Response to CNN writer Les Christie (August 1, 2007)
In his column found in CNNmoney.com on August 30 (http://biz.yahoo.com/cnnm/070830/083007_flippers_fuel_foreclosures.html?.v=2&.pf=loans), CNN Money staff writer Les Christie does a wonderful job of explaining just whose fault it is that the mortgage industry is in crisis. This is the news we have been waiting for! The real culprits are... No, it's not the folks who took out loans that they could not pay. And it's not the banks who extended credit to borrowers with sub-600 credit scores, knowing that the default rate for such folks is astronomical. It simply could not be the unethical mortgage brokers who gladly finance a bad loan, then sell that loan to someone else and watch it foreclose. Oh, heavens no! The sinister culprits are.... are you ready for this? Those evil folks who bought a house that nobody wanted, fixed it up, and sold it. Of course! That makes perfect sense, doesn't it?
Please pardon my dripping sarcasm in the paragraph above. But Mr. Christie's inflammatory piece is not only totally unsubstantiated, it is totally wrong. Of course there are unethical people who made money during the flipping boom. I prefer not to call them "flippers." I call them theives. These people orchestrated fraudulent inspections, paid off appraisers to inflate values, and had complicit mortgage brokers and banks backing their illegal activity. But please, let's call them what they are. Bandits. Not flippers!
The vast majority of folks who made money before, during and after the flipping boom were, and are, honest people. They are not bandits. They are entrepreneurs. Some own construction businesses. Some are teachers, policemen, store clerks and McDonalds employees. And what they have in common is the fact that they took initiative, took a risk, made some money, and improved a neighborhood all at the same time. Moreover, they made inexpensive housing available to some folks who were looking for a nice home in a rising neighborhood. To characterize these folks as a blight on the economy is simply hysterical journalism. If honest entrepreneurs put a bunch of otherwise un-sellable houses on the market, you create a larger supply. I only took one ECON course in college, but I do know that when supply goes high, price goes low. (I barely passed, but I'll bet I got that one right.) So how is it that honest folks are now the culprits for the mortgage industry's travail? That must have been ECON 201.
But everyone is looking for a scape goat, aren't they? I have confidence that the majority of Americans are industrious, honest, and can see through Mr. Christie's pulp fiction. Most Americans recognize the fact that when you buy something you can't afford, you might actually have to endure some consequences. If you walk out of Wal-Mart without paying for a stick of gum, you really can't expect that the store will be glad to let you chew it. And likewise, most Americans recognize that when someone is offering you something too good to be true, like a 1%-down loan when you have a credit score of 600, it really IS too good to be true. Don't pay for the house, don't keep the house. Gosh, with insight like that, I should write for CNN Money!
Mr. Christie, perhaps you believe it would be better for the economy if we tie the hands of entrepreneurs. Perhaps you are right - we'd be better off with millions of aging and decrepit homes dotting the landscape like so many junked cars. Mr. Christie, you owe the home flippers an apology. And you owe it to yourself to repeat the 2nd grade, where we learned that taking personal responsibility for our mistakes is a more mature approach than blaming other people.
Jim Cunningham
Jim Cunningham is the author of Realistic Flipping, a beginner's guide to flipping houses. He is also a partner at www.RealisticFlipping.com, a website which makes practical, honest advice available for people who want to try their hand at renovating homes for profit. Mr. Cunningham is an ordained minister, part time home flipper, and entrepreneur. He resides in Virginia with his wife and 3 children.
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U.S. 1 News (October 25, 2006)
"Realistic Flipping" is well-written, beautifully laid out, and chock-full of information—some of it common sense, but lots of it the hard-earned wisdom of people who have been there and flipped that. See Article
