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California Real Estate Headline Roundup

Posts Tagged ‘asset manager’

191-TNG Radio – Mike Novak-Smith 9-11-10

Monday, September 13th, 2010

Mike-Novak-Smith

Mike Novak-Smith

REO Agent


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September 17th, 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 Investors Association and Bill Tan, Investors Workshops and Shawn Watkins and Angel Bronsgeest, Invest Club for Women and Iris Veneracion and Bobby Alexander, Claudia Buys Houses, The Business Press, Frye Wiles, MVT Productions, and White House Catering.

This week Bruce is joined by Mike Novak-Smith. Mike has been a household name in the REO business since the 90s. He has gained national recognition for his work in the REO industry.

The first REO Mike ever closed was in January of 1991. RT Resolution Trust Corporation was the first REO client he ever had. That company took care of the failed savings and loans assets from the 80s. He thought using that company was a good idea because he sensed a changed in the market at that time. Resolution Trust called and offered him listings that no one else was interested in, and Mike believed he could handle them.

Mike reads a lot and he pays attention to the market. He viewed REOs as a way to survive every month. He knew that if he got 2.5 percent of the deals on the market, then he could make the house and car payment. Once he started doing it, he liked it, because it was more like a business than chasing deals. The audition for the business was hard, but once you have experience, its much less stressful.

There are a few surprises for agents wanting to get into the REO business. First, you have to do a lot of work. Second, you have to put out a lot of money to get properties sold. Third, you get treated rather harshly, because the people you work with are busy and they don’t have time to sugar coat their messages to you. A lot of people can’t wait to be an REO agent, until they become one. You have to be a superior skill level to do REO work in comparison to retail work. It is a very competitive business. If you make a mistake, there are 100 people who want your place.

In the 90s, the peak years for Mike were from 96 to 98. Mike had been in the business for a few years prior to 91 doing retail jobs. All the way through January, 2004, he had a lot of REO deals. From 04 to 05, he did not have any REO deals.

In 2003, Mike closed 110 REO deals. When the REO deals started drying up, Mike was one of the last people his clients were using. When the REO deals came back in 2005, he had 3 REOs within the first month.

Most of the people that Mike knew from the 90s have moved onto bigger things. If they did well during that time period, then they probably moved up to corporate positions.

In the 90s, much of Mike’s inventory consisted of new 4 bedroom, 3 bath houses. Mike gets a lot of new homes as well. He even gets homes that haven’t finished construction.

Currently, Mike’s business is somewhat unpredictable. He might have a several week period where he gets a large number of REO deals, but then the following week he will get zero. This could be a function of the trustee sales changing their bid prices.

The people REO brokers work with do not entirely know the policies of their employees. You hear a lot of rumors, but the only people who really know, are the ones working at the top of the business. Mike occasionally receives calls from corporate leaders in which they ask for his opinion on certain policy changes. Mike does not believe that anyone has complete control over policy changes, because the government makes frequent policy changes as well.

At the peak of this cycle, Mike had over 900 files, and maybe 600 active files in the MLS. Currently, properties spend months in preparation before being listed. Once they are listed, they usually sell fairly quickly.

Properties now require a bit of time before they become vacant. Occupants understand now that they can get money to move out. The magic number for convincing an occupant to move out tends to be between $2,000 to $4,000. Some of these occupants have severe financial problems, but for many of them, its just a game.

The length of time it takes for a property to become an REO after delinquency is 15-18 months. When the property actually goes into foreclosure, the renting tenants are often surprised. Mike advises renters to get their rental property from a broker who manages rentals. Don’t try to just rent a house off of CraigsList. Quite frequently, people will begin renting a house and end up in foreclosure two months later. Bruce was once personally asked by his own potential tenants if he had a loan on the rental house and if it was current. These renters had obviously had this experience in the past.

Most asset managers now communicate through proprietary websites. Offers come in electronically through email. There is not a lot of verbal communication, and fax machines aren’t being used either.

Asset managers have the power to take offers when the asking price is normal, but when an offer is unusual, then the offer must be taken to the next level.

When Mike gets a listing, he often gets the property directly from the lender, but there are also many properties that are outsourced to other companies. Some lenders have received too many REOs for their own labor force, so they have to outsource their work. Outsourcers typically use the same system as the lender.

Mike gets paid back 99 percent of the time if he follows the lenders standards. You cannot do all the work yourself. You must have staff to take on the work load of an REO agent. As an REO broker, you wear many hats, and accountant is one of them.

In 2007, lenders were openly admitting that they would list their properties with the highest broker opinion. Bruce believed that was the perfect system to fail. Lenders have now become more willing to listen to reasonable BPOs, and they often ask for multiple price opinions. Many BPOs today are being performed by inexperienced brokers who will do the work for cheap. Mike thinks this is unwise. When BPOs are done by experienced brokers, the price opinions usually come out fairly similar.

Short sales are becoming more popular right now. Mike closed a couple short sales last year, and he is doing more right now.  He does not prefer short sale deals, because those deals can often take more time than they are worth. Bruce is confounded by the length of time required to do a short sale. Short sales should not take six months to finish. The last short sale Mike finished took six weeks to close. Many short sales involve PMI companies, loan investors, servicers, and possibly an HOA law suit. You have to get all the people involved in the deal to take a loss, and that negotiation takes some time.

There is no compensation for an REO broker until he finishes the short sale. Someone getting into the short sale business could be six months away from a check for every deal they work with. If the broker cannot get someone to help with the paper work, then that short sale is not worth the time.

Mike sees REO levels increasing in 2011. These REOs will come from failed loan modifications and state programs. Short sales will probably increase as well. In the 90s, short sales were very popular, but loan servicers and investors eventually realized that it was easier just to foreclose, because then they could control the process.

Right now, if an inexperience broker attempts to perform a short sale, they often take up to six months to get the deal done. When this happens, the loan servicer will choose to have an REO.

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.

Thank you for being a Gold Sponsor for I Survived Real Estate 2010: Adrenaline Athletics, Benton Investment Group, Community RE-Invest Group, Delmae Properties, Elite Auctions, Entrust California, Everlast Photography, Inland Empire Investors Forum, Keystone CPA, Landwood Title, Las Brisas Escrow, Leivas Financial Services, Mike Cantu, North San Diego Real Estate Investors Association, Northern California Real Estate Investors Association, Personal Real Estate Investor Magazine, Realty 411 Magazine, San Jose Real Estate Investor Association, Rick and LeeAnne Rossiter, San Jose Real Estate Investor Association, Starz Photography, Summit Solutions, Tony Alvarez, Wealth Point, and Westin South Coast Plaza.

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170-TNG Radio – Norris & Barlet 4-17-10

Friday, April 16th, 2010

Aaron Norris

Aaron Norris,
Marketing Director of The Norris Group

(Full Bio)

Diana Barlet

Diana Barlet,
Investor Relations with The Norris Group

(Full Bio)

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This week Bruce Norris is joined by Marketing Director for The Norris Group, Aaron Norris, and Investor Relations Expert, Diana Barlet with The Norris Group.

Diana sold her Riverside home in November of 2006. That was a pushing slightly past the peak, but she bought the home in 2001, so she still profited from the majority of the price increase. She purchased the home for $145,000 in 2001 and she sold it for $400,000 in 2006. She was very pleased with the results. The original interest rate for her home was around 8 percent. The home was an owner carryback. She did a refi on the home afterwards for upgrades.

At that time, her decision to go from homeowner to renter was a big decision. Diana has been a homeowner since she was 21, so becoming a renter felt like giving up part of her identity. Diana also felt like she was loosing control of her life, because she had the property owner telling her what to do.

Her experience as a renter has been relatively unpleasant, but she has benefited from having someone else pay for repairs. However, some repairs are easier for Diana to take care of herself.

Aaron left California for New York in 1997. He stayed there for seven years, and moved 5 times during those years. Aaron lived in Hells Kitchen for part of that time. He was illegally renting from a renter, and he eventually got kicked out. Fortunately, he never worried about being homeless, because he had many friends as a performer. The smallest living quarters he lived in was 80 square feet. That is about the size of his current walk-in closet.

During his time in New York, Bruce arranged for him to own a house. He sold it a bit early, because he thought prices would stop going up, but he still made a decent sum of money. Aaron took the money he earned from the house and placed it in a trust deed. He considered buying a home in Washington Heights, but the house would have been painful to rehab.

Once Aaron came back to California, he began renting. In 2004, he moved to Los Angeles for 2 years. In 2006, he moved back to Riverside and began working full time for TNG. Unlike Diana, Aaron has enjoyed being a renter. He is accustomed to being in small spaces, so renting does not bother him. He just closed a house yesterday. His house is 2,500 square feet and he does not know what he will do with all the extra space.

Diana has lived in two rental units since she sold her house. Looking back, Diana is glad that she sold her house. If she had kept the home, she would now be in a position of negative equity. Being generous, that home might be able to sell for $160,000. When she refinanced the house, she brought the home’s total up to $225,000. The area has also devalued since she sold her home. Right before she sold the home, her car was stolen and her new fence was graphitized. There were a lot of things about that neighborhood that made her uncomfortable as a single woman.

Diana closed a home yesterday. She had 3 important criteria points for buying: a view, a master bath with a walk-in closet, and a 3 car garage. The home was bought as an REO. She looked for a home like this for 2 years. She had made offers on other homes, but her offers were not accepted. She found the home she just closed on through Foreclosure Radar. Her home eventually fell off of the reports on the website, and it popped up later on the MLS. This home originally sold for $565,000. When she bought this home it was extremely clean, so she has little work to do on it.

She had to compete with 10 other offers to get it, but hers was actually the lowest. This shows that price is not necessarily the determining factor when buying a home. The quality of the offer is most important. She beat the other offers because she was able to give assurance that her offer would close.

As was mentioned previously, Aaron just closed on a foreclosed home. He also had to beat multiple offers; one of them was an all cash offer. He beat the home by paying 5,000 more through a loan. Aaron has been looking for a home for 2 years, but he is very picky. He had other opportunities to buy, but those homes were made in the 60s and 70s, and he did not want to deal with the work that comes with an older home. This home originally sold for around $450,000, and he bought it for about half of that price. Aaron felt very discouraged by the process of buying the home. He received threats from the asset manager that they would not uphold the deal. His escrow was supposed to be 30 days, but he was warned that Fannie Mae REOs can take longer. Long escrows do cause problems, because he had to pay extra money to stay in his previous residence.

Aaron and Diana have great track records and FICO scores. Many people have had trouble getting loans. Fortunately, Diana had a good loan experience. She got a conventional loan with a 20 percent down payment. She was prequalified with her lender in November when she originally made an offer. Diana recommends her processor, Genie Ball from Pacific Sunrise Mortgage, to anyone interested in buying a home. Genie is very proficient and does a good job of keeping you informed. Diana had to have documentation for any deposit that wasn’t from payroll on her bank statement.

There are many things that can go wrong when you are trying to get a loan. You have to deal with both lenders and appraisers. When Diana’s appraisal came in, it was only $1,000 dollars over asking price, which happily surprised her. The view of Diana’s home gave her a $15,000 credit. The original interest rate for her home was 4.8 percent. She was prepared to close in 20 days, but the bank told her that they were not going to rush to close. That happens frequently in the loan business. There are many times in which Bruce is ready to provide money for an investment, but he won’t get all the information he needs to provide the loan. Because Diana’s lender did not close on time, the bank extended the closing date for over a week, which cost her an extra $1,000 dollars. Her final interest rate was 4.87. This low interest rate will probably not come back for many decades, if ever.

Aaron got a conventional loan on his home. His escrow was supposed to be 1 month, but it actually took over 2 months. He began the loan process immediately after his offer was accepted. There were a couple documents he had to refill during the process. The original interest rate he was given was 4.87 percent, and even though he extended the closing process, he still got that same rate.

Aaron’s escrow was chosen by his lender in Redondo Beach. Aaron had an overall good experience with her. There ended up being a lot of fighting and ego involved towards the end of the deal because of the good faith estimate. When people like you on the service side, you will find they will do things for you that they would not consider with other people. Aaron’s escrow manager was rooting for him, because he was helpful to her. Aaron helped solve an asset management problem in which $2,600 of city fines were overlooked, but Aaron got that taken care of over the weekend. Aaron did not have any problems with his appraisal, because the house was overpriced to begin with, and he expected a higher appraisal.

Aaron took 2 months to close because of the lender and the asset manager. The lender did not want to give away certain pieces of information. This caused problems with the asset manager, and Aaron eventually had to speak to the lender’s supervisor. Aaron was concerned at multiple times that the property would not close. He was threatened multiple times with an expected closing date, but it was actually Fannie Mae’s asset manager’s fault.

If Aaron was on the other side of the table, he would have chosen a different lender. This is important because when you are selling property as an investor, there are many times when you are not in control of that choice. Knowing the truth is helpful, because that allows you to be a part of the solution.

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113-TNG Radio – Tony Alvarez 3-14-09

Friday, March 13th, 2009

Tony-Alvarez

Tony Alvarez

Expert real estate investor, property manager, and mentor

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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.

Tony Alvarez has been a successful Real Estate Investor and Certified General Appraiser in the Southern California area since 1981. Tony has bought, sold and rented hundreds of properties from vacant land to condos, single family residences, and apartments. More recently he is investing in commercial developments in Arizona, Nevada, and Southern California.

As an appraiser Tony worked as a staff appraiser for Great Western and Glendale Federal Bank and is approved by hundreds of Lenders, Insurances Companies as well as Government Agencies.

He has worked for Fanny Mae, Freddie Mac, FHA and the FDIC.

He has an in depth knowledge of the inner workings of Lenders and their REO (foreclosure) departments. Tony’s knowledge of real estate, appraisal, finance, and investing is vast and varied. He brings a unique perspective to the real estate investment community.

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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