Marsha Norris Cancer Survivor and wife to Bruce Norris (Full Bio)

September 17^th, 2010, The Norris Group returns with its award winning event I Survived Real Estate 2010. The Norris Group has assembled an incredible line up of industry experts to discuss the state of REO from the inside. Topics will include regulatory intervention and aftermath, bulk buying, myths and facts, and opportunities emerging for real estate professionals. 100 percent of the proceeds support the Orange County affiliate of Susan G. Komen for the Cure. This event would not be possible without generous help from the following platinum partners: Foreclosure Radar and Sean O’Toole, the San Diego Creative Real Estate InvestorsAssociation and Bill Tan, Investors Workshops and Shawn Watkins and Angel Bronsgeest, Invest Club for Women and Iris Veneracion and Bobby Alexander, San Jose Real Estate Investors Association and Geraldine Barry, Claudia Buys Houses, Frye Wiles, MVT Productions, and White House Catering.

This week Bruce is joined by his wife Marsha Norris. She is the reason The Norris Group has the I Survived Real Estate events. September 17^th will be the third I Survived Real Estate event. The event will be held at the Nixon Library in Orange County for the dual purpose of discussing the future of real estate and raising money for breast cancer research.

Marsha has a very positive attitude despite the fact that she has breast cancer. Her attitude comes from her great faith that God isn’t finished with her yet. Marsha believes this positive attitude is critical, because it sets the tone for how you live your life. If we live our life positively, all of life seems better.

Many people know that Marsha has cancer, but when they see her they are surprised by the fact that she is not down trodden and sickly-looking. She never tries to get sympathy from people. Many people often forget that Marsha has cancer when they are with her. They often approach with a cautious and contained manner. Marsha’s friends refer to her as the Ever-ready Bunny, because she just keeps on going. It has been amazing for her family to observe her will to thrive.

Marsha was told she had cancer in 1995 after a breast examination. They were sitting in an office full of people with limbs missing, and it gave them a feeling that they were about to take part in a shocking meeting, but nothing could have prepared them for the information they were about to be given. When you hear that you have cancer, you go from shock, to sadness and grief, and then to anger, because you think, “Why me?” The doctor telling them about Marsha’s situation was unsympathetic and unfeeling. It was the worst experience Marsha ever had. The doctor told them that Marsha had stage 2 breast cancer, and then told them that they had an appointment open for surgery, and that he would give them a minute to make a decision. His presentation facilitated their quick exit from his office.

Dealing with cancer has constant ups and downs. There are moments where you feel that you have it control, and then you are reminded that it can show up again.

The first day is really tough. Marsha remembers leaving Bruce that day to visit her best friend, and she broke down and cried. However, she did not stay in that mood long. She was concerned about what she could do to help herself.

You cannot leave your health in the hands of just the doctors. They have protocols and they treat everyone the same, but we are not all the same. We all have different needs, and out bodies have different needs. You need to choose doctors and a team that you can trust.

When Marsha was diagnosed with cancer, they did not have the right insurance. Their insurance limited the number of doctors they could talk to, and they were rejected by a few before they went to UCLA. Her experience at UCLA was great because they treated you as a person, not a number. The UCLA specialists, including the surgeon, the anesthesiologist, the psychologist, and the cosmetic surgeon, worked at as a team. UCLA gave Marsha a lot of hope.

Marsha has been given bad information from doctors in the past. It is very uncomfortable to know that you could be told something that isn’t true. Most doctors have a specific protocol that they have to follow, and they give everyone the same treatment. The UCLA specialists actually met together as a team, and came up with a game plan that was specific for Marsha. Up until they went to UCLA, all the doctors told her that she needed a radical. The UCLA doctors told her that she did not need a radical, and that she only needed a lobectomy and radiation.

Even at UCLA, the specialists had a protocol to take Marsha’s lymph nodes, and Marsha denied them. Several years later, Marsha went to another doctor, and the first thing he asked her was, “What did you lymph nodes say?” When Marsha told him that she did not allow them to take her lymph nodes, he congratulated her and told her that in a few years doctors will not be doing that any more.

Bruce and Marsha had a really bad experience with a doctor in Riverside. Marsha told the doctor that she would not follow along with the treatments he was offering, and he got angry. In frustration, the doctor said, “If it is good enough for the celebrities that have received this treatment, it should be good enough for you.” When Marsha continued to deny the treatments he was offering, he said, “I will be sending you a letter, and you will sign it, so that I can be absolved from any further liability.” All the equipment in his office was old, and that scared Marsha.

After that meeting, Marsha got a call from the doctor who told her they were unable to get a clear margin. For Bruce, that was the worst day, because he thought the problem had been solved but then had to realize that the problem was just being pushed forward.

After Marsha’s second surgery they had a period of 5 years where she was symptom free. Doctors usually say that if you are symptom free for 5 years then you are in remission. However, in the next year, Marsha found out that the cancer had gotten worse. Bruce thinks that may have been even worse than the previously mentioned experience. After the five year period, Marsha was told that her cancer had metastasized. When they discovered that metastasized meant stage 4 cancer, they cried. They did not think there was much healthy time left. When you hear stage 4, you think, “I’m not long for this world.” A doctor even told her that her cancer was terminal. Marsha refused to be let down by this doctor. When they left the office that day, Marsha turned to Bruce and said, “I just want to remind you that we have heard this before, and I’m not buying it.” This event took place a long time ago, and Marsha is still here. Many of Marsha’s doctors are surprised by how well she has done over the last fifteen years.

Whenever Marsha goes to an alternative treatment, she gets educated about it. Marsha reads constantly about cancer and new treatments.

Marsha’s current doctor is a UCLA doctor in Rancho Cucamonga. She is very open to allowing Marsha to try what Marsh feels is best, and she also works as back up for her, and runs her tests.

Once a year, Marsha has a crisis. It is always something different, but they always figure out what to do. Marsha’s experience has made her realize how resilient the body can be if you try some different tools.

Marsha tried taking chemotherapy, and that works for a lot of people, but it didn’t work for her. She took very low dose therapy, so she didn’t get sick or lose her hair. The kind of chemo Marsha took was in a pill. She is also taking vitamin C IVs and hormone therapy. Right now, this stuff is working for Marsha and her markers are coming down.

 Fifteen years ago, many of these treatments did not exist. When Marsha first started reading about breast cancer, doctors had the mentality that once you got it you would not live for long. Marsha believes this is not just a physical issue. There are emotional and spiritual things attached to breast cancer, and having cancer has encouraged her to address these emotional and spiritual issues. 

Most medical treatments are made to deal with symptoms, but not for curing the cancer.

Marsha is always well received by the clubs they attend to each other. Marsha is always the new recipient of things like nogi juice and mona vie. Those things help you on the physical level, but having the support of people is really special. Recently, Marsha received an encouragement card from her church group, and that stuff is very appreciated. She gets something like that from friends and business partners every week, and that encourages her a lot.

When you have a problem like cancer, you have to take personal responsibility and find out what works specifically for you.

 If you ever find out that you have cancer, the first thing Marsha suggests you do is to have a good cry. That is a very cleansing thing. When you’re done crying, figure out what you can do to help yourself and start getting educated. Marsha suggests a book from Bill Henderson called Fighting Cancer Naturally.  When Marsha went to her doctor for hormone therapy, the doctor noticed that her estrogen was unusually high for someone on an estrogen blocker. He then put her on an progesteron cream which helps balance estrogen. After reading her doctor’s book, she discovered that she had been estrogen dominate her entire life, which means she was a ticking time bomb for cancer. If Marsha had ever been on birth control, her cancer would have progressed even quicker. It is a bit scary to think that doctors will give people hormones without even testing them.

If you have cancer, you need to assemble a team to help you, not just one person. Don’t just take one person’s opinion. Marsha’s doctor, Dr. Platt, got into the field of bioidentical hormone therapy because he lost his own mother to breast cancer. At that time, he did not have the knowledge to deal with this issue. People who have alternative solutions are often people who have dealt with issues surrounding those alternative solutions.

Marsha thinks her family has learned to have great faith in God because she is not afraid of death. Also, she thinks her kids have learned that there is support and love out there, and as long as you have that, you can get through anything. There are times when Bruce’s kids ask if Marsha still has cancer, because she is always doing something. Bruce and Marsha have vacations planned, and a new house to prepare for, and they are looking forward to the future.

A special thanks to our gold sponsors including Delmae Properties, Elite Auctions, Entrust California, Inland Empire Investors Forum, Keystone CPA, Las Brisas Escrow, Leivas Financial Services, Mike Cantu, North San Diego Real Estate Investors Association, Northern California Real Estate Investors Association (NORCALREIA), Personal Real Estate Investor Magazine, Realty 411 Magazine, San Jose Real Estate Investor Association, Starz Photography, Tony Alvarez – theREOmentor.com, Westin South Coast Plaza.

Tony Alvarez Author and Investor (Full Bio)

This week Bruce is joined by Tony Alvarez. Tony is a successful investor. He now lectures inside and outside California. Tony is the author of Breaking Into The REO Business. How I Went From Bankruptcy to $7.2 Million in 7 Years While Making Friends.

After the Multi-Millionaire event, Tony spent five years writing his book. Some self proclaimed real estate educators are using things like infomercials to rip people off. Tony was speaking in Vegas some time ago, and while he was there, he heard a story from a young man who spent $40,000 on real estate classes. When this young man was later sent the list of all the classes he paid for, he realized that they were taking place in different states, and he had no way to pay for the traveling expenses. Tony has met many people who are paying large sums of money to learn about real estate, and many of them are being scammed.

You do not need to pay $15,000 to learn how to buy a house. Tony’s book is 25 dollars. You can check out Tony and his website at www.tonyalvarez.com. Tony put a lot of effort into writing this book, and if you can get past the first 10 pages of his book without understanding that he really wants to help you, then you are missing the point. Tony only teaches about what he knows, and Tony knows all about the REO business. 95 percent of the houses he has bought were been bought using REO agents.

The third section of Tony’s book is called “14 distinctions for the lazy and incompetent.” Tony works very hard at what he does. Bruce thinks that Tony’s definition of “lazy” can be more easily translated to “efficient.” Tony focuses his attention on what he knows well, and he kicks everything else to the curb. Tony retires when the REO business is not performing well.

Tony was ready to sell his investment houses 3 years before the last peak. Before Tony sold his houses, Bruce advised him to hold on for a little longer. Three years later, near the end of the real estate boom, Bruce advised Tony to sell. Tony made 3 million dollars by taking Bruce’s advice. Tony claims that Bruce Norris makes a millionaire nearly every day he teaches. After Tony sold his houses, he bought two homes near rivers, and spent two and a half years on vacation. Tony works really hard when he works, and when he is done working, he stops completely.

When Bruce speaks at an event, he often gets an ovation afterwards. Bruce has noticed that every time Tony speaks at an event, Tony has a line of people trying to hug him afterwards. That is not a typical response.

Some people might feel intimidated by Tony, because they do not feel that they can compete with his personality. Tony interviewed the REO agents he worked with, and he discovered some of the reasons they chose to work with him. Perhaps the most important reason why these agents chose to work with Tony is because he never lied to them regardless of the consequences. When Tony had a problem with a deal that an agent gave him, he would schedule a meeting with them so that he could personally explain to them why he refused. Tony always explained to his agents what he needed in order to take a deal. Tony does not like telling agents that he does not want a deal; he tells them that he will take the deal when the numbers work for him.

When Tony interviewed 3 of his agents, they told him that they want to be told the truth, and they want investors to treat them pleasantly. An agent’s job is frequently unpleasant, because they have to evict families and they have their asset managers constantly complaining about their inability to sell quickly. Agents receive 30 calls a day from investors who want to buy foreclosures. You need to solve a problem for them. You cannot buy yourself a relationship if you only call for properties that will earn you an easy profit. If you do that, you will only be called for bad deals. You have to care about the agent’s success as much as your own.

Even an agent’s best investors sometimes cause problems. There are times where an experience agent will back out of a deal in the middle of escrow, because they discovered that a deal was not as good as they thought it was. Once you make a commitment to a deal, you need to stick with it regardless of the outcome. Never complain when a deal does not work out to your benefit.

You do not build relationships at the same speed you perform your business. Building a relationship takes more time. Building a relationship requires you to pay attention to the needs of another individual. Tony does research on the agents he works with. He discovered that some of them had children who belonged to baseball teams, so he donated money to the teams and bought from their candy fundraisers.

If relationships are not getting deeper, they are probably falling away. Realtors are going to first call you with their worst deals. You have to explain to them why you cannot do those deals unless they can get the numbers to work. Doing this will set you up for your first great deal.

When Tony buys a property from an agent, he will come back to that agent when it is time to sell that property. Other agents take notice to this kind of business. When the market peaked last time, Tony’s agents had no idea that he had obtained that many properties from them, and they were blown away. When he asked them to help sell those same properties, some of them were even jealous. Tony explained to them that he could not have obtained these properties without them.

Always thank the agents responsible for your success, both privately and publicly. When other agents notice you doing this, they start asking questions about what you’ve done. One of the agents that Tony worked with gained $500,000 in commissions within weeks, because the properties sold so fast. Tony did not have to do that, but in his mind, that is the only fair way to do business. The 1980s version of Tony would not have done this. Back then, Tony would have been selling his properties on his own, and squeezing every penny from the Realtors he worked with.

Tony states in his book that he is “relentless in loving the people [he] meets.” Tony believes that if he is not doing this, then he is not doing his job. Tony does not feel alive when he is not doing that. When you are kind to someone, it positively affects yourself, the person you are kind to, and the witness. Tony believes in a Creator, and he believes that if the Creator created you with that kind response to love, then you should not ignore it. The love you give others will increase your own happiness, and Tony does not believe that there is any other true recipe for success.

Tony’s book is called Breaking Into The REO Business. How I Went From Bankruptcy to $7.2 Million in 7 Years While Making Friends.

For more information about The Norris Group’s California hard money loans or our California Trust Deed investments, visit the website or call our office at 951-780-5856 for more information. For upcoming California real estate investor training and events, visit The Norris Group website and our California investor calendar. You’ll also find our award-winning real estate radio show on KTIE 590am at 6pm on Saturdays or you can listen to over 170 podcasts in our free investor radio archive.

Tony Alvarez Author and Investor (Full Bio)

This week Bruce is joined by Tony Alvarez. Tony is a successful investor. He now lectures inside and outside California. Tony is the author of Breaking Into The REO Business. How I Went From Bankruptcy to $7.2 Million in 7 Years While Making Friends.

Tony never thought he would write a book. He began considering to write this book after Bruce asked him to speak at the Millionaire Maker. This offer made Tony nervous, because he just thought of himself as a regular person, not a successful business man. Tony was worried about speaking in front of a large group of people, but Bruce helped him to calmly think about exactly what he did to succeed. Bruce structured the Millionaire Maker event so that the audience could analyze each speaker and find at least one successful person that they could replicate. He also was hoping that the audience would be able to take advice from a variety of very different and successful people.

Tony was the last man to speak at the Millionaire Maker event. Bruce assigned Tony the last position because he knew that no one would be able to match Tony’s story. Before he began to speak, he felt nervous and frozen. The reaction the audience had to Tony’s story surprised him immensely. One of the audience members actually stood up and requested that the event organizer cancel the next speaker, so that the audience could hear more of Tony. Tony feels that Bruce has a great talent for recognizing the talents of different individuals.

Tony’s parents traveled to Florida from Cuba in 1960. Because Tony’s parents wanted him to assimilate into the American culture, they quickly moved to Massachusetts. Tony’s family was very poor. His whole family slept in a 10×10 room, and he shared a kitchen with other families. However, he did come away with a sense that opportunity was out there. His family did not complain about anything. Tony’s first playground was the alley behind the International Institute, and he was ecstatic to be there. All of his clothes were donated to him by the Catholic church.

Tony’s parents bought their first home with no down payment. They were told that they would never have anything of their own unless they bought a home rather than renting. Tony’s father taught him to work harder than anything else, and stay focused on what you want to accomplish. Tony’s father is all about people and relationships. His mother was a maid for Phillip’s Academy, where the Kennedy’s visited occasionally. Tony’s grandmother was diagnosed with terminal cancer, and she wanted to die in Cuba, but she couldn’t afford the ticket. While Tony’s mom was working at the academy, she met Bobby Kennedy and befriended him. When the Kennedy’s found out that Tony’s mom was from Cuba, they were more interested in her than she was in them, because she didn’t know who the Kennedy’s were.

Tony’s mother told him that you can accomplish anything you want to in life, so long as you learn to love other people first. That is exactly what Bruce has observed. Bruce and Tony’s work is not about a manipulation, it is about a true concern for the people working with you, and people can sense that kind of concern.

In the 80s, Tony was in the business for the money, and he didn’t pay much attention to the people around him. He eventually left the business because he got burnt out. He no longer wanted anything to do with real estate. He invested all his money into another business and lost it all. When he started investing in real estate again in 1995, he wanted to find a better way of doing business. He did not want to make money at someone else’s expense. He started buying in the Antelope Valley which was known as the foreclosure capital of the United States. People were fighting tooth and nail over all the HUD homes. He decided he did not want to do that, and he discovered these people called REO agents. Tony realized that these brokers needed to have someone who would buy the REO inventory from them. However, you have to be a certain kind of person in order to gain their attention. He discovered that the personal attributes these agents were looking for were the same two attributes his parents had instilled in him. You have to be a hard worker and you have to care about other people. You need to have just as much concern for the success of your partners as you do for yourself. The majority of Tony’s business life revolves around answering his phone, saying “How are you doing? How is your family?”, and saying, “Yes, I will take that”, or “No, I don’t think that is right for me.” When you care about your business partners, they will start caring about you.

When Tony chose to re-enter the real estate business, he began looking for where the opportunity was. At that time, the Antelope Valley was the land of opportunity. The first thing he did was he found a home for sale. The first “for sale” house he found had 3 bedrooms, 1 bathroom, and was selling for $37,000. That house would have cost $100,000 to build that day. The rent was anywhere from $650 to $850 depending on who he wanted as a tenant. This got him excited because he was looking at his second opportunity to succeed.

When Tony left the real estate business long ago, he was very emotionally damaged by his failure. He declared bankruptcy and began working at a pizza business. When you lose everything like he did, you wake up every morning and disgrace the image you see in the mirror. You lose the ability to trust your own decision making.

Coming out of Tony’s life downturn, he learned that he was still the same person who his parents wanted him to be. The love he had was the ultimate tie breaker that opened the door to opportunity. People think they have to assemble all these pieces to become a great investor, but once you develop trust with your business partners, you can assemble those pieces later.

When you have nothing to brag about, like Tony when he restarted his real estate career, all you have to convince an REO agent that you are the real deal is your own personal attributes. REO agents hear enough about personal accomplishments from people and they discount it. People can tell when someone in being disingenuous.

There are more elements to investing than just finding a good product. REO agents have control over these products, so developing a good relationship with them is more valuable than finding a couple good deals. What will help you develop a relationship with an agent has little to do with money.

REO agents do not have the mentality that they have the A-list of buyers. Unlike a marriage where you cannot keep looking for a better partner, REO agents have relationships that are more based on performance. If an agent can find a new guy that can perform just as well as their other partners, but will also complete transactions that aren’t profitable, that new guy will become their number 1 partner. However, getting on an REO agents list of preferred business partners is not easy.

For more information about The Norris Group’s California hard money loans or our California Trust Deed investments, visit the website or call our office at 951-780-5856 for more information. For upcoming California real estate investor training and events, visit The Norris Group website and our California investor calendar. You’ll also find our award-winning real estate radio show on KTIE 590am at 6pm on Saturdays or you can listen to over 170 podcasts in our free investor radio archive.

Nancy West Marketing and Outreach Specialist, Housing and Urban Development (HUD) (Full Bio)

This week Bruce is joined by Nancy West. Nancy is a marketing and outreach specialist for the Department of Housing and Urban Development. She has been working in the mortgage industry since 1977. Nancy joined HUD in 2004, and in 2006 she accepted one of four nationwide marketing and outreach specialist positions.

Non-profit organizations have a special access to a specific list of REO properties. To be considered a non-profit organization, you must be a 501C3 classified company under the IRS. All the requirements for meeting this classification are listed at www.HUD.gov

There is also a special list of REO properties for police officers, firefighters, paramedics and school teacher. These people have the opportunity to buy a HUD REO for 50 percent of the sale value. They are required to occupy the property for 3 years. After those first 3 years, their home value is officially decreased by 50 percent. The difficulty with this program is that these people are restricted to buying in revitalization areas. Right now, there are not many revitalization areas.

Cities and Counties individually determine what they want to do with NSP money. Some cities are acquiring REOs, rehabbing them and reselling them, and others are acquiring REOs and turning them into rental opportunities.

The FBI released a report on Friday about the amount of fraud they are seeing. California, Nevada, Florida, New York and Michigan are experiencing the highest fraud rates, and those states are also experiencing the largest number of foreclosures. Nancy is not sure if these foreclosures are primarily due to consumers, loan officers or realtors. She believes that fraud was committed by many groups, and that no specific group is significantly more responsible than the other.

Loan modification programs are now open to be qualified for. To qualify for loan modification, people are now trying to commit fraud on their modification application. The problem with this strategy is that if they make their financial statement look too poor, they may not qualify for a modification. Bruce knows someone who was recently denied a loan modification due to the fact that they had the ability to make their payments, and then chose to strategically default.

The mission of HUD is to provide a decent, safe, and sanitary home, and a suitable living environment for every American. When Bruce read this, he realized that the word “ownership” was not included in HUD’s mission statement. This made him feel that HUD is now broadening their scope to include the chance that the number of renters may increase in the future. Nancy claims that HUD and FHA has not changed their mission statement. HUD’s mission is to strengthen and provide homeownership and rental properties to the under-served, first time buyers, minorities and elderly. HUD does this in a variety of ways, including Section 8 housing vouchers. FHA wants to specifically promote homeownership to those same people. FHA offers home retention opportunities through the reverse mortgage program. The mission has not changed, it has simply refocused.

HUD has a few programs that most people are not aware of. Individuals who rent in Section 8 single-family dwellings are typically very successful. Many of them eventually leave the program and become home owners. Also, FHA has the Disaster Relief Mortgage Program which many people are not aware of. This program allows people to obtain a mortgage with no down payment if their home was destroyed in a natural disaster. As soon as a disaster area is declared, FHA issues a notice to lenders that a moratorium has been placed on foreclosure action. Also, HUD sends staff to assist homeowners in disaster areas.

If a consumer wants to qualify for a Section 8 rental subsidy, they must apply at their local housing authority. The housing authority will go over the qualifications with them, and see what properties are available.

Right now, the government has helped make the housing industry more fluid. When the problem first developed, lenders were still interested in lending, not collecting. They did not have the correct staff to deal with the problem. Many people who could not get a modification 3 months ago can get it now. This is because of new programs through Making Homes Affordable program and TARP programs.

FHA has always had a modification program. FHA requires lenders to provide loss mitigation help when borrowers fall 30 days delinquent. FHA also has a forbearance option and a partial claim. HAMP is also a tool that FHA can use. FHA can perform short sales with incentives, and deeds in lieu of foreclosure. There is currently no time benefit for people who take the deed-in-lieu path rather than foreclosure. However, their credit score will not be affected in the same way.

Individuals who simply cannot afford a mortgage will not be eligible for a loan modification. For example, some borrowers would require an 80 percent reduction in their loan balance to be able to afford the mortgage. This is not possible.

Non-owner occupants are currently not eligible for loan modification.

TARP’s funds are currently being used for modifications, not HUD’s. HUD is not currently able to make loans to solve lender problems. However, this kind of loan may be considered in the future.

There was once a program which allowed lenders to get 90 percent of the value of a property from a HUD loan to keep a homeowner in their property. That was either the Hope for Homeowners Program or the FHA Secure Program. When this program first developed, lenders were too optimistic about how many of the deals they would be able to fix with it. It took a lot of time before they realized that this program would not be as successful as they had hoped.

TARP funds can be used to modify principle loan balances, but FHA does not have a program for this yet.

There are some 100 dollar down payment programs for HUD REOs. These programs cannot be used in all areas. Currently all areas have a 100 dollar down payment program for owner occupants. If someone is acquiring a property using FHA financing, they have to pay for the difference between the list price and what they bid, and then another $100. The highest offer will not always win on a HUD property. What ultimately determines whether or not you will win a HUD bid is whether or not your offer will net the most profit.

HUD once had a program for veterans which included no down payment, but when the Housing and Economic Recovery Act was passed in 2008, veterans were required to put down 3.5 percent.

HUD is also in the development business. There are HUD projects that win awards. The mission of Secretary Donovan is to build these residences in an environmentally friendly way.

A new HUD plan has been formulated for 2015 which will make HUD less bureaucratic and more fluid. This will allow them to pay more attention to people in charge of departments. The first goal is to stem the foreclosure crisis. HUD needs to meet the need for quality, affordable rental homes. HUD wants to utilize housing as a platform for improving the quality of life. Home ownership is still a good opportunity. Housing provides wealth in the future by building equity. HUD wants to build inclusive and sustainable communities free of discrimination.

For more information about The Norris Group’s California hard money loans or our California Trust Deed investments, visit the website or call our office at 951-780-5856 for more information. For upcoming California real estate investor training and events, visit The Norris Group website and our California investor calendar. You’ll also find our award-winning real estate radio show on KTIE 590am at 6pm on Saturdays or you can listen to over 170 podcasts in our free investor radio archive..

Nancy West Marketing and Outreach Specialist, Housing and Urban Development (HUD) (Full Bio)

This week Bruce is joined by Nancy West. Nancy is a marketing and outreach specialist for the Department of Housing and Urban Development. She has been working in the mortgage industry since 1977. Nancy joined in 2004, and in 2006 she accepted one of four nationwide marketing and outreach specialist positions.

Nancy works primarily on educating industry partners to utilize FHA programs. She also explains the finer details of FHA programs to congressional leaders. She participates in many industry conventions, and she also outreaches to consumers through foreclosure and loss mitigation workshops.

Nancy said someone could have worked in the mortgage industry from 2002 to 2007 and never worked with an FHA loan. This was because of the loan limits at that time. The FHA loan limit at that time was $362,790, and the average sale price was over $500,000. Consumers didn’t want to put down over $200,000 to cover the deference between the purchase price and FHA insured loan limits.

Nancy spent a good portion of her career underwriting loans for Fannie Mae, Freddie Mac, FHA, VA, and stated income option ARMs. Nancy noticed many of stated income loans she was receiving appeared to have over-stated income. She turned down many loans as an underwriter, but some lenders were not concerned with quality control.

People can make income documents look very real now because of technology. However, if you used your with, you could search incomes for certain job positions within specific areas. The average income amount you found for the borrower’s job would give you a good idea of whether or not someone was committing fraud on their stated income.

Nancy works in California, Arizona, Nevada, Washington, Oregon, Nevada, Alaska, Hawaii, and Idaho. Arizona, Nevada, and California are three of the most damaged states.

FHA was not a big participant when subprime loans were booming. This prevented HUD from taking the same level of losses. Bruce would imagine that HUD has had some delinquencies from 2008 and 2009. Nancy claims that this is not true. In California, HUD’s delinquency rate for 2008 and 2009 is only at 2.7 percent. Bruce considers that very healthy. FHA never had a stated income program. Over the last two years, FHA has insured over 500,000 loans.

Regardless of the down payment, you always have to qualify for a mortgage. An effort was recently made to raise the FHA down payment limit, but it did not pass. A new bill is passing through congress which would increase down payment requirements according to FICO scores. Right now, FHA is looking to stabilize the market, and FHA is weighing risks and not sure if increasing the downpayment will help in stabilizing the market.

The loan limit in California is $729,760. This will last through December 31, 2010, but we are not sure if this will be extended. There is some legislation out right now which can increase the loan limit for high priced areas.

The down payment percentage does not increase as the price increases. In California, you can go up to 4 units, and you could then get a loan limit of $1,403,400. As long as you are owner occupied the down payment would remain at 3.5 percent.

The higher loan balance has changed who borrows money. The average FICO score for borrowers has increased from 660 to 680. There are a lot of refinances being made right now.

When someone is buying an owner occupied residence, a 100 percent gift fund is allowed to family members, employers and a HUD approved non-profit organizations.

Non-owner occupant loans are only allowed if the individual is buying a HUD REO with 25 percent down. It is also okay for non-owner occupants to streamline refinance on a home that is already owned.

If a borrower has had a bankruptcy, they must wait a minimum of 2 years before being considered. For foreclosures, short sales, or deeds-in-lieu, they must wait 3 years. However, there are exceptions for documented, extenuating circumstances. For example, if there is a death of a child, and the borrower could not pay for expensive medical bills, then they may be considered an exception. For these people, they may only have to wait 1 year.

Sometimes lenders are not aligned with the policies of FHA. FHA’s guidelines are considered minimum guidelines. Almost every lender has extended guidelines. FHA does not have a FICO score requirement, but most lenders have a minimum of 580 FICO score. There are various reasons for lender’s adding overlays to FHA guidelines.  Stating that to protect themselves from their own mistakes does not give the full picture of what I said or meant.  That is only one of the possible reasons, others include examination of own portfolio to determine risks associated with certain types of borrowers and programs, as well as what the investors purchasing these loans in the market want as added layers of protection.

FHA does not actually make loans, it only insures the mortgage. The difference between FHA and private mortgage insurance companies is that FHA insures 100 percent of loans. Because of this, the lender does not have to worry about suffering from a loss. The reason for extended lending guidelines is to protect themselves from their own mistakes.

FHA audits a portion of all their mortgages up front. FHA audits 100 percent of all reverse mortgages, because they are very protective of senior citizens. If fraud is found on a mortgage, then they can ask for an indemnification. If a pattern of fraud is found, then they will remove the lender. FHA has stepped up its auditing of lenders. It now has the ability to pursue lenders more quickly than in the past.

People have a misconception about the home conditions required for FHA. FHA only demands that a house be safe, sound, secure, and free of health issues. FHA does not mandate termite or septic reports.

FHA does not require the use of appraisal management companies, but the lender may require use of such company as it is their right to add overlays and require it. These appraisers are approved by taking a test online, and if they are successful then they are made an FHA appraiser.

All homes repossessed through HUD are listed online. There is a place called Statistics where you can check on what bids have been made on which houses, so you can feel comfortable with the process. Owner occupants are given a ten day priority bidding period for buying HUD REOs. Investors can participate in the bidding process after ten days. In the future, HUD may allow investors to bid on these properties in less than 10 days depending on the condition of the property, but this has not happened yet.

An investor is not eligible to buy an investment property and use FHA 203K loans under current guidelines. However, 203K loans have never gone away for investors on HUD REOs. Bruce did not know this. Unfortunately, investors are still required to put down 25 percent.

When Bruce talked to Nancy two years ago, investors were still required to wait 90 days to resell their houses. There are cases where flipping houses can encourage fraud, but for the most part, investors involved in flipping are doing honest business. However, it should be noted that if a property resells within 90 days and is resold for more than 20% of the investor’s purchase price at auction, there are added requirements and may perhaps not be eligible for FHA financing.

Bruce and Nancy will cover more on HUD approved non-profit agencies next session.

For more information about The Norris Group’s California hard money loans or our California Trust Deed investments, visit the website or call our office at 951-780-5856 for more information. For upcoming California real estate investor training and events, visit The Norris Group website and our California investor calendar. You’ll also find our award-winning real estate radio show on KTIE 590am at 6pm on Saturdays or you can listen to over 170 podcasts in our free investor radio archive.

David Kittle Senior Director Industry Relations, IMARC 2009 Chairman, Mortgage Bankers Association (Full Bio)

This week Bruce is joined once again by David Kittle. David began his mortgage banking business in 1978. In 1994 he founded Associates Mortgage Group, and owned it until 2006. He is a past chairman of the Mortgage Bankers Association, and is currently senior director for IMARK.

Mortgage brokers are required to have checks and balances to ensure that funded loans are legitimate. Brokers table fund loans and sell those loans to other loans, who then sell those loans to Fannie or Freddie. Fannie Mae does have rules requiring the underwriting lender to check for fraud, but this is not necessarily the requirement of the mortgage broker.

Most quality control plans require a minimum of 10 percent, and some lenders have gone higher than that. David Kittle recommends that you go as high as 25 percent. We need to do as much as possible to detect fraud before loans are funded. We need to personally call the people being written down as home buyers to ensure that they approve of the transactions occurring with their names. Sometimes identity theft occurs, and the people stealing your identity will sell your house.

The most frequently committed fraud that has occurred over the last few years has been performed on no income/ no asset loans. On these loans, people will lie about their job and income details with the intent to flip a property. Many fraud schemes are occurring over the internet, because documents can be easily and convincingly produced.

There is a lot of talk about mortgage fraud, and you would think that people would get the message that committing fraud can be severely penalized. David claims that the government is primarily focused on attacking fraud cases involving citizens with larger incomes. He believes the more fraud is penalized, the less people will try to commit fraud.

Bank of America recently claimed they save approximately 15 percent when they accomplish a short sale rather than a trustee sale. There are transactions known as flopping in which an investor will submit an offer on a property at a reduced price. The broker will then submit the offer to the lender. The lender will be looking at a broker price opinion that they believe is accurate, and that will set up the purchase price. Shortly after, this house will be sold at a different price. This is a new kind of fraud, which Bruce and David recently learned of within the past few days.

Bruce and David discuss fraud and short sales and what’s being perceived as fraud and what is not.  Disclosure is key as is disclosure. David would agree as long is there is full disclosure and all paperwork is correct, that this is not fraudulent.

In 2005, Bruce filled out a loan application for a 10-31 exchange. When Bruce read the loan documents, he noticed that the paperwork had been radically changed. He called the broker and told her that the loan application had been changed. She said, “Your application was too complex and confusing, so we simplified the paperwork to get the loan done.” Bruce told her that is considered loan fraud, and she then got offended. She exclaimed, “We do this for all our clients.” This amazed Bruce, because they did not even discuss the changes with him. If he had signed those papers without re-reading the documents, he would have taken part in fraud without knowing it. David says this kind of fraud happens all the time. If a borrower notices this sort of change, they should report it as fraud immediately. Loan applications are very complex and difficult to understand, so few people read their loan documents. So when documents get switched after the application process, they walk away thinking that everything is fine.

At the present time, we are probably making the best loans we have made in 15 years. Nobody wants to be involved in a risky loan. It is up to the mortgage bank to make sure that the people they hire are responsible. Mortgage banks need to do a better job of checking on their employees. If a loan officer goes from a mediocre loan officer to top producer in a few months, that should give you a warning sign.

To get a loan modification, you must have hardship. Right now, people are trying to get loan mods by attempting to look poorer than they really are. We need to be honest with people receiving loan modifications. Giving them a loan modification will not save them from default. In another 5 months, they will most likely redefault. The best way for an alcoholic to recover is for them to reach their lowest point. We need to reach our lowest point on values, and then the market will be able to recover.

When Kittle’s company investigates loan fraud, they do not walk to each person involved in the loan and conduct an interview. They collect the loan information from whoever filed the claim, and then they call the people involved and ask them if any sort of misleading information was placed on the loan. IMARK has over 100 employees in Santa Ana, California who were recruited out of college. Those students are trained to look at files very quickly to determine whether or not fraud may have been committed.

If fraud is involved, lenders may be asked to repurchase the loan for a number of reasons, but then the lender will turn around and make a claim on the mortgage insurance. The mortgage insurance company will want to check out the loan to make sure that the person who made the loan did everything they were supposed to in order to prevent fraud. Kittle’s company determines whether or not the loan maker did their job, and then they send that information to the mortgage insurance company. The mortgage insurance company then determines whether they will pay for the costs, or kick the loan back to the lender. Not all denied mortgage claims become criminal files. If the loan is kicked back to a bank, it becomes the bank’s loss. Sometimes the lender has bought a kicked-back loan from a broker or mortgage lender, and sometimes the lender will go after those people.

For more information about The Norris Group’s California hard money loans or our California Trust Deed investments, visit the website or call our office at 951-780-5856 for more information. For upcoming California real estate investor training and events, visit The Norris Group website and our California investor calendar. You’ll also find our award-winning real estate radio show on KTIE 590am at 6pm on Saturdays or you can listen to over 170 podcasts in our free investor radio archive.

David Kittle Senior Director Industry Relations, IMARC 2009 Chairman, Mortgage Bankers Association (Full Bio)

This week Bruce is joined by David Kittle. David began his mortgage banking business in 1978. In 1994 he founded Associates Mortgage Group, and owned it until 2006. He is a past chairman of the Mortgage Bankers Association, and is currently senior director for IMARC.

IMARC is a fraud investigation company for the mortgage industry. IMARK works with mortgage insurance companies, Fannie Mae, Freddie Mac, and HUD. IMARC’s job is to look at defaulted loans and determine whether or not an insurance claim should be made. Lenders do not work with IMARC. To determine whether fraud has been committed, IMARK talks to the buyer, seller and builder about information regarding the loan.

Fraud can be simply defined as a misrepresentation of the truth. Sometimes loan officers encourage borrowers to do this. In 2006, loan officers were encouraging borrowers to misrepresent their income in order to receive a loan. Some estimate mortgage fraud is up 400 percent from 2 years ago.

Bruce wonders how much mortgage fraud was hidden during the real estate boom due to price appreciation. David believes there probably was some undetected fraud due to price appreciation, because nobody had a problem with it. As unemployment rose, values decreased, and delinquencies increased, then the fraud became more evident. Now investment banks like BofA are wanting to determine whether fraud has been committed on a loan, so that they can deny claims.

There are loans being analyzed for fraud 4 years after the creation of it. Investors can determine whether or not they want to recreate the file based on whether or not fraud was committed multiple years before.

David has heard that up to 80 percent of delinquent stated income loans had some sort of fraud committed on them. David heard examples of gardeners making $1,5000 a month who were encouraged to claim an income of $15,000 a month to get a home loan. After they bought the home, they would flip it in a few months and receive $10,000 of the profit.

Borrowers can commit fraud without the lender knowing. There are companies set up to falsify verifications of employment. About 1.5 years ago, David gathered information on a street gang that discovered they could make more money committing fraud on loans than they could selling drugs. This gang had over 150 loans, and 75 of them had already gone delinquent. That is how easy it was to commit fraud in 2006, 2007 and 2008. Sometimes a group of people will collude to set up an escrow which appears real with somebody who actually qualifies. That sort of scenario is difficult for the lender to detect.

David believes that the mortgage industry needs to make the effort to detect fraud before it occurs. Fraud can be detected by having a call go directly to the buyer to determine whether or not the claimed borrower is actually wanting to buy property x with x amount of dollars. This would prevent a lot of identity theft borrowing, which is prevalent in Arizona, Nevada, Florida and California.

When a broker is involved in fraud it is usually not an isolated case. Brokers will assemble a team of people he knows when committing fraud. David just had a case in which a builder and a real estate company falsified documents with borrowers. In these cases, you often have the appraiser and title company involved in the fraud.

David recently discovered a website which falsifies your career online. This online company will provide documents for your false company, so that you can commit fraud. Technology is making it more difficult to detect fraud, because it makes it possible to convincingly reproduce identity cards and other information.

A mortgage reform bill was very recently passed by both republicans and democrats in the House. David believes we are going to see a lot of mortgage reform. David has testified before Congress on the issue of mortgage fraud. Congress should not be making problematic reforms which make it difficult for good borrowers to buy property. Right now, investment property is difficult to get a loan for. The market for jumbo loans is beginning to come back, but it has been dried up for two years. David hopes that congress will not over-reform the mortgage industry, and do a better job of enforcing the rules they have.

When David lobbies before Congress from a mortgage lender’s point of view, there is always someone lobbying from another point of view. All lobbyists are hoping to educate the representative of their opinion, so that the representative will be encouraged to vote for one side. However, there is no way for an elected official to understand David’s business as well as he does. David feels that the MBA has done a good job of educating congress on mortgage related legislation.

The Federal government has allowed many aspects of mortgage legislation to be decided within states. This has caused problems for companies that do business between states, because they have to hire someone who is familiar with the laws of each state. This extra cost is passed onto the consumer.

When someone participates in fraud, as time passes, they probably come to believe that they will never have to worry about it. There are thousands of loans still out there which have fraud committed on them in many ways. The FBI works with IMARK on identifying fraud. Fraud is increasing the cost of getting a loan.

The FBI divides fraud into two categories. One of these categories is “fraud for ownership”. The FBI didn’t consider these people to be as big of a problem, because those people were only committing fraud to own a home. The other category is “fraud for profit”, and people who commit this type of fraud are considered more harmful. However, this is not how David’s company works. Everyone gets in trouble regardless of why they committed fraud. The FBI usually prefers to attack people with more money, because it is more profitable, but all people involved in fraud are damaged to some extent.

From 2004 to 2006, stated income loans were openly considered to be inaccurate, and that risk was usually passed onto mortgage backed securities. It seems as if there was some sort of agreement to allow fraud to occur. David was once on a panel for Congress in which he was the only person who claimed that the CRA was partially responsible for the mortgage meltdown. Congress thought he was crazy for claiming this to be true. David then explained that “when the democratic congress told the free market that it needed to reach certain goals, it will go there. To reach those goals, we developed loans with no asset verification and stated income claims. Those programs were only made for specific types of people, and it was good for those people, but we allowed those programs to be used on anyone interested in getting a loan. When those loans were pooled with other good fixed rate loans, the rating agencies did not do their job. Those rating agencies then sold to Europe and China. Unfortunately, Congress spends most of its time pointing fingers when people come to testify on these issues, rather than taking the time to listen and find solutions. This accomplishes little to nothing.

For more information about The Norris Group’s California hard money loans or our California Trust Deed investments, visit the website or call our office at 951-780-5856 for more information. For upcoming California real estate investor training and events, visit The Norris Group website and our California investor calendar. You’ll also find our award-winning real estate radio show on KTIE 590am at 6pm on Saturdays or you can listen to over 170 podcasts in our free investor radio archive.

Rick Solis Appraiser and Investor (Full Bio)

This week Bruce is joined once again by Rick Solis. Rick wears many hats. He is a real estate investor, he is the appraiser for all of TNG’s hard money loans, and he occasionally trains people to appraise in TNG’s REO investing boot camps.

Rick bought his first house a week after his 20^th birthday. This house was in Montclair. He sold it at the peak of the market, but then 10-31 exchanged the money from that property into another one, and eventually lost all the profit. He owed approximately $250,000 for the Montclair property in 1988, and he sold it for $450,000. He was paying for the home with the tenant, so they split the profit earning $100,000 each. In 1988, he read the Robert Allen books. Using that information, he found a realtor who helped him get a loan for this house.

The books Rick read helped him to think creatively about investment. However, Rick no longer uses creative investment techniques. Today, Rick is primarily concerned with buying properties below market. When you invest creatively, you usually owe 100 percent of what it is worth, and you do not have an equity option.

Rick and Bruce first met at a Nick Manfredi meeting in which Bruce spoke. Bruce was offering a deal on his product Selling Systems. Rick bought the book, and liked it so much that he came back and bought the rest of Bruce’s books.

Rick had a difficult time building an investment relationship with Bruce. The first time Rick asked Bruce to help him invest in a property, Rick was looking at a 5-unit property in San Bernardino. After describing the property, Bruce simply said, “No, that is not something I would be interested in.” Bruce thinks he might need to do a better job of explaining his decisions in the future. The reason why Bruce was not interested in this property was because he had previously tried buying similar properties in San Bernardino and that experience did not end well. Sometimes investors just get used to a specific niche and choose not to work with anything else.

Bruce bought a lot of 4-plexes in Moreno Valley during the 1990s. He sold these properties for $139,000, and their value peaked at $600,000. One of these properties recently opened for bid at a trustee sale for 1 dollar. This type of property has a tendency to cause a domino effect for other similar properties in the area; when one goes bad the rest usually follow. A lot of towns just tear these properties down.

Rick met Andrea at a book store in 2003. Rick told Andrea about Bruce’s boot camp, and she decided to attend it. At that time, the boot camp was pretty basic, but it told you exactly what you need to know when buying houses.

In the past, Rick advertised through the newspaper. Andrea advertised through letter campaigns. When Rick started working with Andrea, they were doing 1,000 letters per week, and they averaged 4 to 6 houses per month using this method. Their business relationship worked to their advantage, because some people do not want to work with men, and others do not want to work with women. Rick and Andrea have very different selling strategies. Rick’s selling strategy is straight forward; he looks at what you have and gives you an offer. Andrea can sell anything to anyone, even at a discounted price. Andrea’s ability to sell is more than a technique, it is a natural gift.

The longer Rick and Andrea did letter campaigns, the harder it got. When they first started they could find plenty of people with just a couple hundred, but by 2007 the lettering campaign become too expensive to pay for itself.

Most of the properties they bought were flipped in 2006. One of these properties was flipped to Bruce’s auction, and it worked very well for Rick. Unfortunately, the auctioning business did not work well for Bruce. Bruce started an auctioning business with high hopes, but discovered that it was very difficult to attract buyers. Rick tried helping Bruce by wearing TNG t-shirts and posting signs, but he was only able to get a couple people to attend his auction.

At the end of the boom, Rick got cocky because of how easy it was to buy and sell. Rick decided to 10-31 exchange into other properties in order to avoid taxes. Unfortunately, he reinvested too much and he lost a lot of the profit he gained from his California properties. Next time, Rick plans to just sell his properties, pay the taxes, and live happily with that.

Rick finds all his properties through the MLS. Sometimes agents bring deals to Rick. Lots of investors are entering the real estate business. About ¾ of the buyers are investors now. Unfortunately, many investor offers do not close. Some agents are now refusing to accept offers from investors now, because of the bad reputation investors now have for not closing.

Right now, the best-working strategy for Rick seems to be driving around and looking at properties. He does this 1 day per week, and Andrea does this 3 days per week. They both buy 3 properties per month. They hold 2/3 of them as rentals, and they intend to sell them as prices increase. After the next price increase, Rick intends to sell all of his properties and stop.

Rick and Andrea invest in the High Desert area. There are not many resale opportunities in that area, so they are primarily renting there. Many of the people in that area have bad credit, and will probably always be renters. Andrea has a sixth sense for knowing when a person is going to be a good renter. She is able to meet the potential renters, look at their application, call their employers and their landlords to see if they will be good renters for Rick and her.

Rick decided to quit investing in real estate around 2007, but Andrea continued. Andrea got great deals on six houses last year, and she was able to convince Rick to start investing again.

Business is completely different now. It is a much bigger challenge now to deal with owners and resale. Rick thinks this aspect of the business will become easier in the coming years.

Rick has been using his IRA to invest in mortgages since 2000. He began using his IRA to invest in houses since 2003.

Rick’s target rental property is less than half an acre. Properties with lots of land have a tendency to collect lots of junk. He prefers single story houses, and he is completely uninterested in rental properties with pools. Rick does not like investing in houses built before 1978, and he prefers the house’s square feet to be between 1,000 to 1,800.

In the High Desert, Rick typically gets 1 house for every 10 offers he makes. In areas near Fontana and Corona, Rick typically gets 1 house for every 50 offers. Rick does not make offers before he has seen the home and made repair estimates.

Rick likes Tony Alvarez’s business model, because Tony gets properties to cash flow. Rick does not like the buying, fixing, and selling business model right now, because it is very difficult to get to the finish line with a first time buyer, FHA loan, two appraisals and a review appraisal.

For more information about The Norris Group’s California hard money loans or our California Trust Deed investments, visit the website or call our office at 951-780-5856 for more information. For upcoming California real estate investor training and events, visit The Norris Group website and our California investor calendar. You’ll also find our award-winning real estate radio show on KTIE 590am at 6pm on Saturdays or you can listen to over 170 podcasts in our free investor radio archive.

Rick Solis Appraiser and Investor (Full Bio)

This week Bruce is joined by Rick Solis. Rick wears many hats. He is a real estate investor, he is the appraiser for all of The Norris Group’s California hard money loans, and he occasionally trains people to appraise in The Norris Group’s REO boot camps.

Rick started appraising because his mother was a loan processor when he was a teenager. He was also interested in investing, but he was overpaying for properties. He began appraising to become a better investor. When he first began his appraising career, the only thing you needed to be an appraiser was a clipboard and a tape measurer. However, Rick believes that appraisal qualities were better back then than now with all the education requirements. In the past, appraisers had to be approved by each bank you wanted to appraise for, and you had to submit six work samples to prove you were able to do the job. Once licensing came into play, the banks eased off of those restrictions.

Rick closed escrow on his first house 1 week after his 20th birthday. Rick became attracted to the real estate business because of infomercials from Dave Deldado and Robert Allen.

Rick enjoys working with hard money lenders, because they actually want to know what the property is worth and what is wrong with it. That is the complete opposite of an A-paper appraisal job. All people involved in the A-paper transaction, other than the investor, do not want to know that information, because that information can kill the deals. Information like termite problems cannot be disclosed on an appraisal.

The investor is typically a private person with money, but you can also have a hard money loan with a different kind of intent. Some lenders are pressured to provide lenders with a specific appraisal value. Rick has had this experience with lenders in the past. Those lenders put a lot of pressure on appraisers, but he does not receive that kind of pressure from The Norris Group’s loan processor. Craig, TNG’s loan processor, would rather skip a deal than skew appraisal values.

In May, HVCC was passed. This new rule requires appraisal management companies to check on all appraisals for accuracies. Unfortunately, appraisal management companies are taking 40 percent of the earnings from appraisals, which means they must work much harder to earn the same income. This has caused many of the veteran appraisers to leave the business. Rick knows an appraiser who has found a way to cope with HVCC and make his job more efficient. This appraiser only takes appraisals that are close to him, and he looks at the properties before he accepts it. If there is anything wrong with the property he is looking at, the appraiser will skip it.

People often think of the appraisal process as being easy, because now they can push a button on Zillow which gives an estimated home value. However, this is very inaccurate. It is very difficult to come up with an accurate appraisal. It is also difficult to make an appraisal which meets all the guidelines of the lender and the investor who the lender is selling to.

FHA significantly loosened their requirements in the early 2000s. FHA once had a 2-page checklist of everything you had to check for on a property. For example, if the crawl space under the house didn’t have 18 inches of clearance the house had to be fixed. If there was any chipped paint on the house it would need to be fixed. However, they will allow some things like dirty carpet. FHA will accept non-permitted home modifications just as long as there are no health hazards. However, many banks and underwriters will not accept that. If non-permitted additions add value to a house, then you are supposed to account for it in an appraisal. It is very difficult to find comparable houses for a house with non-permitted additions.

In the current market, if your house is in average condition, there is not much you can do on repairs which will add a significant amount of value to your house. However, if your house is in bad condition then you can get a decent return on the cost of repairs. Regardless of how much money you’ve spent rehabbing, appraisers will not adjust the price by any more than 10 percent.

Cost basis appraisals are no longer being used. No appraiser who spends half his day looking for land sales is going to come up with an accurate land value.

Bruce Norris brings up an example for when the cost based appraisal may be useful…

Bruce: “If you were making an offer on a custom home, and you wanted the lot value to be emerged from what a custom home would be once it is done, then that would be like a residual value. This could be used to prove to a lot owner that it was once worth x value, but once you subtract the costs and the appraisal then the lot will be worth x. ‘Is that a useful idea?’”

Rick: “Possibly.”

Rick has never done this kind of appraisal, but Bruce wants him to. If you can look at the comps and subtract the costs, then you will have the residual dirt value. Rick thinks that is so simple that you probably wouldn’t need an appraiser to do it.

Around 2006, people were concerned about buying homes with awkward floor plans. Currently, investors no longer seem to be concerned by this. This may be due to the fact that these types of homes represent the largest portion of the current “for sale” market. They are taking a price hit on those homes, but they are still able to make a profit.

Appraisers account for pool values using comps. For example, if an appraiser is looking at two homes that are very similar except for the fact that one has a pool and the other does not, then the pool value will be calculated by subtracting the value of the home without a pool from the value of the home with the pool. If the home without a pool has a value of $200,000, and the value of the home with a pool is $210,000, then the value of the pool is $10,000. The value of a pool can change dramatically depending on where you live. In some areas a pool adds little value to the home, but in other areas a pool can add a lot of value. Rick has noticed that pools typically add up to 0 to 5 percent of the house. Also, the value of a pool can change dramatically depending on what season you sell in. If you sell during a hot season, the pool will be more valuable.

The number of bedrooms within a house does not affect the price much. The square footage of a house is more important the number of rooms within it. Some families like two big bedrooms more than 3 small ones, and vice versa.

If you are appraising a property as an investor, avoid location problems. Stay away from atypical problems, especially problems that cannot be fixed. Old homes surrounded by new homes will not sell well, and dome home styles don’t sell well either.

Investors often make the mistake of assuming that an old remodeled home will sell for the same value as a new home in the same condition. Newer homes will always sell at a higher value.

Mello-roos homes can also be a detriment to home value. However, a lot of first time buyers do not always notice this difference.

For more information about The Norris Group’s California hard money loans or our California Trust Deed investments, visit the website or call our office at 951-780-5856 for more information. For upcoming California real estate investor training and events, visit The Norris Group website and our California investor calendar. You’ll also find our award-winning real estate radio show on KTIE 590am at 6pm on Saturdays or you can listen to over 170 podcasts in our free investor radio archive.

Bill Shipp, California Real estate Investor (Full Bio)

This week Bruce is joined by Bill Shipp. Bill has been investing in Riverside real estate for many years. Bruce thinks Bill is Riverside’s best kept secret.

Bill believes it is important to be true to your word when doing business. Bill has been working with his contractors for 10 years, and he has never had a bid on a home repair. These contractors know that if Bill hires them, they will get paid at the time he specifies. This is even more important than having people skills.

Bruce has taught many real estate investors. Some of them have great people skills, and that is what gets them business. There are also people that are trustworthy, and that is also attractive to business partners.

In the last segment, Bill said that he is willing to do his job every day, and that attitude has allowed him to accumulate a wealth of knowledge. Bill’s knowledge of his market place allows him to live in Utah while still making good investment decisions in Riverside.

Bill has never closed an escrow with a person in it, and he has never bought a house at the steps. Bill does not want to deal with those hassles. This is why he uses the MLS and agents who know what they are doing. Bill gets over 50 percent of the houses that he makes offers on, because his realtors know not to call him unless a home shows promise. Bill works regularly with two realtors, but he receives calls occasionally from other REO agents as well.

Bill has a specific skew number for the paint which he uses on all his houses. Because he uses the same paint for his houses, it is easier for him to calculate how much repairs will cost when buying a new home. This also makes it much simpler for his repair men, because they know exactly what to do for every new job.

Bill discourages investors from traveling to see their investments. Do it for the first two properties, so you can figure out how to do the job. After the second, you should know what kind of property is worth your time, and trust your contractor to do his job. Traveling to your investment homes will cost you money and time. Also, Bill suggests that investors not bring their wives. His wife always has minor problems with his investments, such as the amount of flowers in the yard.

The typical repair cost for Bill’s investment houses is $15,000 or less. However, he has had home repairs that cost $100,000. In the early 2000s, he bought older homes. The oldest home he ever bought was developed in 1828. The house was so old that the home began to dissolve when the repair man tried to pressure wash it. Bruce once bought a home in 1898. Bruce had a termite investor inspect the home, and the inspector told him that there were no termites because the wood was petrified.

Bill does not have a construction background, but he has learned some things about that trade over time. When you buy a lot of older homes, you have to be creative to find a style that people will want to buy. In the late 1980s, Bill only bought homes that were 5 to 10 years old and did not need work, but Bill now only works with fixers built before the 2000s. Bill does not like to compete with home owners. When you are flipping new homes, you are not creating value. Bill thinks that working in the trustee market requires too much work. This is what Bruce’s company does, and Bruce agrees that the trustee market is too much hassle for Bill’s business model.

When reselling a property, Bill uses the listing agent that found the home for him, and he only uses two agents to keep the process simple. Using a large number of agents makes it difficult to determine whether or not those agents are doing their jobs correctly.

When Bill is selling his properties, he tries to control the escrow, but he never controls which lender is used. Bill’s buyers are always cross checked with the lender. Bill’s agent will not tell him that he has an offer until the buyer has been cross checked, and until he can know if he will get a good offer.

Bill is constantly educating himself in real estate. He reads many books, he has attended Bruce’s seminars, and he has been trained as a certified financial planner. Bill believes that many people know how to make a lot of money, but they do not know how to spend it. People do not often plan for downturns in the market, and their lack of planning ruins their financial health.

In the early 1990s, Bill had 40 rentals. It took 8 years to get those homes sold, and it was very frustrating because the market kept going down.

Bill began investing in Texas during 1989. He bought homes for $10,000 each and he owned them free and clear, but he was receiving negative cashflow every month because of property taxes. Repairing one roof could wipe out your positive cashflow for a year. In the end, he only made money on one of those homes. Do not buy real estate in other cities and states if you do not know what you are doing.

In 1986 Bruce was asked to speak on a panel of real estate experts. There were two well known attorneys on the panel, and all of their claims regarding out-of-state property ownership contradicted Bruce’s practical experience. When Bruce asked those attorneys how they came to their conclusions, he discovered that they had no out-of-state investment experience and were relying on theoretical knowledge. When people come from other states and tell you to buy homes in their areas, be careful. Why would someone travel across the United States to encourage you to buy their property if they cannot even get the people from their own state to buy?

If there are more listings in a region than sells, you should be nervous. On the other hand, if there are more sells than listings, then you should be happy. This is all Bill looks at when predicting whether or not he should be investing. Bill does not pay much attention to economic forecasts. He only pays attention to Riverside’s market, so he does not have to worry about general market forecasts.

The best deal Bill ever had was a wholesale in Corona. The property sold in 2 weeks and he earned over $100,000. If you want to find deals, you need to be watching the market every day. You never know why a seller might want to get rid of their property quickly. An agent once called Bill and told him that the seller was offering five houses and two lots on one street. The seller was the chairman of a bank who had stock options which were about to expire. The banker needed the money for those properties quickly, so that he could buy his stock. This deal shows that you never know why and when a great deal is going to show up. Bruce once bought a house from an agent once who was getting into the plastic extrusion business. The agent needed to buy an extrusion machine for $10,000, so Bruce bought two of his homes for that amount.

Bill has been approached with bulk buying opportunities over the last few months. The people offering these bulk buy deals told Bill that they have had bulk buys in the past that sold quickly. When Bill asked for an example of one of these bulk deals, he never received a response and he still hasn’t. Bill received a bulk buy opportunity from a company in Los Angeles as well. Because the company seemed professional, Bill had his agent check out the properties. The agent discovered that all 20 of the properties for bulk sale were short sales.

Bruce will be a moderator for Fannie and Freddie in June. These companies are putting together bulk sale divisions, so perhaps bulk sale opportunities will be available in the future.

For more information about The Norris Group’s California hard money loans or our California Trust Deed investments, visit the website or call our office at 951-780-5856 for more information. For upcoming California real estate investor training and events, visit The Norris Group website and our California investor calendar. You’ll also find our award-winning real estate radio show on KTIE 590am at 6pm on Saturdays or you can listen to over 170 podcasts in our free investor radio archive.