Dear Renter,
Youve been patient. Youve waited for the perfect time to buy a home. Well this is it. Home prices have bottomed out. Many experts see prices rebounding from current lows. The $8000 Federal Tax Credit is available for a limited time. The….. Buyers Rebate is yours when you use me as your Buyers Agent. And now Mortgages are at their lowest since 1971…Your patience has paid off!”
Seattlerenter asks if this is legal and ethical, specifically, using the phrase “home prices have bottomed out.” Since I do not practice law, I cannot answer the legal side. In this blog post, I will analyze the ethical question.
First we need to differentiate between real estate agents and Realtors. Everyone is an agent but only some are members of the National Assoc of Realtors. In order to solve any ethical dilemma, it’s important to first consult the minimum moral standard; the law. First we would consult the state agency law. Next we would look to other state laws that may answer the question such as consumer protection laws. After that, there may be a federal law that addresses the question. If we still have no answer, we would consult MLS rules. After that, we would check with our own company for policies and procedures and company ethical codes that address honesty and advertising. Perhaps we belong to a professional association. Then we would consult the ethics code of that association for guidance.
Real estate agents who belong to the Realtor association consult their Code. Here is the link to the NAR Code of Ethics.
As we see in Article 1, a duty of honesty is paramount when working with a client. But at this point, we are soliciting to obtain a client. We don’t have a client yet. Standard of Practice 1-3 says, “REALTORS®, in attempting to secure a listing, shall not deliberately mislead the owner as to market value.” In order for the marketing piece to be deceptive, the real estate agent must have known about the falling market in advance and intentionally choose to mislead potential home buyers and sellers. Since we can’t know the future, this article may not fit our situation. Article 2 says “REALTORS® shall avoid exaggeration, misrepresentation, or concealment of pertinent facts relating to the property.” If Realtors have facts that lead them to believe that now is NOT the bottom, then they might be in trouble here. For home sellers, that’s not going to be a problem (since selling NOW in a down market is better than waiting.) This would only be problematic for a buyer who was lead to believe through exaggeration, that we are at the bottom.
Here is what I’ve been waiting for. Article 12:
“REALTORS® shall be honest and truthful in their real estate communications and shall present a true picture in their advertising, marketing, and other representations.”
How would a Realtor put up a defense against an Article 12 ethics violation for sending out the above letter? Well, I suppose what he/she might do is to provide some sort of analytical proof with numbers, statistics, and graphs as to how he/she arrived at an affirmative realization that “now” is the bottom of the market. This Realtor may be able to defend against an ethics complaint by saying that he/she WAS being honest, based on the facts known at the time, and based on his/her analysis.
This leaves homebuyers to make their own decision as to if this particular Realtor’s personal opnion and analysis of the market can be verified by other third parties.
A prudent decision for a Realtor (who is going to embark on a bottom calling ad campaign) to do is to take his/her personal bottom calling statistics and analysis and have it reviewed by a neutral third party for accuracy. Similar to how we had our thesis papers reviewed by professors and then winced when they tore up our paper with obvious errors and made us do more research. We were better students because of those professors, even though we didn’t like doing the extra work, but I digress. Without neutral third party review, a bottom-call is just one person’s opinion.
If ever hauled in for a professional standards committee hearing, there would be ample documentation from a wide variety of local, state, regional, national, and international economists , Nobel Prize Winners, and other real estate industry experts who could provide solid opinions based on known facts as to if we were at the bottom on the day that marketing piece was mailed.
The third to the last step in any professional ethical dilemma is to consult one’s own set of values. What kind of a real estate agent/Realtor do I want to be? What behavior do I value in this world? For example, if I value honesty then I need to also be honest with other people, too. Careful reflection is important when considering all the possible consequences. Realtors value honesty, justice, beneficence and non-maleficence, responsibility, respect for persons, loyalty, and compassion. These values are hidden all throughout the Realtor Code. How does our marketing campaign support the values that we believe in?
The second to the last step is to make the decision.
The last step is to look back and reflect on what we did, how it turned out, and if we’d do anything different next time.
The person making the “bottom call” in the letter claims to have experts who agree with him/her. Who are these experts and where can the letter reader go to get more information? Perhaps the real estate agent who wrote the letter could provide that information in the letter.
At best, the letter brings to mind the viagra, porn, and loan mod spam in my spam bin, and I haven’t even touched the typos and the deception regarding the $8,000 tax credit.
If Realtors care about their ethics as much as they claim to, then Realtors should talk with each other about the possible consequences of calling bottom in marketing material and provide guidelines as to what research to use. It goes without saying that we would have benefitted from guidelines like this when we rode the real estate bubble on the way up.
Using the NAR’s economist as the only source would be a very, very bad decision.
I have bought and sold many dozens of properties. Since when did most real-estate agents care about ethics?
Jillayne, do you consider entries on a blog such as RCG “marketing materials”?
Personally, I do, but I know others may feel differently. For example, blogs are often seen more as opinion, even if people state things as fact in their postings…
Jillayne, do you consider entries on a blog such as RCG “marketing materials”?
Personally, I do, but I know others may feel differently. For example, blogs are often seen more as opinion, even if people state things as fact in their postings…
Hi Warren,
The National Assoc Code of Ethics is over 100 years old. They are way, way ahead of mortgage lending when it comes to helping their members with moral growth. The ethics class is mandatory every 4 years.
Hi Warren,
The National Assoc Code of Ethics is over 100 years old. They are way, way ahead of mortgage lending when it comes to helping their members with moral growth. The ethics class is mandatory every 4 years.
Hi Gene,
Yes, I do consider blogging a component of marketing for real estate agents and Realtors.
Jillayne,
I appreciated your commentary regarding this over at SB as I get ready to post my stats on my blog. As a REALTOR I find it reckless when someone is calling bottom with blanket statements and no data to back it up.
At least Ardell puts in research, posts numbers and draws a conclusion.
So as I do my own research on the Snohomish County market and post my numbers and conclusion, I shall be very careful how I present myself. I want to maintain my favorable reputation as well as become the reliable source of acurate Snohomish County real estate market statistics. I have achieved this over the last 20 years with the agents in my office and am ready to step out into the public (via my blog) and will present fair and honest data without a bunch of hype.
Glad you like my foreclosure stats.
JJL
http://snohomishcountymarketstatistics.blogspot.com/
Jillayne,
I appreciated your commentary regarding this over at SB as I get ready to post my stats on my blog. As a REALTOR I find it reckless when someone is calling bottom with blanket statements and no data to back it up.
At least Ardell puts in research, posts numbers and draws a conclusion.
So as I do my own research on the Snohomish County market and post my numbers and conclusion, I shall be very careful how I present myself. I want to maintain my favorable reputation as well as become the reliable source of acurate Snohomish County real estate market statistics. I have achieved this over the last 20 years with the agents in my office and am ready to step out into the public (via my blog) and will present fair and honest data without a bunch of hype.
Glad you like my foreclosure stats.
JJL
http://snohomishcountymarketstatistics.blogspot.com/
Regardless of the factual content of the piece, anything that leads off “Dear Renter” goes right in the recycle bin. That opening line tells me that whoever sent it has not taken the time to learn anything about me – except that I am a renter. If indeed I am.
This is lazy marketing.
Hey Jillayne.
Did you happen to see the this Saturday’s Real Estate section of the Seattle Times?
Nearly every ad that mentioned an interest rate violated the law, mostly by not prominently displaying the APR (burying the 3-2-1 buydowns and other pertinent details in the tiniest of fonts).
(Take a look and see if you agree…)
The state regulators don’t seem to care one iota about violations from real estate marketing companies when they violate the law in broad daylight.
How can you get them to care about a little mailer (of a RE agent or REALTOR), hopefully calling for the bottom of a falling market?
I also thought it an odd claim to say that “Mortgages are at their lowest since 1971”
In what way? Certainly not in loan size.
To me, it’s no different than saying, “It’s a great time to buy.”
In who’s mind? In what set of circumstances? Where? When? How? What? Why? It’s like saying, “It’s a great time to get married.” or “It’s a great time to get a puppy.” or “It’s a great time to go fishing.” Sometimes, I go fishing when I’m pretty much sure that I’m not going to catch one fish. Yet, I still go. So people go fishing simply to catch fish. I go to see the eagles catch fish. To see children (and my children) have a good time. So enjoy the mist rising off the water as the dimples of rising trout break the mirror-like surface of the still waters. To regale in Nature’s Beut….ah, I think you get the point.
To me, it’s no different than saying, “It’s a great time to buy.”
In who’s mind? In what set of circumstances? Where? When? How? What? Why? It’s like saying, “It’s a great time to get married.” or “It’s a great time to get a puppy.” or “It’s a great time to go fishing.” Sometimes, I go fishing when I’m pretty much sure that I’m not going to catch one fish. Yet, I still go. So people go fishing simply to catch fish. I go to see the eagles catch fish. To see children (and my children) have a good time. So enjoy the mist rising off the water as the dimples of rising trout break the mirror-like surface of the still waters. To regale in Nature’s Beut….ah, I think you get the point.
70ford(@show) is correct. In whose mind is it a great time to buy? This is a question everyone has to answer individually. It’s a personal decision, based on the facts and one’s personal situation. Everyone has to decide for his/her/their selves whether the time is right. The reality is interest rates are terrific, prices are down, but, at the same time, some people are feeling insecure about their jobs. If the first two things work for you and you are secure in your job and have great credit then it is a good time to make a move.
Jillayne……………..The buffet is coming to an end. This profession of “agents or realtors” is slowly going the way of the dinosaur. Selling your home for 3-7% is pure insanity. The public knows it, the agents know it, and so do you!
Google, Transaction facilitators (formerly known as Realtors/Agents), and Attorney’s are the future of real estate both working as independent contractors and neutral parties.
Research the model that Google presented nearly 7 years ago of real estate in the future and you will see why we are swiftly heading toward a Far better way to buy and sell that will be much more consumer friendly and 95% less litigation.
The collapse of the NAR and the MLS system as we know it is less then 5 years away. We will all look back and laugh at what people were paying. Unfortunately/fortunately it took a housing collapse to help speed up the process.
Soon you will see at the major Brokerages signs that state ” Assist your agent in finding your home and receive……………….or ..Buy from this office and receive….at close…………………..then Jillayne it will be over.
Time is ALWAYS on the side of commonsense.
Jillayne……………..The buffet is coming to an end. This profession of “agents or realtors” is slowly going the way of the dinosaur. Selling your home for 3-7% is pure insanity. The public knows it, the agents know it, and so do you!
Google, Transaction facilitators (formerly known as Realtors/Agents), and Attorney’s are the future of real estate both working as independent contractors and neutral parties.
Research the model that Google presented nearly 7 years ago of real estate in the future and you will see why we are swiftly heading toward a Far better way to buy and sell that will be much more consumer friendly and 95% less litigation.
The collapse of the NAR and the MLS system as we know it is less then 5 years away. We will all look back and laugh at what people were paying. Unfortunately/fortunately it took a housing collapse to help speed up the process.
Soon you will see at the major Brokerages signs that state ” Assist your agent in finding your home and receive……………….or ..Buy from this office and receive….at close…………………..then Jillayne it will be over.
Time is ALWAYS on the side of commonsense.
Most states make a distinction between misrepresentation and what is called “puffery”. In many states, puffery is allowed. I don’t remember if WA is one of them.
Jillayne, I don’t understand your statement about the $8,000 Homebuyer Credit. Isn’t it “for a limited time”?
Hi Ardell,
Yes but the tax credit is only for first time home buyers.
Roger, we’ve been down the APR road before. Turn them in to their regulator, or call them first and point out their error, make a note of your warning call, and then turn them in after repeated violations. Sometimes the person approving the ad is not mortgage compliance-savvy and just needs a gentle reminder. Sometimes it’s a choice. The mortgage industry is in desperate need of a nationwide standard of ethics like what the Realtors did 100 years ago.
Hi Ray,
Wow, that’s some prediction! We will have to check back 5 years from now to see how things turned out.
Jillayne #12,
The credit is for anyone who has been renting for at least 3 years, who hasn’t owned a principal residence for at least three years. So when mailing to renters…well, I don’t see it the same way you do. I think it’s a fair assumption subject to more detail upon meeting someone.
Her statement is less wrong than saying it is only for first time buyers, or at least equal.
Ray and Jillayne,
Florida tried that almost 15 years ago. It didn’t work, though they still have it. Long story, but trust me…not the answer 🙂 In fact it may have contributed to why Florida is worse off now than many other states as to the mortage meltdown.
Jillayne,
What about loan originators advertising historically low interest rates… is that unethical too?
And I’m not understanding your comment about “the deception” with the $8000 first time home buyers tax credit. Are you seeing something over and over again from different sources? I think the first time home buyer’s tax credit has been pretty clear–but maybe I’m missing something.
Jillayne,
What about loan originators advertising historically low interest rates… is that unethical too?
And I’m not understanding your comment about “the deception” with the $8000 first time home buyers tax credit. Are you seeing something over and over again from different sources? I think the first time home buyer’s tax credit has been pretty clear–but maybe I’m missing something.
Hi Rhonda and Ardell,
In the “dear renter” letter, the sender, by omission makes it sound like the tax credit is for all buyers. More details are needed. The letter is too vague.
Hi Rhonda,
“Rates are historically low.” What about this sentence is unethical from your point of view?
Thanks.
Jillayne, what is your opinion of:
The current commission structure as it stands?
What do you believe will happen in the next 5 years in/re to the duties of an Agent/Realtor and how they will be compensated?
What do you believe will happen to the % of litigation if we choose to end up in a “facilitator role” being neutral to both parties and utilizing attorney’s for the closing of transactions?
What do you see as the future of the MLS system as we know it?
What do you see happening to the Major Brokerages and increasing cost-cutting and office closures?
What do you see happening to the current 35k Agents in Washington State?
With the ever increasing negative press of Agents/Realtors–do you think this can change with the current commission structure?
I have a 100 questions for you. As an educator you SURELY have some educated opinions on some of these basic questions?
How much longer will people pay 1-3% to LIST in an internet society?
How much longer until Major brokerages begin giving Buyer Bonuses to buy through their office? Heck, any Skyline Agent will give 30% if asked.
How much longer will I have to hear:
I always found my home anyway!
This can’t be legal!
Why doesn’t everyone charge this?
Don’t you have to charge 3%?
What if I list with 1% to the Buyers Agent? Will my home get shown?
Fill me in…………Don’t let me think I have all the answers!
Jillayne, what is your opinion of:
The current commission structure as it stands?
What do you believe will happen in the next 5 years in/re to the duties of an Agent/Realtor and how they will be compensated?
What do you believe will happen to the % of litigation if we choose to end up in a “facilitator role” being neutral to both parties and utilizing attorney’s for the closing of transactions?
What do you see as the future of the MLS system as we know it?
What do you see happening to the Major Brokerages and increasing cost-cutting and office closures?
What do you see happening to the current 35k Agents in Washington State?
With the ever increasing negative press of Agents/Realtors–do you think this can change with the current commission structure?
I have a 100 questions for you. As an educator you SURELY have some educated opinions on some of these basic questions?
How much longer will people pay 1-3% to LIST in an internet society?
How much longer until Major brokerages begin giving Buyer Bonuses to buy through their office? Heck, any Skyline Agent will give 30% if asked.
How much longer will I have to hear:
I always found my home anyway!
This can’t be legal!
Why doesn’t everyone charge this?
Don’t you have to charge 3%?
What if I list with 1% to the Buyers Agent? Will my home get shown?
Fill me in…………Don’t let me think I have all the answers!
Sorry Ray,
Those are too many questions that are way too off topic to answer in the comment section.
Yes, I have some opinions about where we’re headed. I taught a class several years ago, just when Redfin and Zillow were picking up steam called “RE 2.0: How To Create a New Business Model.” It was a very fun, cool class, but it was not a big seller. I will tell you why off blog. What’s more important is that I believe the political structure being what it is, the bigger real estate companies and NAR will be with us for quite some time, the one exception being if we sink into a depression. Then all bets are off and those companies and associations who can radically transform will survive.
Sorry Ray,
Those are too many questions that are way too off topic to answer in the comment section.
Yes, I have some opinions about where we’re headed. I taught a class several years ago, just when Redfin and Zillow were picking up steam called “RE 2.0: How To Create a New Business Model.” It was a very fun, cool class, but it was not a big seller. I will tell you why off blog. What’s more important is that I believe the political structure being what it is, the bigger real estate companies and NAR will be with us for quite some time, the one exception being if we sink into a depression. Then all bets are off and those companies and associations who can radically transform will survive.
Jillayne, you’re not answering my question. You’re responding with one.
Let’s parse the offending postcard. I’ll put a Y or N if the language seems unethical or not:
Youve been patient = Good advertising copy. Got our attention. N
You’ve waited for the perfect time to buy a home = Isn’t this always the case, no matter what the market is? N
Well this is it. Home prices have bottomed out = Puffery to encourage inquiry and action by the reader. Y & N
Many experts see prices rebounding from current lows = fun with statistics. Everyone does this. N
The $8000 FTC is available for a limited time = Yes, so what? N
The…Buyers Rebate is yours when you use me as your Buyers Agent = ????????????????? Y & N
And now Mortgages are at their lowest since 1971 = N
Your patience has paid off = N
A couple of observations: 1) Terrible piece of writing, 2) No serious adult would spend more than one nano-second reading it, 3) Emblematic of the level of professionalism in our industry.
This is a great ethical debate to open. Thank you for your thoughts.
Great Q&A going on. Thanks for the help.
Keep posting!!
James,
I assumed the “buyers rebate” was more specific in the letter, as in “the agent suzie buyer’s rebate of x cash toward closing costs”, but Jillayne left that part out. It could depend on the purchase price or seller offering amount, so it’s possible the amount was TBD.
Jillayne:
The regulators have not made illegal advertising a high priority. I have concluded it is a poor return on my investment of time to regulate the industry, in the absence of their support, so I have curtailed my efforts. There are certainly more fullfilling hobbies to pursue.
Evidently there is little interest or incentive among the real estate marketing companies to stay in compliance, or to enforce compliance against one another. The same may be true among mortgage advertisers, as there is ample evidence of deceptive and illegal advertising in that arena as well.
Calling the violators is largely a waste of time, as you and I have both discovered.
As we have so painfully learned, the market place has it’s limitations at restricting harmful economic behavior, and we must have meaningful government regulations and enforcement.
Frankly, absent government policing, the best solution I can come up with is to the make the media carrying the advertisement liable for violations of the law. Otherwise, the benefits for each individual to cheat outweighs the calculated costs of getting caught. As it stands now, the media is explicitly absolved of ANY responsibility for advertising misleading credit terms.
Regarding the phrase about the $8000 credit (# 11 and 12), I side with Ardell. The credit is a little more complicated than the phrase “first time home buyers” covers. Oddly, it is more generous. The presumption that occupants of a rental community are largely qualified for the bonus is supportable, even if some residents are not.
For example, a person could be the owner of a residential property, and still qualify for the bonus, provided the property the person owned was NOT their primary residence.
Rhonda, regarding “rates are historically low”, I prefer the phrase “rates are hysterically low”, as it gives plausible deniability and adds a bit of fun. 🙂
Seriously, the phrase is sufficiently vague to pass muster legally, and ethically. Of course, it loses it’s impact with tiresome repetition, as I have heard that phrase far too often.
Still, it would be easy to disprove the statement. Are rates at 1%? They were a few years ago, according to some mortgage advertisers, and no such rate is currently available. Of course, that depends on the interpretation of “rates”, a term that is inherently vague.
Finally, Realtors interests are largely to get the market moving and making transactions happen. They promote that activity. Classical economic theory tells us that when trades happen in the absence of coercion, and with reasonable disclosures, both parties to the trade emerge happier, and the world presumably is a better place for it. It does not guarantee that outcome, nor can it.
Let them promote the benefits of engaging in trade, while requiring them to make reasonable disclosures, in compliance with the law.
It likely is be a great time to buy, and a great time to sell…for any individual buyer or seller. It cannot be true for all individuals, nor should we subject it to such a stringent test.
Jillayne:
The regulators have not made illegal advertising a high priority. I have concluded it is a poor return on my investment of time to regulate the industry, in the absence of their support, so I have curtailed my efforts. There are certainly more fullfilling hobbies to pursue.
Evidently there is little interest or incentive among the real estate marketing companies to stay in compliance, or to enforce compliance against one another. The same may be true among mortgage advertisers, as there is ample evidence of deceptive and illegal advertising in that arena as well.
Calling the violators is largely a waste of time, as you and I have both discovered.
As we have so painfully learned, the market place has it’s limitations at restricting harmful economic behavior, and we must have meaningful government regulations and enforcement.
Frankly, absent government policing, the best solution I can come up with is to the make the media carrying the advertisement liable for violations of the law. Otherwise, the benefits for each individual to cheat outweighs the calculated costs of getting caught. As it stands now, the media is explicitly absolved of ANY responsibility for advertising misleading credit terms.
Regarding the phrase about the $8000 credit (# 11 and 12), I side with Ardell. The credit is a little more complicated than the phrase “first time home buyers” covers. Oddly, it is more generous. The presumption that occupants of a rental community are largely qualified for the bonus is supportable, even if some residents are not.
For example, a person could be the owner of a residential property, and still qualify for the bonus, provided the property the person owned was NOT their primary residence.
Rhonda, regarding “rates are historically low”, I prefer the phrase “rates are hysterically low”, as it gives plausible deniability and adds a bit of fun. 🙂
Seriously, the phrase is sufficiently vague to pass muster legally, and ethically. Of course, it loses it’s impact with tiresome repetition, as I have heard that phrase far too often.
Still, it would be easy to disprove the statement. Are rates at 1%? They were a few years ago, according to some mortgage advertisers, and no such rate is currently available. Of course, that depends on the interpretation of “rates”, a term that is inherently vague.
Finally, Realtors interests are largely to get the market moving and making transactions happen. They promote that activity. Classical economic theory tells us that when trades happen in the absence of coercion, and with reasonable disclosures, both parties to the trade emerge happier, and the world presumably is a better place for it. It does not guarantee that outcome, nor can it.
Let them promote the benefits of engaging in trade, while requiring them to make reasonable disclosures, in compliance with the law.
It likely is be a great time to buy, and a great time to sell…for any individual buyer or seller. It cannot be true for all individuals, nor should we subject it to such a stringent test.
Hi Roger,
The state regulators have far more serious problems to deal with when compared to false advertising….unless the false advertising is a serious threat to consumers. They have to triage the complaints.
If those who are left standing in the mortgage industry want to stop deceptive advertising, then they should take a look at how the Realtor Code addresses ethics in advertising, write a code, and self-police.
Yes, it does take time. Time is money. If we don’t want to do something, we can pay someone else to do it for us. That’s why professional associations (such as the Realtor organization) collect dues: To pay those people to do the work that we don’t want to do.
IF advertising ethically is important to the mortgage industry, then the mortgage industry needs to do something about it themselves instead of pushing this all onto the state.
IF the industry wants the state to do it’s job, then be prepared for harsher laws and HIGHER state fees.
Pay a professional assoc or pay the state. Any industry is far better off self-regulating something like ethics in advertising instead of letting the state do it because costs will be lower and it will be out of the public eye.
The industry has to WANT to do this, though.
At this point, the industry seems FINE with allowing things to be what they are. The downside is that consumer respect and trust is lower when compared with professionals who are self-regulated, IMHO.
Hi Roger,
The state regulators have far more serious problems to deal with when compared to false advertising….unless the false advertising is a serious threat to consumers. They have to triage the complaints.
If those who are left standing in the mortgage industry want to stop deceptive advertising, then they should take a look at how the Realtor Code addresses ethics in advertising, write a code, and self-police.
Yes, it does take time. Time is money. If we don’t want to do something, we can pay someone else to do it for us. That’s why professional associations (such as the Realtor organization) collect dues: To pay those people to do the work that we don’t want to do.
IF advertising ethically is important to the mortgage industry, then the mortgage industry needs to do something about it themselves instead of pushing this all onto the state.
IF the industry wants the state to do it’s job, then be prepared for harsher laws and HIGHER state fees.
Pay a professional assoc or pay the state. Any industry is far better off self-regulating something like ethics in advertising instead of letting the state do it because costs will be lower and it will be out of the public eye.
The industry has to WANT to do this, though.
At this point, the industry seems FINE with allowing things to be what they are. The downside is that consumer respect and trust is lower when compared with professionals who are self-regulated, IMHO.
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Here’s my lunch break comment on the ethical nature of ads:
Laura Kiel at Kiel Mortgage circumvents all the puffery of advertising of rates by essentially saying in her recent ads that advertising rates and programs are essentially “backwards” looking of what was or may have been offered and that free appraisals or other gimics offered are a sham of advertising. Borrowers are paying for it one way or another.
I tend to agree with her. Unfortunately, consumer psychology is greatly tuned in to “rates.” So much so, that some consumers foolishly pay huge fees in discount points obtain a rate that may take years and years to recover their costs. But, they can certainly tell their neighbor that they got 4.625% when they could have received a rate at 4.875 costing them zero in discount points. So, my guess is that those who advertise rates even though they may be backward looking or only available to a select group of borrowers (say 740 mid FICO borrowers), they are probably highly effective.
Here’s my lunch break comment on the ethical nature of ads:
Laura Kiel at Kiel Mortgage circumvents all the puffery of advertising of rates by essentially saying in her recent ads that advertising rates and programs are essentially “backwards” looking of what was or may have been offered and that free appraisals or other gimics offered are a sham of advertising. Borrowers are paying for it one way or another.
I tend to agree with her. Unfortunately, consumer psychology is greatly tuned in to “rates.” So much so, that some consumers foolishly pay huge fees in discount points obtain a rate that may take years and years to recover their costs. But, they can certainly tell their neighbor that they got 4.625% when they could have received a rate at 4.875 costing them zero in discount points. So, my guess is that those who advertise rates even though they may be backward looking or only available to a select group of borrowers (say 740 mid FICO borrowers), they are probably highly effective.
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