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Marsha Norris lost her brave battle with cancer on January 22nd. For the next several weeks, we honor her memory by re-airing three shows she recorded leading up to our I Survived Real Estate events that raised awareness and money for breast cancer.
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Marsha Norris lost her brave battle with cancer on January 22nd. For the next several weeks, we honor her memory by re-airing three shows she recorded leading up to our I Survived Real Estate events that raised awareness and money for breast cancer.
Thank You for the notes, flowers, and prayers during this difficult time. We truly appreciate your concern and all the support over the years. We feel the love. We will deeply miss Marsha (Mom) but will forever cherish the wonderful memories.
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This week, Bruce is joined again by Randy and Mike Grigg who head Elite Auctions. Randy Grigg is President of Elite Auctions and Mike Grigg is the Chief Auctioneer.
Last week, Bruce, Randy, and Mike discussed a Riverside auction in which a man bought a home out of the MLS. Because of the price deterioration in the market, Bruce said that the man should flip the property via auction. In the end, the buyer earned a large profit after the property sold. Bruce asks about the costs to market.
Randy and Mike Grigg discuss marketing and advertising and what the auction company does to attract attention. They are also able to show all their results to their clients, so that they know where their money is being spent. Bruce asks Mike and Randy how many people showed up to a particular open house they had. They had approximately 60 to 80 people come in to view their property. They typically have a successful auction when there are that many people attending their open house.
Whenever someone attends one of their auctions, they always ask the attendees how they heard about their auction. Only about 30 percent of their attendees go to the open house. In this case, the winning bidder did not go to the open house. The winning bidder owned rental properties in that same area, and he was attracted to the property from a post card advertisement. Altogether, 38 bidders showed up at the auction, and they all had $5,000 dollar cashiers checks. The home being sold needed paint, carpet, and the kitchen was in bad shape. Just down the street from their auction, REDC was selling similar inventory for $98,000. The final sale price for this house was $147,400. The investor bought the home for $75,000. What a fantastic deal. They closed the property in 12 days.
Bruce goes on to discuss what people consider to be a “deal”. Bruce believes that if that buyer owned homes in that same neighborhood then he might have paid more for every house that he owns than that particular one. People are used to thinking that real estate is so cheap, that they have forgotten that real estate used to be 2 or 3 times the current price. Sarah, Bruce’s daughter, bought a house very recently. From Bruce’s perspective, her deal was the interest rate she received. The market was at 5%. The man who bought this property knew the area he was buying in, so the purchase worked well for him.
Auctioning properties is challenging right now, because buyers are very cautious. In a market where prices are escalating quickly, the auctioneer will be ahead of the prices in the MLS. The consumers prove how much the auctioned property is worth when there is competition. Bruce believes that his properties in Rosamond would have sold better if they had been auctioned. Bruce is surprised builders don’t use this method instead.
Bruce asks what Mike’s duties are as the president of the California Auction Association. Mike’s main duty is following California government legislation in regards to real estate auctions. He also assists other auctioneers by showing them what they need to do to be a legitimate auctioneer. Mike arranges conferences where speakers come and talk about their specialties. The main goal is to better California’s auctioneers, so that they can offer better service to their clients.
Bruce asks Mike if there are California rules that trump national rules and vice versa. Mike says that auctioning rules vary greatly state to state, and that California is actually very lenient. Mike would like to see more legislation to stop people from holding deposits for lengthy amounts of time after the bid is rejected from the lender. Bidding on behalf of auctioneers is also something that needs to be addressed by legislation. Instead of an auctioneer having to be licensed like a realtor, there should be a separate real estate auction test. It’s very different.
Bruce asks Mike what C.A.R. thinks of real estate auctioning. Mike does not think that C.A.R. views auctions as a bad thing. There are some Realtors that view auctions as a threat to their business, but it is not . Mike and Randy pay Realtors if they bring in buyers and sellers.
Approximately 10 percent of the time a Realtor represents a client for his auctions. Occasionally, Realtors get confused by the process because they are not used to that method, but Mike does not feel that this has affected his ability to close a deal.
In the United States people have viewed auctioning as a necessary evil. Bruce asks Mike if he thinks that auctioning will have a strong foot hold in the real estate business in the future. Mike thinks that auctioning will become more important for real estate sales in the future. California seems to be far behind the rest of the United States in regards to understanding the value in auction sales.
Bruce believes that the key going forward is to have repetitive clients. If investors get the idea that they can efficiently sell houses in auctions then it would be constantly viewed by retail people as a respectable selling method. Mike believes that as the real estate market returns many of the big auction houses will go back to land auctions, but Mike and Randy’s business will stay as a local California business.
Bruce asks Randy what kind of perception change has taken place in the auction industry. Randy thinks that much of the public still view auctions as a fire sale, but many investors believe that it is an effective way to sale inventory. It depends on who you talk to.
Bruce discusses how variable the results can be when selling properties through auctions. The right person for the sale may or may not be attending. Often the problem with auction sales lies within the seller’s expectations. When people own properties, which they have assigned a feeling of value to, it can distort one’s perception of whether or not a property is being sold at the right price. Randy believes that houses sold through auctions are priced properly about 80 to 90 percent of the time.
Bruce asks Mike how different it is to auction real estate in comparison to other auctions. In real estate you do not get paid immediately. You have to go through escrow, and you have to understand how to deal with Realtors. An antique seller is not going to understand real estate, just as a real estate auctioneer will not understand antiques. In the rest of the auctioneer industry, you usually get paid immediately after the sale. Online auctions are also much different than the on site real estate auctions that Mike and Randy handle.
The number for Elite Auction is 661-325-6500, and their website is www.sellwithauction.com
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This week Bruce interviews Randy and Mike Grigg from Elite Auctions. Randy is the President of Elite Auctions for which Mike serves as Chief Auctioneer. Mike is also current president for the California Auctioneer Association.
Bruce begins by asking Randy how he got involved in real estate. In 1977, Randy had heard in seminars that real estate was the way to go, so he eased into it. He brought his first rental house in 1977, and after that he bought about 2 or 3 houses every year, for 20 years, and then stopped. Randy’s plan for real estate was to buy houses so that he could pay them off and enjoy the cash flow. This has worked well for Randy, and he currently has a few dozen houses that he is collecting cash from.
Bruce asks Randy when he started auctioning houses. Randy says that he started doing auctioning after he decided to stop doing real estate for a while. After getting involved, he decided that he did not like the selling process, because he had a few escrows that fell out. He drove past a house in his neighborhood one day, and he discovered that it was being auctioned. He decided to attend the auction in hopes that he might buy the property. He thought that he might be the only person at the auction, but he discovered that many people were interested in bidding at auctions. The house he wanted to buy went up to full market value, so he thought, “this might be a good way to sell.” This occurred in 2002.
Bruce asks Mike when he got involved in the auction business with his dad, and who the typical selling client was from 2002-06. He says that he got involved in 2002, and that he dealt with a lot of homeowners who were expecting to receive a high offer. In 2004-06 most sellers were astonished by the selling price of their homes. When Mike and Randy got involved in the business, they did it to help investors help sell 5 houses per day, but when other home owners discovered what Mike and Randy were doing many decided they wanted to auction their houses too.
Bruce asks Mike if he gets a lot of exposure from just holding an auction that is successful. Mike claims to receive a lot of attention from his auctions, because many times Mike will have 100 people show up for one house, and some of the participants have houses to sell as well.
Between 2004-06 the typical buyer was an own occupant. The typical buyer showing up now is often a long term investor, and first time home buyers are getting into the market now too. One of the recent changes that have been made to the $8,000 tax credit program is that first time buyers can use their 8,000 $dollar credit as a down payment up front.
The typical selling client that Randy works with right now is a rehabber, or a wholesaler, who understands that if they do not get their houses sold within two months then they will lose their opportunity to gain a profit. Prices went down a great deal.
Mike and Randy have an auction coming up on June 4, which will include houses that they have bought at REDC and Hudson Marshall. They have done minor fixes to them, and they are hoping to gain a profit. They have done 25 auctions within the last 8 months, and most of them are profitable.
Bruce asks Mike and Randy if they have ever had their competitors try to buy their houses, and then resell them for profit. They do not know if that has ever occurred, but they doubt that this has ever occurred, because they fix their houses more than other auction companies do.
Some auction companies host their events in a ballroom setting with a large amount of inventory, but Mike and Randy have taken a different route. Mike and Randy typically sell 3 or 4 houses per day, because they do their auctions at the property they are selling.
Mike and Randy’s advertising has done very well, but it has changed dramatically in the past seven years. They are doing much more internet advertising now. It is more expensive to send letters than to advertise on the internet. Mike believes that their may be a time when they no longer need print media. The newspaper does not work as well in bigger metropolitan areas.
Bruce asks Mike what source he receives his most qualified buyers from. Mike claims that the sign on the front of the property often attracts the most qualified buyers, because those buyers often own property on that same street. When you put the word auction on a sign, people pay much more attention.
Mike usually has two open houses during the week before the auction. Each open house is about 2 hours. The main reason why they have a limited time for viewing each house is to create sense of urgency. They are prepping their mind for the auction, because the house is going to be sold at a specific time and date. Bruce asks Mike if it is important that there are other people present when someone attends the open house. Mike thinks this is very important, because it gives them the idea that they are doing the right thing.
Bruce asks Mike what his main objective is when people call about an auction ad. Mike’s main objective for the initial conversation is to get them excited about the auction, and to get them to come to the open house, so that they can fall in love with the property. He also wants to assure potential buyers that buying from an auction is simpler than buying the normal way. The first call that Mike gets from a potential buyer is the most critical call, because it is easy to lose buyers when they first call for information. A first time participant may be looking for a reason not to attend the auction. Mike has hired a professional to handle most of his buyer calls.
Most people assume that an auction would be held on the weekend, but Mike and Randy are having their auction during the week. They hold auctions on everyday except for Sunday and Monday. They prefer not to hold auctions on Sundays because they do not want to get in the way of anyone’s religious traditions, and on Mondays people are busy preparing for the rest of the week. However, he has attended an auction on a Monday that was very successful. The time that they choose to hold their auctions does not seem to matter too much. There are times when more people will show up for a Wednesday auction than a Saturday auction.
Bruce asks Randy how many bidders are typically needed for a successful auction. Randy has had successful auctions with as little as 3 bidders. He often feels better when there are only about 5 to 10 people attending. There’s been up to 70. Bruce asks if there’s been any issues with appraisals. At one auction, the bank lowered the $10k. They stuck to their guns and the buyer ended making up the difference.
Bruce talks about The Norris Group’s current appraisal situation and how the verdict is still out.
Back to auctions, when Mike starts an auction he often begins by auctioning something small for charity. He does this because it helps new bidders to relax, and it encourages them to bid. It’s an ice breaker.
Bruce asks if people ever forget about the buyer’s premium. About half of the time, people forget about the buyer’s premium. This still occurs even though they disclose it in all the written terms, and it is disclosed before all the auctions they do. Even Mike has forgotten the buyer’s premium, because there are many times where people come to an auction not thinking about the buyer’s premium; they are thinking about winning the property they want to bid on.
Bruce asks if Mike can tell when buyers feel remorseful over their decision to buy. Mike can tell when people feel bad about their decision because they do not look excited. This is why Mike does his best to make people feel comfortable when they buy his properties. He does his best to answer his buyer’s questions.
Mike believes that receiving a healthy deposit for the closing of a property is of key importance. In this market, you cannot come out and tell people that they need $15,000 dollars for them to bid, because you will knock out all the first time home buyers. On a single family house in Bakersfield, Mike and Randy will often ask for a $5,000 dollar deposit, because it is enough to encourage people to close the deal. Mike and Randy close about 95 percent of their escrows during the first try.
Bruce asks Randy to describe the perfect seller to have as an auction client. Randy thinks that the perfect seller is someone who works with wholesale properties. Those kinds of people have reasonable price expectations, because they often buy at the right price to flip it, and they are willing to pay for the marketing cost with the expectation that Mike and Randy will make them a profit.
The number for Elite Auction is 661-325-6500, and their website is www.sellwithauction.com
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Part six of “I Survived Real Estate 2008” picks up with review from last week. Since this is the solution portion it’s very important. Later in the interview the Q&A with all panelists begins.
Bruce shows the audience a list of 20 homes The Norris Group purchased in the past 45 days through auction or out of the MLS and the huge price hits lenders are taking. On 20 transactions, the banks took a $4.6 million dollar loss. Bruce says he’s worried about the domino effect. Too many people owe more than their property is worth.
Bruce says there are three ways to solve a vacancy. We can tear down houses and create an artificial housing shortage. We can leave it vacant and wait for till household formation catches up with supply. Or, we could make it possible for investors to have financing to hold them.
Four solutions that are needed to get us back on track. The 203k loan program from FHA should be made available to investors. It was available to investors until 1996 and then FHA discontinued because it had done its job of getting rid of foreclosures. FHA doesn’t have a ton of foreclosures because they didn’t make a ton of loans. However, the loan program needs to be made available for investors to expedite the foreclosure problem.
Fannie and Freddie need to increase the number of loans they will give to investors. Both want to open offices in California to help unload inventory more quickly and investors are likely candidates. At the same time, they are cutting back on financing available. Both are in a dire situation. Fannie and Freddie hold a huge amount of the foreclosures.
Option Arms are the next wave and these loans represent 50% of Fannie and Freddie losses. Bruce shows the Option Arm reset chart. The chart shows the expected resets and what’s currently happening now. A huge number of these Option Arm loan holders are making teaser payments. Once the loan balance hits a certain percentage, the loan resets. 90% of the borrowers of these loans made the minimum payment. Many won’t walk until the reset because the payment is cheaper than rent.
The foreclosure process is now taking longer because the banks are so slammed but because of the new regulations as well. The bulk of these are set to land in 2009. The loan amounts were typically more than subprime and the lenders will have to recalculate what they made because of how they were writing things off.
Bruce says a due on sale moratorium would make it possible for investors to buy properties that would undoubtedly become foreclosures, it would allow Realtors and auctioneers to make commission on properties with no equity but favorable financing, allow a consumer to move on with credit intact, and improve liquidity in the system.
In the 1980s, foreclosures exploded but price deterioration wasn’t bad. Assumptions of loans saved the market. When interest rates were 17%, people were able to assume better financing. Bringing back the simple assumption could really help.
Bruce also suggests the 90 day seasoning period on properties to be removed so investors can fix houses and sell them more quickly. Bruce shows the audience the picture of one of The Norris Group’s fixed up properties. Bruce describes why our fixed up inventory is so important for the market. The assumption that investors are committing fraud is completely wrong and is actually causing more problems. The creation of the two levels of comps is necessary to keep prices stable.
Bruce also wants to see long-term financing for investors so we can get the market cranking again.
Bruce then starts the second part of event. All eight guests appear on the stage to discuss the solutions brought forward.
Tommy Williams starts off by speaking on the point that there are some properties that should be bulldozed as some neighborhoods would actually be better off.
Christopher Thornberg brings up the political ramifications and complications of solutions and the difficulty of getting people to listen. Christopher also brings up the myth where some people renting must mean that person’s life is a complete wash. Christopher also brings up how investors were blamed for the current market.
Bruce brings up the fact that all the solutions he proposed are not new and that they had existed at one time in the past. It’s nothing new and they worked before.
Rick Sharga says the number of properties in foreclosure that are not owner occupied have not gone up that much. The myth that the investor caused it is not correct. Rick points out that many of the solutions would have to be implemented one piece at a time and it would take time. Rick also talks about non profits getting involved. Habitat for Humanity is taking REOs and rehabbing them instead of starting from scratch. Rick also talks about how numerous investors are coming in with large pools of money ready to take down portfolios of notes.
Bruce talks about how he gets called by Wall Street often and how they are putting together multi-million dollar pools to do that and they want to know when bottom is. Bruce is not excited about the thought that the very companies that helped get us into this mess will be the ones who also take advantage of the current situation. More to come.
The following partners and sponsors without whom the event would not have been possible:
Platinum Sponsors:
The San Diego Creative Investors Association (SDCIA): sdcia.com
Investors Workshops: investorsworkshops.com
Frye Wiles: fryewiles.com
Proxibid: proxibid.com
White House Catering: whcatering.com
MVT Productions: mvtproductions.tv
Pechanga Resort and Casino: pechanga.com
The Denver Nuggets: nba.com nuggets
The Chicago Bulls: nba.com bulls
The Cleveland Cavaliers: nba.com cavaliers
Gold Sponsors:
7 Steps to a 720 Credit Score and Philip X. Tirone – 7stepsto720.com
Chicago Title – ctic.com
Elite Auctions – sellwithauction.com
Foreclosure Trackers – foreclosuretrackers.com
Investors Resource Center of America LA and Steve and Robyn Love – irca-losangeles.com
Las Brisas Escrow – lasbrisasescrow.com
National Club of Real Estate Investors and Sam Saddat – ncrei.com
Northern California Real Estate Investors Association (Norcalreia) and David Granzella – norcalreia.com
North San Diego Real Estate Investors and Linda Wessels – nsdrei.org
RealtyTrac – realtytrac.com
RE Ventures and Michael Pines – reventuresrealty.com
Real Estate Investors Club of Los Angeles and Phyllis Rockower – realestateclubla.com
Real Wealth Investor and Scott Whaley – realwealthinvestor.com
Saddleback Valley Communities – svc4.com
Silverstar Finance and Janet French – silverstarfinance.com
Sunset Hills Memorial Park and Mortuary – sunsethills.cc
The Mission Inn – missioninn.com
The Mortgage Equity Group – http: themeg.net
The Naked Real Estate Investor Club – Rosie Nieto – nakedrealestateinvestorsclub.com
The Short Sale Processor and Nick Manfredi – theshortsaleprocessor.com
Virtual Real Estate Tour and Layla Tusko – 1wealthcreation.com
Wholesale Capital Corporation – wccmtg.com
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Bruce Norris launches this week a very special event for a very special cause. On August 23rd, 2008, The Norris Group along with support from generous partners and panelists will host an event entitled, “I Survived Real Estate 2008.”
Proceeds from the event will benefit the Orange County Affiliate of the Susan G. Komen for the Cure. The event seeks to bring together the real estate community including Realtors, auctioneers, investors, mortgage professionals, economists, service providers, and builders to discuss how we got here, how the respective industries are changing, and how we move forward and prosper together in 2008 and 2009. This is about solutions and synergy, not bad news.
The TNG radio interviews for the next several weeks leading to the event will seek to introduce the audience to the panelists that are participating in the live event. Many have been guests on the radio show before and we appreciate their willingness to help us with such a worthy cause.
This week, Bruce Norris is joined by wife of 38 years, Marsha Norris. Marsha is a cancer survivor and has been fighting for 13 years. Her cancer battle started with breast cancer and she is now fighting bone cancer. Marsha and Bruce discuss how they found out, the initial reaction to finding out, the journey they’ve taken trying to find a doctor who would listen, protocols, the important of self education when it comes to illness, surrounding yourself with people who believe you’ll survive, how the real estate community has been a HUGE support system, spirituality and getting through the tough times, believing in a cure, pursing health versus buying time, the Susan G. Komen website and the resources that help, treatments she’s tried along the way, and how believing in your treatment is important.
Marsha Norris has four children, seven grandchildren, and has been married to Bruce Norris for 38 years. Marsha is a trained massage therapist and loves reading on holistic medicine, different massage techniques, and numerous other topics. She enjoys traveling and looks forward to seeing Egypt for the first time this coming Fall.
Official site launch of www.ISurvived2008.com and tickets for the live event will launch early July. Thank you for your patience and we’ll keep you posted on the radio show and TNG website. There will be numerous ways for you to get involved so we look forward to sharing them with you soon.
Special thanks to the following partners who are helping make this event possible: the San Diego Creative Investment Association and Bill Tan (sdcia.com), the Investors Workshop in Orange County and Shawn Watkins (investorsworkshops.com), Frye Wiles, the results-oriented web design, Internet marketing, branding and creative design firm helping us with the web (fryewiles.com), MVT Productions who always does an amazing job with our audio/visual needs (mvtproductions.tv), Proxibid who has graciously offered to air this event nationwide live via the Internet (Proxibid.com), White House Catering (whcatering.com), and finally, the Nixon Library for allowing us to use their wonderful White House Replica of the East Room to hold the live, black tie event (nixonlibraryfoundation.org).
