The Root Causes of the Underwater Homeowner...Part II

Earlier today I put out a Tweet (follow me @ForSaleByOwner) to pass along a news story about a real estate broker who apparently has been smashing the yard signs of a former employee-turned-competitor. As you can see in the video, the broker was arrested for destruction of personal property and should rightfully be held responsible for his acts.

But my attention was also focused on the other party, a Realtor who apparently works for a real estate company that promises buyers the opportunity to buy homes with only a $500 downpayment.

As I wrote in an earlier post about the root cause of the underwater homeowner, the median downpayment of a home bought in 2008 was just nine percent. For first-time home buyers, it was just 4 percent. Financial advisors suggest that buyers make at least a 15-20% down payment. So, I questioned, who has been planting the idea in so many people's minds that it's a good idea to buy a home with hardly any downpayment (29% of all buyers, by the way, put 0% down)?

Maybe it's real estate agents with businesses like 500downpayment.com? Telling people that they can buy a home with such low down payment amounts puts these folks on the path to heavy debt and, as we're seeing across the country, foreclosure and bankruptcy. The real estate commission structure is designed so that it rewards any and all real estate transaction, no matter if the buyer can actually afford the home or not.

Sadly, as long as the commission structure is maintained whereby it rewards even sly real estate sales tactics, far too many unsuspecting Americans will continue to be put in situations where they don't have the financial means to pay for their homes.

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