Bruce Norris is joined this week by Ward Hannigan. Ward is the founder of Foreclosure Forum.com, a website specifically for education of real estate investors, specifically trustee sale experts. Ward is the most recognized name in training other people to do trustee sales, and he is one of the most respected men in the industry.
Bruce thanked Ward for all the years of dedication to the industry. His reputation is no joke, and Bruce has never heard anyone say anything bad about Ward. Bruce asked Ward when he first decided to become involved in real estate investing. Ward said he was not entirely sure at first and was one of the guys who lived by his wits and was bright, but he would not stick to something long enough and get bored very easily. Therefore, when he graduated from college he was recruited on campus by IBM. He loved the job while it was a novel and he was making more money than he had ever made. When they rewarded him with increased quota and cut his territory the second year, he felt like he had been robbed. He started looking around for something else, and he discovered that he did not want to be a little minnow in a big pond like IBM. It was a fantastic company that offered fantastic benefits and kept their word, but he wanted to be the big fish in a small pond. After that he intentionally never worked for a big company again.
After this, Ward initially went on to create a company called International Franchise Enterprises because he noticed every time he visited Tijuana where he picked up his wife’s relatives, there were all kinds of Americans down in Tijuana who were specific about what they eat and drink. Ward thought there was an opportunity here, so he bought an A&W root beer franchise. He went to Santa Monica, where they had their headquarters, and he negotiated purchasing the area franchise for Baja California Norte. This included all of Mexico down to and including Ensenada and Mexicali. He put the largest A&W root beer stand in the world in Tijuana, and they did fantastic but for the wrong reasons. He thought he was getting a name that Americans would gravitate to and knew was a quality drink. Unfortunately, where he had the stand located was on the busiest street going out to the race track. All the Americans were so busy and wanted to get to the track before everybody else that they were not going to stop to get a root beer; neither would they stop on the way back as they wanted to get back across the border. However, the locals absolutely fell in love with his root beer stand. Things got crazy, and the police had to come out to control the lines of people trying to park underneath his umbrella stand.
After this, Ward ended up taking food into Mexico. He would take in 2,000 pounds of hamburger meat, and other restaurants would come over and buy American hamburger they did not have to get from across the border. Ward had an added profit to this because American meat is pen fed and has 21-22% fat in it. Mexican meat, on the other hand, is range fed and only has about 10% fat. This kind of meat will crumble.
Real estate came into play after he came back to California and ended his meat business down in Mexico. He did not want to live back in Riverside since he had fallen in love with San Diego and wanted to stay. He had a bachelor’s degree in economics, so he thought this would make him a great stock broker. He went over and got a job as a stock broker trainee in La Jolla with a company. He really liked doing this job and the novelty of it until he found out that in order to prosper he was going to have to fudge on a lot of things. This made him feel very uncomfortable, and he could not stand lying to people. One of the worst things you can do is be ashamed of you. If you are ashamed of yourself, then you are dead in the water. He was so ashamed of himself and eventually went to the hospital from both hives his reactions to people about his lack of full disclosure. He decided to quit that job after this.
After being a stock broker he began working at Country Wide Funding. Despite not having a real estate license, he answered an ad in the paper for this company. Country Wide had initially been formed back in 1969 in Los Angeles, and they spread out to San Diego. They only hired two men in San Diego, and Ward was one of them. He ended up working as a mortgage solicitor for Country Wide. At first there was a joke because he thought there was no such thing as a Country Wide company. He thought he had heard them wrong and initially called it County Wide. When he reported to the company the very first day, the secretary corrected him. He learned everything essential to making FHA and VA loans, and he memorized all of the qualifications for these loans. These were the only loans Country Wide made at the time since they did not do conventional loans. He did extremely well with them and enjoyed working with them. The person who recruited him would get $10 million from some investors in New York as his operating cash, and he would create mortgages with this to sell to Fannie Mae. Sometimes he would have a shortage and the company would get furloughed, something which he got really tired. He finally called his recruiter and told him he was sorry but that he was moving on to another job.
Bruce asked Ward if while working for Country Wide he noticed the agents that were selling the real estate were making more than him. Ward said they were making a lot more, which intrigued him. After he left Country Wide, he took the time to stay home for a while. He decided to obtain his real estate license and switch over to sales because he could see they were making a lot of money. He had Angelo, his former recruiter, call him and he could not believe Ward was quitting since he was his star person. He even had Ward come up to LA and demonstrate how he could sell mortgage term insurance almost 98% of the time.
After seeing an ad in the paper, he went to a company called Chula Vista Commercial Realty who told him to come talk to them and not worry if he did not have a license. Chula Vista was fairly new and specialized in selling 5+ unit apartments. This was the start of Ward’s career in real estate. At this point he was in his late 30s, and he still had yet to deal with his first foreclosure property intentionally. A lot of people may find this surprising but also encouraging. They probably thought Ward had been doing this his entire life, when really he was almost forty before he got into real estate. Even now he is not even into foreclosures yet and is just about to make the brokerage scene.
Bruce asked Ward how long he stayed in brokerage before he noticed the people who owned it were making more money than the agents. Ward said it was ten years. He worked from 1972 to 1982. He had broken off after about 4-5 years and went off to form a company called Income Realty. He telegraphed that he was only interested in rental income, and he had his own office. Here he was making lots of money, but from the sales. The reason he did so well in sales was he convinced the sellers to carry a good portion of the sales price back and have the owner carry it back. This made a lot less down for new buyers to buy in, and they only took subject to the existing loans. At the time interest rates were climbing from the mid-70s to that point, so the carry-back financing was a good yield for the seller. It was a fantastic thing for the seller since he would get into very few arguments about the price since not everybody would carry back. Those who were not licensed could not charge points and loan fees.
Ward is 49 years old and has not bought a thing yet. He was 42 when he got into foreclosures. This intrigued him since every once in a while one of the people who had convinced the owner to do a carry-back wrap-around would call him up and tell him how an apartment house he had sold three years ago they did a carry-back note one was sold to somebody else who was not paying. They asked Ward what to do, and he told them they would have to foreclose. He started becoming intrigued when people asked him how to do this, so for his business he had to know all the answers about foreclosure so that the people would not take a loss on something he suggested they do. The more intrigued he got, the more he started looking at it as a source for finding properties for investors. He wanted to do this on the side since he was initially way off base and thinking of it as an adjunct to his regular brokerage activity. He found out that investing in foreclosures is a full-time business, and there is no such thing as doing this part-time if you really want to prosper.
In 1976, he subscribed to a foreclosure notice service. In a whole month he did not even open up more than two of their envelopes that came every single day with paper notices. Bruce thought maybe they were two colors since he received a subscription to one that had one yellow card and one pink card. Ward said they may have had that too, but he was overwhelmed since he was making good money in brokerage. He had just cancelled his subscription after one month and thought he would get back to it. Two years later, the business was bought out by somebody else. The person in charge contacted all of the previous subscribers and said he had made it simpler, faster, and easier to get rich off of foreclosure subscriptions. Ward fell for it hook, line, and sinker. He subscribed again; and the same thing happened where he was overwhelmed with his real estate business and not giving it a serious thought. He had made a vow back in 1978 that he was not going to get into the foreclosure business unless he had a lot more time to devote to it.
He did not have to wait that long since in 1982 interest rates went up to 16-18%. At this time the apartment industry was dead since buying apartments is an elective. You do not have to have an apartment to live. You could have a house; so people would fold their arms and say they would wait until the nonsense subsided and buy an apartment house when mortgage rates were reasonable. He went from being overwhelmed to having nothing to do. This is when he came up with the idea to work with foreclosures.
Bruce asked Ward when was the first time he shared what he knew with someone else. Ward said he did not share with anybody at first since he did not have any tutors and there was nobody around who seemed to know anything about it. They would have carpet-baggers come down from LA to San Diego and have a seminar on Wednesday to round up business for the weekend. Ward would look at their manuals and see that it was nonsense and he would not give $200 for it. He knew at that time that the menus were out of date even though they knew foreclosure laws were changing all the time. Ward guarded what he knew as a corporate secret and made up a manual he could reference fairly quickly. He knew a lot about raising cash, regaining possessions, researching the title of the property, and rehabbing and was interviewed by Jack Fullerton. Even though he did not know him at the time, he called Ward from Orange County and told him he had been recommended as a person who might be able to act as a substitute speaker. He had a speaker arranged who cancelled at the last minute, and he already had a large people already registered and coming. Ward told him he did not know what gave him the idea he was a speaker since he had not taken any public speaking classes. He had a local club in the area he worked, and they only met once a month amongst themselves. The members gave their success stories to the other members, and they try to help out all the other members. They told them to bring the most recent deal; and a lot of times people would be embarrassed. He was often asked to give the most recent foreclosure story at the meetings if a speaker did not show. That was about all he would do. He told Jack he was making a wrong move and really did not have any experience speaking. Jack told him he is better than nothing, so Ward agreed to speak.
Ward went up on the stage to give his talk, and afterwards he received a standing ovation. Greg Metcalf, then 28, was in the audience. At that time he was living at home and very upset about it because he wanted to be like his peers and drive fancy cars. But from this experience, he now knows why comics go back to their roots and go to the comedy store. It is because they want to be back in the audience again and get the buzz that it gives you. The minute it was over he was glowing and felt like he was having fun. Another person in the audience was a coordinator for arranging speakers for a combined club up in Orange County called ACRE, or Area Congress on Real Estate. He also gave a talk to this group, and instead of 25 men like Jack, there was over 200 and it was very different. To feel a little more comfortable, he jumped off the raised platform and left the microphone. He walked up and down the aisles between the people speaking a little louder, and it was the same thing. He would look directly in the eyes of no more than 10-15 people at a time.
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