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04-11-2009 |
Bruce Norris is joined this week by past President and current Chairman of the Board for the National Auctioneers Association and co-founder of Williams and Williams Auctions, Tommy Williams. Bruce starts the interview by asking what auction companies miss out on when they aren?t members of the National Auctioneers Association. Tommy says non members miss out of networking, best practices, and education which furthers their professional endeavors. April 18th is national auction day and Tommy would like auctioneers to make communities aware of the benefit that auctions bring to the community. Auctions have the huge benefit of establishing market value on a certain day for numerous products and assets. They also might highlight their charity work in the community through charity auctions. Tommy feels the media picks up too much negative information about auctions and doesn?t highlight all the positives. Bruce says he read that auctions raise as much money for charities that is sold in real estate and Tommy says that is true. Tommy says auctioneers bring a very important piece of expertise to nonprofit organizations. Bruce asks if Realtors view auctions as competitors or partners and Tommy thinks too many see auctions as competitors. Tommy says there is fear that auctions establish market value and sometimes people don?t want to really know that actual value. The real estate community wants to not take the hit. Bruce says he?s baulked at final bids before and most times he paid for not selling at that time. Tommy says all of us have been in that situation. Usually, the public will tell the truth and auctions are the best barometer for prices and it will also tell you where price trends are going. Bruce asks if women are getting more involved in auctions. Tommy says this is a growing trend as it used to be a male dominated field. Tommy says 20-30% of classes for auctions are now women. Bruce asks about legislative issues that are affecting auctions in general. Tommy says that when legislation postpones the sale of assets it usually means there will be net price deterioration. Real estate is very fragile and unattended and vacant homes tend to lose value. Bruce says Fannie Mae and Freddie Mac postponed auctions for their properties but in April have started back up. Doing this moratorium cost them money. Tommy says their unwillingness to accept market value has cost them millions. The more they postpone, the worse it will get. Bruce says he read the auction magazine that in the last few years $270 billion worth of assets were sold. Tommy says this is not a record but getting close. There?s been steady growth in the total dollar sold at auction. 2008 saw prices for assets decline so volume went up but prices were down due to devaluation. So in volume, 2007 and 2008 were record setting years. Bruce talks about trustee sales and how the lack of advertising doesn?t help the cause. Bruce asks if the National Auctioneers Association has any intent to try and get involved in the trustee sale process. Tommy says that was one of his main goals as President was to do away with the traditional foreclosure process. If the home was sold at the trustee sale to an end user it would save the mortgage holder at least $15,000 in transaction fees. This is not including price declines. This would be of huge benefit to the mortgage industry as a new loan with a new end user would immediately take the property. Bruce talks about current laws and issues of cities hiring people solely to write fines to homes that are considered blight and that are violating codes. Tommy worries that these types of laws only makes lenders not excited to loan which further exacerbates the lending policies we currently face. No one will want to lend in these areas. Bruce asks Tommy if he?s nervous about a shift in the American perspective. Tommy says he is concerned that capitalism and private enterprise is something that Americans are now wondering if they should be in favor of. Bruce says he?s concerned as well for some of the things that he?s seen and hopes we can solve some of these issues soon. At ?I Survived Real Estate 2008? several solutions were presented but none have been implemented. Bruce things banks could save themselves so much time and money by doing so. Tommy talks about his pre-foreclosure auction concept. Some Realtors are doing something very similar without approval. Tommy says they?ve implemented something very similar in their company and they?ve tried it out with consumers. As soon as a consumer was falling behind, Williams and Williams worked with the consumer to present the property to the public as well as possible. The final offer was presented to the lender. However, the loan servicer is typically the decision maker and is far removed from the actual decision maker. The goal needs to be lenders getting rid of this stuff as soon as possible to get things moving. This particular solutions gets a new person in the home right away. For more information visit williamsauction.com or thenorrisgroup.com. Join us next week for part two with Tommy Williams. |
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04-04-2009 |
Bruce Norris is joined this week by David Rosnik, Economist at the Center for Economic and Policy Research. Bruce talks about reading several years back that the Baby Boom generation was worth trillions and in great position to retire. David says the Baby Boomers have a fair amount of wealth and every generation typical has grown in wealth over the years. Baby Boomers, however, have been recently hit by the stock market and housing bubble that has caused some great losses. In a recent report written by David and his team on this very issue, it says the Baby Boom situation looks much bleaker than 8 months ago. Bruce asks how they are coping with this fact. David says the Baby Boom generation has been witnessing the trend for two years. Last summer the savings rate started to increase and consumption has really slowed. The full effects of this contraction in spending and consumption has yet to fully hit the market. David says he?d like to see the government continue the money stimulus and look into subsidizing shorter work weeks, vacation, and sick leave. Bruce asks if the wealth members of the Baby Boom generation would be harder hit by stock prices and the poorer be more affected by the real estate declines. David says the wealthiest are indeed more likely to own stock but are also more likely to be home owners. The bottom 1/5 of households could get completely wiped out with foreclosure. Bruce asks David how he feels about recent solutions presented by the government such as the cramdown. David says he?s not so concerned but would like to see the homes go back to the bank and perhaps the individuals getting to stay in their homes and pay market rent. David says the bank doesn?t want to try to take it over and sell the property in this market. By keeping the homeowner in the home, it?s a win-win situation. Bruce brings up that the prices are very skewed in California. David says the bank just needs to decide how they want to take the loss. By not making this mandatory the banks would not participate as they are being a stubborn. Bruce asks how the lenders would react if this was made mandatory. How much would then be available for lending? David says there will always be solid prospects and that it wouldn?t really matter. Bruce asks David about people stating their income and if they should be held responsible for that. David says that lenders were more responsible for that as he understands it. When real estate was headed up, it didn?t matter and no one cared. This is an example of an unsustainable home bubble that people refused to acknowledge. David created a housing cost calculator which compares owning vs. renting the same home. Bruce asks if the price to own is much more than renting. David says historically it hasn?t been that different. David says when it went way out of whack that it was almost guaranteed that there would be loss. Bruce asks if bubbles ultimately benefit people. David says bubbles that are uncontrolled is a problem. Bruce says many were refinancing and spending the money. There must have been a short-term streak of wealth. David says people thought they were very wealthy and savings rates went way down. Bruce asks if there should be some acceptance of risk when any investment is made. David says experts gave people a lot of bad advice and since there was a lack of an alternative voice, it wasn?t very fair. People were told that real estate was the way to wealth. Bruce asks if people should absorb that risk or if there is a backstop to save them. David says Social Security and defined benefit plans act as that backstop. Personal savings is only one alternative. David explains the difference between defined benefit plans versus defined contribution plan. Bruce says that guarantees of payout were as good as investments made. David says the bubble market really hurt these potential retirement funds. When things get so out of line, people make bad planning decision. Bruce asks if defined benefit plans for cities like Vallejo that just declared bankruptcy will ever see that money. David says in California he?s not sure who is getting what. Bruce says that defined benefit programs typically have a projected return rate and almost all have seen losses. David says that those promises will most likely not be able to be upheld because of the economy. Bruce asks David is he is afraid for seniors as they retire. The Baby Boomers encompasses the 45-64 age range. The older baby boomers are about to retire so there?s a little more concern there. The younger Baby Boomers have a little more time to get back on track. Overall, they aren?t looking good so far. He says the lower 1/5 could be completely wiped out because of foreclosure. Bruce asks if we should be worried about the Social Security Program since the baby Boomers will have less population paying for benefits as they retire. He says it?s nothing urgent but today the health care costs are getting worse and are more of an issue as Medicare and Medicaid need to be helped. David says socialized medicine might be a possibility since it?s worked in other countries. We have the best medicine but the worst delivery system. In David?s report entitled ?The Wealth of the Baby Boom Cohorts After the Collapse of the Housing Bubble,? David says the net worth of Baby Boomers that owned a home was less than those that were renters in 2009 which is surprising. David says wealth isn?t just in equity and the housing and stock bubble real caused a problem. More on this report at the Center for Economic and Policy Research at cepr.net. Next week join us as we welcome back Tommy Williams, co-founder of Williams and Williams auction company. |
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03-28-2009 |
Bruce Norris is joined again by upcoming 2011 President of the National Appraisal Institute, Joseph Magdziarz. Bruce asks Joseph why he?s teaching appraisal courses in foreign countries. Joseph says numerous foreign countries are asking for the education so they can find out how to write an appraisal that could be understood globally. This will allow them to participate in the global mortgage market. Joseph says the ultimate goal of an appraisal is to assign a value of an asset in the now. An acceptable margin of error for an appraisal is 3% but no more than 5%. The definition of market value is a buyer and seller under no undue stimulus coming to an agreement on a price to be paid for an asset. Joseph talks about REOs and short sales and how they should not be factored in to appraisals as they are liquidation prices. Bruce beings up this appraisal issue which investors are having to deal with when they purchase these types of homes and then repaire them in California. Joseph says the banks should not consider REOs and short sales market value because of the repairs being done and the risk the investor takes in this market. Bruce asks if the new buyer of a fixed home is setting the new market value. Joseph says in the open market, it should but the appraisal might be different because of all glut of REO comps. Often times, appraisers are not being fair and many properties are being undervalued which is a problem. Bruce brings up the typical scenario of The Norris Group when dealing with appraisals in the current California real estate market. TNG purchases the distressed, ?as is? property from auction or from an REO agent and spends time and money upgrading the property. If TNG gets multiple offers, why isn?t it considered market value? Joseph says competent appraisers will say that that does create market value. Submitting those back up offers could really help force the appraisers make that market adjustment. Bruce asks if there is no similar inventory, what should investors do? Joseph says hire someone with specific experience with an MAI or SRA designation. Bruce talks about an area in Moreno Valley and the glut of vacant REO and ?as is? inventory. When TNG fixes something, the appraiser is typically not getting cooperation because there is no similar substitutions in the market. We?re the only fixed up property. Bruce talks about the appraisal business in 2004-2005 and how they were feeling pressure to get to a certain high number for refinances. Bruce asks if there is now the opposite pressure from banks wanting to loan less thinking the value will continue to decline. Joseph says lenders can make loans in a declining market at today?s value and shouldn?t feel like there?s excessive risk if there are the three C?s: collateral, capacity to pay, and credit rating. Joseph says he heard that appraisers were using foreclosure and short sales and these DO NOT make market value so are inappropriate. Liquidation value is a better term for these types of inventory. Bruce brings up review appraisals and how the original appraisers are worried about coming in too high for fear of being blacklisted from doing work for a certain account if the numbers are adjusted. Bruce asks about the review appraisal process and what authority they have to adjust prices the way they do. Joseph says these review appraisals have to come up with their own opinion but to arbitrarily adjust a number up or down 10% without just cause would be a violation. Many times these reviewers are not following the same license laws the appraisers are required to follow. Appraisers could ask for the review appraiser to send to them the review but most probably won?t. They are entitled to a copy of the review appraisal. Bruce asks if the review appraiser goes out into the field. Joseph says they often do the review behind a desk using AVM. This is not the same and is just an estimate. Joseph says many lenders might be looking for quick and cheap. Joseph says the lending institution or review company they pay does the review appraisal which is also causing a problem. Bruce asks how difficult it is for appraisers to work in a market with such wide swings in price, sometimes monthly. Joseph says he doesn?t know how they work in states like California. He says only the best people should be doing these appraisals. People need to use a professional appraisers and not AVMs or BPOs. Bruce asks if there are new rules for appraisals coming down the pike. Joseph say the Home Valuation Code of Conduct (HVCC) says any new loans that are purchased has to have an appraisal and any existing can be less than that. A borrower is also required to get a copy of the appraisal. Joseph said the use of management companies is causing a problem because they are keeping part of the fees that should go to the appraisers so they may be spending less time doing a proper job. Joseph says an appraisal is typically good for six months but in this market, it?s not as relevant. Bruce asks about improvements on homes above and beyond like pools and upgraded hardscaping. In an inactive market, it?s very difficult to assign a value to these extras. An appraisal will have to try and find similar comps. In this type of market, it is possible for these extras to result in little extra value. Bruce asks about ?standard 3.? Joseph says they are 10 sets of rules that govern the appraisal industry. For more information, visit appraisalinstitute.org. |
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03-21-2009 |
Bruce Norris is joined this week upcoming 2011 President of the National Appraisal Institute, Joseph Magdziarz. Bruce starts by asking what the MAI designation means. MAI used to stand of ?Member of the Appraisal Institute? but now means a members holds the highest professional designation for appraisers. The SRA designation is for residential appraisals and once again gives you the highest designation for that profession. These designations are given by mandated educations and experience. In 1989, the FIRREA Act was passed. The FIRREA Act was put in place to create barriers to entry for those seeking to become professional appraisers and also to standardize the appraisal process. While it didn?t clean up the appraisal institute completely, it did put in place important systems. In 2008, the Appraisal Foundation brought education and review to a new level. This is still a work in process. Joseph says on-the-job training is probably the most important aspect of a trainee becoming competent in the world of appraisals. Bruce asks what the stimulus was behind the FIRREA Act. Joseph tells him that at the time there was huge losses going on and lenders were able to hire whoever they wanted and they sometimes had no experience. This lack of experience was seen as a huge part of the problem during the S&L crisis. Bruce talks about the current markets and asks if appraisers are taking some of the heat for the foreclosure problems. Joseph mentions the Appraisal Institute just got back from a Washington D.C. meeting with Congress and other groups in related industries. The Congressional Research Services gave them a copy of a report that was done on all the causes of the current crises. Out of 26 key areas that are listed as the cause of the real estate and mortgage backed securities issues, the appraiser world is not listed. Joseph says it?s good but it doesn?t mean the organization is perfect yet. Bruce asks if Joseph sees legislative changes coming regardless of who is at fault for the current real estate crisis. Joseph says the Appraisal Institute?s president, Jim Amorin, is testifying before the Congressional Housing and Finance Committee speaking on the Housing Valuation Code of Conduct. Bruce says in California foreclosures are a huge percentage of the for sale inventory. Often the process starts with a BPO. He asks is appraisers are part of that process. With BPOs, Joseph says there is not accountability and the requirements are different. Joseph says there are different motivations and that appraisers are required to remain unbiased. Bruce asks how Realtors and appraisers get along and if they typically agree on important issues. Joseph says the two groups differ greatly on the BPO issue and appraisers think Realtors and brokers should be held to the same standards when making real estate evaluations and appraisals. Many states have their own rules and regulations so the National Association of Realtors doesn?t have much control of this issue on a state level. There are 23 states that currently prohibit BPOs for lending purposes. Fannie Mae and Freddie Mac were unaware of this and called their management companies immediately and halted the practice in those states. Bruce says a few years ago he was at a Five Star Conference and a lender was on the stage when a broker asked why she had never gotten a listing from the numerous BPO submittals she had put forward. The lender admitted to giving the listing to the highest BPO they received. Joseph says that doesn?t surprise him. Bruce asks how much of a problem coercion is for appraisers. Joseph says it?s been a real problem lately and especially in states like California. There was recently a lawsuit about an appraiser getting blacklisted because he didn?t give a lender a certain price. The Home Valuation Code of Conduct should address this as a new hotline will be created so appraisals can report this when issues like coercion arise. Joseph says there could be a penalty if an appraiser was caught adjusting numbers or was influenced. The other side is not currently help accountable and that should change. Bruce says he had read that appraisers may soon have to be bonded and asks how that would change the appraiser business. Joseph says it would be devastating to the business. This would raise an appraiser?s overhead $16,000 and that would be passed on to the customers. The lenders should be the one with the bond since they approve the loan. Bruce talks about the cramdown in which a current appraisal is necessary. Joseph says it?s excellent for appraisers but it hasn?t passed it yet. Too many people did home valuation models and BPOs and not professionals appraisals. It would have helped. There is a downside to cramdowns so he?s waiting to see what happens. Bruce asks about valuations models. Joseph says sometimes they are very good and sometimes they are really bad. Areas like San Diego where there are a huge amount of dissimilar properties in a neighborhood make these models less effective. AVM is a type of regression analysis reliant on historical data so it?s not always current. Sometimes these models aren?t updated for sometimes months. Bruce asks if this is the issue with review appraisers. Joseph says this is more of an opinion and not a real estimate. AVM stands for automation evaluation model. Fannie and Freddie say they test and update their systems often but to not give details. Every time new data gets in the model changes. But once a downward trend starts, it will predict lower and lower numbers much like it did when the market was booming. It works best when markets are flatter. Bruce asks Joseph what changes he would like to say in the business. Joseph would like to see more education and higher standard of competence for all appraisers. Listen in next week as the interview continues. To read more on the Appraisal Institute, see appraisalinstitute.org. |
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03-14-2009 |
Bruce Norris is joined by expert real estate investor, property manager, and mentor, Tony Alvarez. Bruce starts by asking if teaching will be a new venture for Tony. Tony talks about The Norris Group giving him his first speaking chance several years back and how doing so forced him to think about what he brought to the table as an individual. Tony had to figure out why he was different in the business. Tony talks about how building relationships is so important and how those relationships can build unbelievable business relationships and wealth. Bruce asks why a Realtor is better off building a relationship with an investor. Tony says many of these REO houses are going into escrow multiple times. Tony has built his relationships by performing. He has never put in an offer to an REO agent he didn?t close if it was accepted. Agents begin to understand he stands for performance. That strong performance gives the agent ammunition for their asset manager and makes his offer stand above the rest. Tony discusses coming out of bankruptcy and how he started investing in Palmdale. Tony talks about how he gets in the door with REO agents. These REO agents are busy and they can?t stand newbie investors and the amateur mistakes they make. REO agents eventually end up relying and trusting an investor only after they prove they are an asset. Tony goes over an example of what he had to deal with when starting to work with REOs in the Antelope Valley in the 90s. Tony talks about approaching an REO agent and how he got the door open. One relationship made him millions and he returned the favor when the market changed. Tony and Bruce discuss trying to make connections with people. Tony says he?s never met an REO agent that was from Mars. They?re people. There?s always a way. Bruce talks about Tony and why he is so loved. Some people think Tony is the greatest negotiator but Bruce says why he?s so good is because it isn?t the intent. Bruce talks about love and what Tony brings to the table. Investors have to not only know what is working to make deals in this California real estate market but they also must understand what they bring to the table as individuals. We as individuals must know what we?re good at and why each of us is different so we can use that in our daily lives to impact people around us. Tony put it best: The one who gives the most gets the most. Thanks Tony for joining is on the radio show. Best of luck with you training in Los Angeles this weekend. Next week, a very important interview with Joe Magdzriaz from the Appraiser Institute. |
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03-07-2009 |
Bruce Norris is joined by expert real estate investor and mentor, Tony Alvarez. Tony got started in 1980 watching the infomercials on the television. He bought all the courses. It quickly led him to appraising. All the courses he had bought didn?t get him to the numbers he needed. The appraisals license really helped him take off. Tony was born in Cuba and his first exposure to real estate at a young age was very positive. In the 1980s the interest rate was high. Tony started buying little single family home sin Burbank. He expanded in ?The Flats? and kept his job as an appraiser. He started working with two gentlemen from New Zealand. These guys opened his eyes to a new world of investing. Tony learned quickly that his preconceived notion on real estate investing had held him back from what was really possible in the business. Tony goes into detail about what many new investors say and how they fear getting in the market. Tony discusses the specific questions he asks new investors because he finds they typically make the same mistakes and they just don?t know where to start. They haven?t really thought about the details of where they want to invest and say that they just want a deal. Bruce talks about how many investors are trying to either make up for lost time and/or trying to make up for losses which is not good. Hearing the desperation makes him nervous as many of these investors get led astray. Tony feels the same way. He himself struggled with this issue early in his career. Tony talks a little about his ?Third Element? concept. He goes into fear and how it really controls people and what they do and don?t do. He talks about fear and how it really gets in the way of real accomplishment. More people need to analyze how they make decisions and stop operating under fear. Tony talks about people making mistakes because they are unwilling to learn from people already in the business and do not invest in education. He talks about his philosophy on education which is very much like Mike Cantu. Tony went to Mike Cantu?s training although he?s been a land lord for years. All it takes is one simple idea that can revolutionize how you do business. Tony talks about how much money he would have saved if he had been more careful with education in the beginning. Bruce and Tony discuss how this business has changed his life and how he?s set up his properties to pay for his base lifestyle. It?s afforded him to do some interesting things. It was a little long of an introduction but more is coming next week. |
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02-28-2009 |
Bruce Norris is joined once again by California trustee sale and foreclosure expert and educator, Ward Hanigan. Bruce talks about Ward?s reputation that is so important in this business. Ward talks about why it?s so important to stay on top of current trends and how his students help him do that. Bruce talks about the foreclosure problem and all the new ?solutions? the government is throwing at the issue. Bruce brings up SB1137. Ward says this bill just delayed the inevitable and now they are coming back on the market. Bruce talks about fines being given out by the cities and how lenders are taking additional huge hits by way of code fines. Bruce met with a Southern California city that says they hired four employees that get paid only when they write code violations. He talks about a recent boot camp and a fine that was levied on the house for something silly. He sees fines upwards of $20,000 on some of these lender-owned California properties. The quantity of foreclosures is making it difficult for lenders to handle it all. Bruce talks about the cities and counties that are now getting money. Ward likes the programs because a fair amount of the money is going towards the first time buyer assistance programs which help us. There?s also an $8,000 tax credit for certain buyers. Ward?s view on the new Foreclosure Prevention Act won?t do much as there are plenty of investments that it won?t help. Ward talks about a large number of non-owner occupied homes that will be let go from speculators. Bruce asks where those stats come from because when he looks at County Records Research, Bruce finds that around 70% are owner occupied and 100% financed. Ward says some people coming to him say they were able to finance investments 100%. Bruce talks about how quickly people went from a positive equity position to negative. Bruce asks Ward how he prepared for the downturn. Ward said he lined up lines of credit in 2006 but did not borrow on them. He owned several homes free and clear. He did a little spec building that worked out well at the peak. Now he?s in a great position. Bruce asks Ward what he tells people who are having start over. Ward tells them to be a survivor and not a victim. They got caught up in the euphoria, don?t blame yourself, pick yourself up and start over. You have to get over it and get started on something new. Bruce hears every quarter that now is the best time to buy real estate. Ward says as Option ARMs adjust it will only get better. Ward likes to eat every day and he feels the same way about investing. He makes money in all times of markets. It?s about the deal considering the market you in. Trying to time bottom is not important. Bruce asks Ward how important it is to him to have his basic needs being taken care of automatic pilot. Ward?s ?Dingbat Retirement? program has made him very happy. It?s important for him to have his keepers paying him every month. He has retirement section 8 that?s done quite well. Putting himself in this position allows him to make much more calm and wise decisions. Ward rents to a very unique group of people. Ward rents to retired individuals. Ward learned early on he wanted to rent to those in their last 20 years of life. He wants people with no job and people who were settled. Retirees want peace and quite, individual units away from other people, don?t have to have a garage, no need for a yard, and overall just want something that?s simple to maintain and is cheap. Bruce asks what the age of these homes are and he says they are typically from the 20s. Bruce asks about neighborhood safety. Ward says that it?s not too important. They want level ground for safety reasons and they, of course, don?t want heavy crime areas. Bruce asks how Ward advertises his homes and gets the right people there. The inventory he has helps with that. Ward?s average turnover is 17 years. Ward is looking forward to picking up more. Bruce and Ward talk about Fannie Mae raising their loans to investor back to 10. Bruce talks about the confusion between speculator and true investors. Investors need to be part of the market. We will need more than 10. foreclosureforum.com |
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02-21-2009 |
Bruce Norris is joined this week by California trustee expert and trustee sale trainer, Ward Hanigan. Ward talks about training people about trustee sales from different states. He does so to train investors how to specialize in their area. Different states handle foreclosures differently and he makes sure he caters his training to the area they are investing. Is the foreclosure explosion good or bad? Ward says its good it?s mind boggling. Comparing it to past downturns, there?s nothing like it. Credit is frozen, the stock market is bad, and unemployment is way up, it?s a bad combination. This is definitely the worst downturn he?s seen. Bruce says the speed has been surprising too. Bruce asks what niches Ward sends people to. Ward says there?s some niches that work and some that don?t. Bruce brings up a sample of a 10 year old house that went to trustee sale that had no equity. Prices have really got hit hard. Bruce asks Ward why people are losing their homes. Ward apologizes for his abruptness but says he doesn?t really care. He tried to figure it out but the end result is still the same. You can?t change personal situations and it?s whether or not you are going to purchase the house. Ward says anything negative, including unemployment, frightens the average person. There?s less competition right now. That?s good for investors. Bruce says that many people think the foreclosure business is simple. Ward sees too many people who don?t do their due diligence and are buying seconds. Google Earth photo and Zestimates aren?t real research. No one helps other investors at trustee sales and even if they did, the person probably wouldn?t believe it. It?s a pros game and not to be taken lightly. Ward talks about trustee sale buyers and how it is typically the only thing they do. It takes a lot of research and you don?t have time to do other things. Bruce says he knows very few trustee sale buyers that do other investments strategies. Bruce and Ward discuss their first time bidding at a trustee sale and overbidding by $100. Both talk about if you don?t know your information, you better not show up. Ward teaches his students to over analyze the deal so they?re filled with confidence and nothing can rattle them. Bruce and Ward talk about lenders now lowering the specified bids at auction. Ward says they are doing it so often and frequently he?s worried about competition showing back up. Bruce asks how much warning you get. Ward says hardly any if at all. Lowering the bid at the last minute doesn?t have the desired effect. If they don?t let the investors know, the investor can?t do the research. Some lenders are posting one day in advance. Bruce and Ward discuss some new terminology they are using at the trustee sales. Drop bid means the bid is going to be dropped. It could also mean the lender can raise it on you, it becomes almost like a reserve auction and the caller is bidding on behalf of the lender. The lender, in this case, is fishing. Specified bid means the purchase price is dropped and it?s in essence an absolute auction. Ward talks about what he does with that information at the beginning of the sale. Bruce talks about title. In the trustee sale business, you MUST have access to that information. Ward says title companies need the work. Now is the time to work with them and ask for access in exchange for a partnership. Bruce and Ward talk about how Ward got into the business of foreclosures and trustee sale investing. Ward says he is getting back to trustee sales now. He says people laugh at him because he still does it but he loves it. He?s putting together funds now to invest more. Ward joins us again next week for the second interview. You can find out more about Ward Hanigan and Foreclosure Forum at foreclosureforum.com. |
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02-14-2009 |
Bruce Norris is joined once again this week by California investor and property manager expert, Mike Cantu. Bruce asks about how Mike feels about the use of leverage in this market. Mike says leverage when buying at the right price is fine. Finding the long term leverage is the issue. It?s a challenge because banks want fully qualified and documented loans and stated income is out for investors. Bruce thinks this will change because they?ll have no choice but to open up to investors. It getting over the issue of investors being considered the ?speculator? and everyone realizes we?re part of the solution. Bruce asks Mike what his long term rental would look like. Mike goes into details exactly what he looks for in long term holds including structure and neighborhood. Mike and Bruce also talks about paying a little more for property that is premium. Both talk about neighborhoods and why he likes certain types. Mike goes into a little more detail about renters and what he looks for when considering renting to a consumer. Mike goes over his job description concept. It?s truly unusual for the renters to hear what Mike has as expectations. Mike says a few people get offended by his direct questions but he ends up with some of the lowest turnover in the business. If he and the renter make it to signing the rental agreement, he hopes that the renter forgets what he looks like because he never has to hear from them and visa versa. He rarely sees many of his tenants because of correct tenant selection. Mike talks about liking to rent to blue collar workers. He loves tenants that fix things along the way and then sends him a receipt. Better to solve problems as they come up instead of letting them turn into big problems. Bruce talks about questions Mike asks that are legal on the first meeting. He says humor and personality are important. Mike talks about things you can?t talk about as outlined in the Fair Housing Guidelines. You can?t not rent to people because of moral issues so be careful and understand what you?re getting into. Bruce asks what the biggest surprise was that a renter ever gave Mike. Mike talks about a few good surprises and some bad experiences. Bruce asks Mike about Section 8. Mike says he has mixed feelings about Section 8. Mike likes to be a little more independent. He has seen good and bad. The biggest issue comes with inspections. In his experience, houses don?t break themselves. People break houses and inspectors expect you to fix what renters break. Bruce asks about rents and if he expects them to go down. Mike has seen his rental market get stronger as people move back to his area that had once gone to the high desert but have now foreclosed. He had a few vacancies but once they were fixed they were rented within 30 days. He says he?s even done a round of rent raises this year and no one has moved. The biggest mistakes are buying the wrong house and overestimating rent. You can?t be way over on rent. Investors have to do their homework on the tenant and accepting a person check for deposit and first months rent is a huge mistake. Bruce asks about who handles evictions. He?s been very unhappy with services and luckily he doesn?t have very many. He?s seriously thinking about taking them on himself again. Mike does not use a property manager and he urges people to learn what it is that an investor is about to pay somebody else to do. Mike talks to Bruce about the time it takes from an REO purchase to rehab to rental. Mike would like people to start doing houses one at a time and not try too many at once. Mike is teaching his ?Rental Properties and Management? seminar live for the first time February 21st in Riverside. This course is being presented by The Norris Group. Visit thenorrisgroup.com for more information. Next week, Ward Hanigan! |
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02-07-2009 |
Bruce Norris is joined this week by expert investor, Mike Cantu. Bruce starts by asking Mike what he did before real estate. Mike talks about his background in professional skate boarding. Mike moved from being a skate boarder to a very young start in real estate. Bruce says in the 1980s the interest rates were not that great so was curious why Mike liked real estate. Mike Cantu talks about an info commercial that changed his life and how he started. Bruce asks Mike about his education and why he is such a supporter of education since he?s already so successful in the business. Mike talks about his long-term plan. He?s really built as a buy and hold guy. Mike talks about his overall strategies and his mentors. Bruce asks about the difference between a ?B? and ?C? neighborhoods and how Mike chooses which properties he?s interested in holding. Bruce and Mike talks about how important being able to purchase below market was to his business. Bruce asks Mike if he thinks 2009 will be the best buy and hold opportunity we?ve ever seen. Mike thinks that this year will be a great year. Prices for houses are very low in some areas and rents are still relatively high. Bruce asks Mike where he?s buying his properties and how long it?s taken for some of the properties he?s buying to close. They discuss the extraordinary price declines. Mike says he?s still contacting people directly but not as much. He says 2/3 of sellers are still in denial of what?s happened in the market. Mike and Bruce discuss about carrying paper to have deals make sense. Mike says he did that he did that in the 80s and 90s but not as much recently. Bruce asks Mike if he had to do something over in 2006 what would it be. Mike says take a two year vacation! It was a lot of work for sometimes little results. Bruce and Mike talk about different strategies and how it changes the outlook on what real estate is going to be for different investors. Mike has a large portfolio of rentals and he knew prices were going to fall. Mike has a different philosophy. He wasn?t too interested in leveraging them all to the hilt. Mike says he saw leveraging work for some and others it was their downfall. Mike talks about each of his houses and having a job description for each one. Mike doesn?t plan to touch any of these. Sometimes people feel it?s sometimes unsophisticated but ?unlocking equity? has its own risks and Mike says he?s very clear on what his portfolio does. He heard horrible stories of people?s lifetime of work being wiped out by being too risky. Mike discusses his two piles of houses and his goal for each pile. Bruce asks how he thinks people can get back on their feet if they have lost everything. He says go back to the basics. Bruce asks about his calmness level over the past few years as the market has tanked. Mike says he planned for this and knew it was coming. He went through it before and was determined not to make the same mistakes. Bruce said he was glad to go through the 90s. Going through the pain makes you learn some important lessons. Going through the 90s for both Mike and Bruce gave them a very different outlook and respect for down markets and they?ve done things very different this year. Mike is teaching his Rental and Property Management Seminar for the first time in conjunction with The Norris Group coming up February 21st. More information available at thenorrisgroup.com. |
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