Cleveland, Ohio may well be the foreclosure capital of the nation. More:

When asked recently just how bad it is, [County Treasurer Jim] Rokakis unfurled a six-foot by four-foot Cleveland city plot map. Each lot was covered with dots of red ink where foreclosed homes filled the plots. From a few feet away, the map looked heavily freckled, while some neighborhoods nearly melted together in crimson masses.

Foreclosures hit Cleveland early and hard. By the summer of 2007, it had four of the top 21 ZIP codes for foreclosure filings in the United States. According to RealtyTrac, the city’s 44105 ZIP, known as the Slavic Village, was the hardest hit U.S. community with 783 filings.

Think about that. Seven hundred eighty three foreclosure filings in one ZIP code. Amazing.

Today, Forbes.com asked “Where Were the Realtors?” Moreover, “How is it… that millions of borrowers took on toxic subprime mortgages that could cost them their homes? Why did their agents not warn them off?” Well, it’s pretty simple: real estate agents are not mortgage brokers. More to the point, real estate agents are not lawyers or accountants.

Sure, smart agents begin by having potential buyers sit down with a trustworthy mortgage broker. This serves several purposes: it separates those who want to buy a house from those who just want to look at them; it determines exactly how much the client can afford to spend; it enlists another person who has a vested interest in getting a deal done. On one hand, that means the mortgage broker will make sure all his paperwork is done correctly and shepherd it through the system in a timely fashion — nobody wants closing to be delayed or even canceled because the mortgage didn’t come through. On the other hand, an unscrupulous broker might be inspired to push a bad deal through the system just because it is a deal. How do you know you have a “trustworthy” mortgage broker? You have a little faith, you ask around the office, and you get a second opinion. I am not above calling my current mortgage company and asking what they can do for me on a new place.

Forbes goes on:

At the heart of the matter is the way agents are paid–traditionally through a commission, paid by the seller, of 5% or 6% of the home’s sales price. Nudging buyers toward subprime loans, or keeping mum about the risks, means more sales go through. Also, the low teaser rate on a subprime loan allows the buyer to borrow more, helping to boost sales prices and commissions. “You can’t lie,” [Wharton real estate professor Georgette Chapman] Phillips said of the agents. “You cannot intentionally mislead somebody. But you work for the seller.”

I’m sorry, that paragraph is flatly misleading. Sure, the commissions come out of the seller’s proceeds. But nobody gets paid anything until there is both a willing seller and a willing buyer. The buyer’s agent works for the buyer and has certain fiduciary duties towards the buyer he or she represents. Nevada, like many states, has a specific form outlining these “duties owed” which must be provided to and signed by the client. Sure, if the buyer has no agent, the buyer is at the mercy of the seller and his/her agent. But in an environment where there are thousands of houses available in any given metropolitan area at any given time? The buyer is free to walk away if he doesn’t like the terms of the deal. There is no deal — and no commission — without a willing buyer and seller.

And they go on:

“It is my experience that real estate agents have been pushing people to buy more expensive homes than they were initially qualified to buy under 30-year, fixed-rate [loan]s,” said [Shanna] Smith [President] of the National Fair Housing Alliance.

She recalled a young Washington, D.C., couple that had pre-qualified for a fixed-rate loan no larger than $310,000. “Their agent kept pressing them to look at $400,000-plus properties because he could get the same payment, or even lower payment, for them for a more expensive home,” she said. How? By encouraging them to get a “2/28″ subprime, 30-year loan that started with a low rate, which would reset two years later, and then again in each of the 28 subsequent years. The borrowers qualify for such a loan based on their ability to make the initial, low payments, even if they cannot afford the higher payments likely to come later. By selling the more expensive home, the agent earns a larger commission, she noted.

This behavior is outrageous, and I refuse to believe it is common. Forgive me, I am one of those radicals who thinks if you take care of the clients, the commissions take care of themselves. If an agent is pressuring you to purchase a home that does not fit your needs — and “price range” is part of your needs — you tell them what you need, you tell them not to show you anything that doesn’t fit your needs, and if they persist you tell them to get lost. You walk away. You consider reporting them to the state agency that regulates real estate agents.

I am forced to wonder if that agent is even still an agent. He’s certainly not getting repeat business or referrals from families like that.

On the second page, they make an attempt to be even-handed. “But experts are divided over the agent’s legal and ethical responsibilities”? I must not be an expert then; I know that an agent’s legal and ethical responsibility is to encourage clients to seek experts when there are issues. Oh, and the National Association of Realtors agrees. From the Forbes article, page 2:

“It’s pretty complicated,” said NAR policy expert Jeff Lischer. “A good agent, in order to get the job done and help the person buy or sell … is going to do whatever has to be done to [accomplish that].” In his view, an agent working for the seller might be free to suggest that the buyer get professional help with lending issues, but a seller’s agent should not give advice on the pros and cons of different types of loans.

The NAR has a consumers’ brochure describing the pros and cons of various loans, and another one warning home buyers about predatory lending. But Lischer said he did not know how many agents hand the brochures out. The NAR also has a lengthy code of ethics which calls for agents to “treat all parties honestly” and to “protect and promote the interests of their client,” whether the client be buyer or seller. Since it is usually the seller, a realtor could run afoul of the code by warning a buyer off a particular loan and killing a deal. Moreover, the code bars realtors from professing to be experts in areas in which they are not.

Funny, the law says the same thing. Oh, and REALTOR® is a term specifically referring to members of NAR; not all real estate agents are REALTORS®.

I guess I’m not impressed with Wharton’s and Forbes’s real estate experts.

Today’s Review Journal includes an item on getting around the Strip without a car. Now, some locals do like to go down to the Strip for shopping, dining, and entertainment. Many others work there. But usually we just drive to whichever casino or mall we are headed to and park. Parking is free just about everyplace unless you choose valet service.

Our reporter begins with the monorail, which is sort of scenic and “is cheap and quick compared to driving or taking a taxi or bus,” but “It’s not available 24 hours.” Vegas is a 24 hour a day town, for the most part. He also tried “The Deuce”, the double-decker bus that runs up and down the strip, which was cheap but “time consuming” and “mostly quiet and not that scenic, unless you like construction projects and cars. Lots of cars.” He also tried the taxis, which of course were more expensive, but “Strip cabs run quickly and the only time it’s difficult to find one is during a big event.”

It’s worth reading just for the “How to Survive” box. The only thing I see missing is “Be sure to wear sunscreen if you are out in the day.” Oh, and if you wear sandals? Don’t forget to put sunscreen on the tops of your feet.

I think by now everyone is aware that we are living in an environment of declining home prices. One aspect of that is reduced equity. This is a big problem for people who are in need of refinancing options: people with too much unsecured debt; people who need to finance a big-ticket item; people with resetting ARMs. There were hundreds of billions of dollars worth of equity loans last year, and most of the money those homeowners took out is long since spent. Because consumer spending is about 70% of GDP, a slowdown in these loans could be bad for the economy as a whole.

The other side of this coin is those people who, for whatever reason, are selling their homes. Briefly put, the market is “slow”. How slow? “At the current pace of sales, it would take more than 10 months to clear this backlog, according to the National Association of Realtors.” In Vegas, it’s over twice that. The article is pretty sobering, but the short version is that if you want your house to sell in a matter of weeks rather than months, it boils down to price. As painful as an aggressively low price may be now, you may get even less if you wait for the market to say it’s overpriced.

Homeowners facing foreclosure, along with their lawyers and accountants, need to look at the charges from the mortgage company very carefully indeed. An authority no less than Gretchen Morgenson tells us that “some consumers may be losing their homes unnecessarily or that mortgage servicers, who collect loan payments, are profiting from foreclosures,” and “lenders and loan servicers often do not comply with even the most basic legal requirements, like correctly computing the amount a borrower owes on a foreclosed loan or providing proof of holding the mortgage note in question.”

One researcher found errors or “questionable” fees in almost half the cases she examined: interest rate miscalculation; late fees; overnight mail fees; “demand fees”; payoff statement fees; property inspection fees over and over; checks lost or outright destroyed by the lender or mortgage service company. Mostly little fees here and there, they add up quickly and often exceed $10,000.

Whether you pay on time every month or are one of the many homeowners involved in a foreclosure process — that would be one out of every 196 homeowners — it is always a good idea to keep your records in order… and read those statements carefully!

I am very fortunate to have colleagues like Tim Kuptz. Nobody knows the Vegas real estate market better than him, period. Every week, he looks at the actual market data and compiles it into a “snapshot” of current market conditions. Strangely enough, I first encountered his work several years ago while trying to get some facts and figures together for my personal site; I got the figures I needed and forgot all about his ongoing research until recently, when I began to seriously pursue my new career in real estate. Needless to say, I am delighted to have access to his experience and expertise on a regular basis.

But you want to know about that “good news”, don’t you? His current data suggests that:

While we are not at the bottom of the market in terms of price, we just may be at the bottom of the market in terms of sold transactions. This is the first step in turning the greater Las Vegas market around. Prices will continue flounder for another 6 to 8 months while resale transactions stabilize and even increase right after the first of the year.

Needless to say, I hope he’s right about that. Keeping in mind that he is specifically talking about the local housing market, the Vegas market peaked before several other hot markets, so it would be logical for it to recover a little early as well.