Truth or Consequences

By Joel Persinger
YourRealEstateDude.com

When I was a kid, one of the game shows my parents most liked to watch was called, “Truth or Consequences.” As far as I know, that show has been gone for decades. But, what is still with us is the idea that lies can bring about terrible consequences.

On a daily basis, my staff and I work with homeowners who are in terrible fixes. In most cases they either purchased their homes using risky loans or were not entirely truthful when filling out their loan applications, or both. While it might be considered foolish, there is nothing illegal or immoral about taking out a risky loan. However, telling bald faced lies on a loan application is a crime. It’s called, “Fraud.” Some lies are as simple as indicating that the buyer is going to live in the home, when he is actually going to rent it. Others are more serious, such as the buyer telling the lender he makes more money than he actually does. Regardless of the severity of the lie, it is still a lie and can carry serious consequences when (and I say when, not if) the lender becomes aware of it.

The other notable area in which folks often get themselves into hot water is during the sales of their properties. I was reminded of this yesterday as I talked with a friend from church who had expressed a desire to purchase my car. As he marveled at the car’s excellent condition, I felt it prudent to also point out its faults. People can get excited about cars, particularly a convertible when summer is just around the bend. As evidence of this I could mention the fact that he gleefully put the top up and down several times. But, the moment I mentioned that the air conditioning needed to be charged and that the sound system was on the blink he began to take a much more serious look at the vehicle.

This is precisely the kind of behavioral shift that home sellers want to avoid. They know that home buying is an emotional process and they don’t want to chase a hot buyer away by telling him things about the house that might be bad. I’ve actually had sellers tell me, “It’s not a lie if I just don’t tell them.” Actually, it is a lie. It’s called, “a lie of omission.”

So, to illustrate how important the truth really is, it is an indisputable fact that the real estate and lending markets would not be in the pickle they are in if people had simply told the truth. Here are the facts, like them or not. Some lender’s lied when they neglected to tell their clients about the dangers of risky loans. Some buyers lied when they told lenders that their incomes were greater than they really were. Some sellers lied when they failed to mention that their homes were in worse shape than advertised. And yes, I hate to admit it, but some real estate people lied too. Even the politicians have gotten into the act by telling lies about what happened and who is responsible. Perhaps we all should have watched that old game show a little more often. As you may remember, it was called, “Truth or Consequences.”