer. I have leanred so many evil tricks from them, I am surprised that any of them are naiive and don’t know the games.

    I never want to be a victim again!

    When I complained to the CDE enforcement people they told me to join the crowd get a brokers license—and I could do that too. DISGUSTING and it should be first degree felony with serious penalties.

    Let me know?

    I am not aimlessly pissing on REALTORS, they have pissed on me too many times. One was the President of a Realtor Association who refused to take a complaint about his OWN misdeeds.

    Another bragged to me about HOW he rips off bothe sellers and buyers (he thought I was an “investor”, so he was bragging to get me as a client).

    I learned a few tricks of the trade —that were pulled on me.

    BTW the president of the Realtor Association? I hired an investigator and found out he had a criminal record—that was later expunged after he went to prison. Seems like he never really changed – Once a crook always a crook.

    The person who advised me of the shill offers was my daughter.

    She sold a house not worth what was offered—I know I helped her buy it. She reluctantly told me about the scheme of her listing agent—as though it was a good thing. I tiold her it was evil and a lie.

    Let me know?

  5. Anonymous

    If you ever visit California, be cautious! The Realtors, developers and builders will eat you alive.

    I have some verifibaly TRUE stories that will make you cringe. The only solution is transparency and extremely painful penalties for breaking the rules. Losing a license is not enough pain, since most Realtor associates in California are really only part time. They have other jobs. 50% of the NAR Realtors are in California. One in 25 adults is a Realtor. If one in 10 adults is a criminal, what does that tell you?

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