# What liability do Banks and Estate Agents have for the current crisis



## onq (11 Aug 2009)

In theory these are two separate questions, but in reality they are merely two sides of the same coin.

Someone has said that criminal action against the bankers involved cannot happen because you cannot take people into court "merely because they did their job badly".

As someone who has been practising architecture for 19 years, I know only too well that members of my profession have been the subject of legal action whenever an issue arises where persons have relied on their judgement or their designs.

Yet in Ireland we have estate agents who in 2007 were telling us of the "value" of properties, and on a recent late-late show we had a representative on one of the leading firms not being drawn on whether it was better to buy or wait.

Similarly you had Banks lending willy-nilly even after the Northern Rock collapse, when it is reasonable to suppose that senior executives saw the writing on the wall. Why didn't European Banks steal a march on their American buddies and divest themselves of the toxic loans and derivitives portfolios at that time?

In my opinion, it seems that we have been badly served by both Estate Agents and Banks and both professions need external oversight and regulation.

Instead we see Estate Agents and Bankers wandering into the sunset, with the latter in particular still getting paid bonuses in theface of the worst economic crisis in nearly a century, possibly the worst crisis ever.

Still, let them enjoy the fruits of their labour for now. When the catastrophic meltdown comes and currencies devalue in a race to the bottom, their fortunes better be in pork bellies or wheat, because they won't be able to eat their worthless greenbacks.

In the meantime, whatever about criminal cases, where a hugely high burden of proof is required, there is certainly scope for civil cases to be brought and I wonder what measures we could take.

Mods if this post is in the wrong forum, my apologies and if so, please move.

ONQ.


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## MrMan (11 Aug 2009)

An EA makes a valuation based on what the current market points to. EA's were and obviously still are blamed for pushing the price up on property, when the fact of the matter is/was prices went up and people continued to pay the price and often beyond it. If you are in negative equity now it may seem plausible to try and lay the blame on others doorsteps, but in the cold light of day repsonsible adults should look at their own decision making processes and evaluate them accordingly.


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## Conan (11 Aug 2009)

ong,
I think the Law of Supply and Demand should be blamed.
It's not that long ago when Banks were criticised for their strict lending policies ("How do I stand for a Mortgage? You dont, you kneel"). Yes they lost the plot more recently, consumers also lost the plot ("I have to get on the property ladder"). 
So if consumers were queing to buy property (remember the photos?) and developers were building to meet the anticipated demand and banks were meeting the demand for mortgages and Estate Agents were seeking the best price for their clients (the house seller) etc, etc .... who is to blame?
Maybe its Architects..... for all the houses they designed and helped to get built, thus flooding the market????

The answer - we are all to blame for buying into the notion that we could sustain an economy built on selling houses (apartments) to each other. But then hindsight is always 20/20.


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## onq (11 Aug 2009)

MrMan said:


> An EA makes a valuation based on what the current market points to. EA's were and obviously still are blamed for pushing the price up on property, when the fact of the matter is/was prices went up and people continued to pay the price and often beyond it. If you are in negative equity now it may seem plausible to try and lay the blame on others doorsteps, but in the cold light of day repsonsible adults should look at their own decision making processes and evaluate them accordingly.



I'm not in negative equity.

I agree with your basic point, but note that its a well known fact that the man on top of the Clapham Omnibus is susceptible to marketing and in my opinion this marketing should be fair and reasonable.

I don't think that continuing to market higher and higher prices for property is either fair or reasonable at a time when comparative studies with similar properties in developed countries showed properties here was massively over-valued.

I think that people involved in the selling of property have a better-than-layperson's knowledge of the markets and should have a similarly competent knowledge of comparative values.

I think this places on them a duty of care to purchasers and its not good enough to be at the mercy of unqualified successes who take their 1.5% and don't even stand over what's in their brochures on a fitness-for-purpose basis, never mind giving fair value.

One reason its so easy to point the finger at Estate Agents is that the do have a proviliged position in the deal-making process and they are not the ordinary man on the Clapham Omnibus.

This goes far beyond the need for regulation of the profession and way into accountability and liability.

I agree that where competent professional balanced advice has been given then no blame should attach.

I think that the profession in relation to the buying and selling of property is biased in favour of the seller.

I foresee that this "natural" bias will lead to its opposite - the development of property-finding professionals.

FWIW

ONQ.


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## onq (11 Aug 2009)

Conan said:


> ong,
> I think the Law of Supply and Demand should be blamed.
> It's not that long ago when Banks were criticised for their strict lending policies ("How do I stand for a Mortgage? You dont, you kneel"). Yes they lost the plot more recently, consumers also lost the plot ("I have to get on the property ladder").
> So if consumers were queing to buy property (remember the photos?) and developers were building to meet the anticipated demand and banks were meeting the demand for mortgages and Estate Agents were seeking the best price for their clients (the house seller) etc, etc .... who is to blame?
> ...



I agree up to a point, but I don't believe that an unregulated free market is a sustainable way to trade.

When we were buying our first house we needed a minimum of 10% deposit for the bank plus a 1% deposit to secure the house from the purchaser.

We were pretty well-off at the time as a couple and repayments were not problem, but the upper limit also came into play of 2.5 times the highest earners income.

This limited the houses we could make offers on and on a market wide basis, this limited the amount of trading being carried on.

In this regard, the brakes on the headlong rush we've recently experienced used to be the banks and the landing institutions and they went west.

The result of this has been over-trading to the benefit of those that make money on the trades, not particularly those who were designing the house types.

In general the boom favoured only the few large commercial practices who geared up to do, and were given, larger schemes.

Many of these commercially-driven practices have now gone the way of the Anglo-Irish accounts.

One practice I know of has dropped from 110 to 10, another from 21 to 3.

Much of the new talent nurtured on the rising tide is now washed up on the beach in their thirties, with no jobs, no clients and no office to work in.

Its in the hope of starting something that will restrain the worst of the excesses of the market the next time around that I began this discussion thread.

ONQ.


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## MrMan (11 Aug 2009)

onq said:


> I'm not in negative equity.
> 
> I agree with your basic point, but note that its a well known fact that the man on top of the Clapham Omnibus is susceptible to marketing and in my opinion this marketing should be fair and reasonable.
> 
> ...



Sorry ONQ i meant 'you' in the general sense with regard to negative equity.
I agree with your points on regulation, i would hope that the serious downturn may provide the perfect time for which the relevant bodies can be whipped into shape and the industry given a much needed make over.

With regard to valuations there is a key player and that is the vendor. What EA would have kept any business if they tried to turn against a growing market? Buyers continually inflated prices with bizarre bidding wars, so it is not cut and dried.

On your last point i have often thought of how such a model could work, as I would like to re-enter the market with a fresh approach, but so far i'm coming up empty.


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## Lobby (13 Aug 2009)

> "I think that the profession in relation to the buying and selling of property is biased in favour of the seller."


 
Too many people forget that the EA is usually paid by the vendor hence where his responsibility lies.

Sadly through the boom, the public queued up to buy properties, you're not suggesting that EAs should have somehow "vetted" each potential buyer to determine whether or not they were suitable or deserving of the property?


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## UFC (13 Aug 2009)

The reality is buying a home is a massive decision which should only be undertaken by those who understand what they're doing, e.g. they understand interest rates can go up as well as down.

What happened over the past few years is people blindly bought houses without thinking things through or doing much research. These people are now upset this has come back to haunt them.

As someone who believes in personal responsiblity, the buck stops at the homeowners. I don't believe people should be allowed blame others for their own bad decisions.


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## PaulHoughton (13 Aug 2009)

Estate agents sell houses for the highest price they can get. They do not make the market. I don't see that they have any responsibility for what happened.

There are several current crises
*Bank solvency crisis*
The banks are responsible for overlending and making themselves insolvent

*property price collapse*
The government is responsible for providing too many incentives to buy property.
The house buying public is responsible for falling victim to irrational exuberance/madness of crowds.

*Deficit crisis*
The government is responsible for gross public overspending since 2000.
The public is responsible for choosing the government.

*sterling devaluation*
Our largest trading partner has effectively devalued its currency against ours.

*Attempt to keep banks solvent at any cost*
Our next crisis.

I doubt there is any legal liability. Bubbles happen. Most people think bubbles are a great idea until they burst.


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