By Rick Sharga
RISMEDIA, Nov. 8, 2008-Despite his lame-duck status, George W. Bush, president of the United States of America, is still arguably the most powerful man in the world-at least for another two months. Secretary of the Treasury Henry Paulson and Federal Reserve Chairman Ben Bernanke have more influence over U.S. and international financial market performance and monetary policy than almost anyone else.
Yet, for all the influence and all the resources at their disposal, these three powerful men have been largely ineffectual in their efforts to stave off an economic meltdown far worse than anything seen in several generations.
Bernanke has slashed Fed funds rates, flung the discount window wide open and orchestrated buyouts of once-dominant financial institutions. Paulson fired his infamous “bazooka” and took Freddie Mac and Fannie Mae into conservatorship. Over $1 trillion has been earmarked to prop up the imploding housing and financial markets. Have all these efforts been for naught? And if these powerful men have been unable to turn the tide, who can?
The Butterfly Effect
An offshoot of Chaos Theory, the Butterfly Effect suggests that small variations of the initial condition of a system may produce large variations in the long-term behavior of the system. A butterfly’s wings might create tiny changes in the atmosphere that, ultimately, alter the path, delay, accelerate or even prevent the occurrence of a tornado in a certain location. The flapping wing represents a small change in the initial condition of the system, which causes a chain of events leading to large-scale alterations of events. Had the butterfly not flapped its wings, the trajectory of the system might have been vastly different.
Real estate professionals have a once-in-a-generation opportunity to break out of their cocoons and become butterflies, altering the course, slowing down or perhaps even preventing severe financial storms from devastating their neighborhoods, cities and states. One flap, one home, one family at a time. And the place to start this chain effect is in the foreclosure market.
Agents of Change
Think about what happens when you conduct a successful short sale: the homeowner is spared the emotional and economic trauma that comes with foreclosure and eviction; the lender saves tens of thousands of dollars in legal and processing fees; a home buyer gets a property below market value; and you make a commission. Who loses in that transaction?
There will be over 1 million REOs on the market by the end of this year. Until this inventory is exhausted, home prices and new home sales will continue to languish. Bank-owned homes can quickly ruin a neighborhood-nothing drives property values down more rapidly than vacant homes, and nothing is more of a safety hazard than an empty, boarded-up property. The faster you can help a first-time home buyer take possession of an REO, the faster the neighborhood has a chance to stabilize and recover. Foreclosure sales, in today’s troubled market, present a rare opportunity to do well for yourself while doing good for others.
The current problem isn’t a battle between Main Street and Wall Street; it’s a systemic problem that threatens both. Like it or not, your role in this drama has shifted from “real estate agent” to “agent of change.” And you are uniquely positioned to help affect the recovery for which the powers-that-be have provided massive financing. Start flapping, and let’s see what happens.
Rick Sharga is senior vice president at RealtyTrac.
For more information, visit www.realtytrac.com.