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Bruce Norris is joined again this week by Ward Hanigan. Ward is the founder of Foreclosure Forum.com and the educator of real estate investors for the last 20+ years. He is the most recognized name in trustee sales training and one of the most respected men in the business.
Ward mentioned in the last segment how he received a surprise speaking invitation. At this speaking engagement, there happened to be a 28 year old in the audience named Greg Metcalf who was not doing well at the time; and Ward changed this. He was looking for something else to do since he had his own janitorial service business servicing a couple broken down office buildings in the Orange County area. He hated doing this and was going to real estate meetings to search for something onto which he could latch. When he heard Ward speak, he was absolutely thrilled.
Two weeks later Ward showed up at the area Congress for real estate’s meeting, and this same guy was there again. This time he latched onto Ward and told him he knew what he wanted to do and asked if he could teach him. Ward told him congratulations, but unfortunately he did not know anyone he could recommend him to who was qualified enough to train him. Ward simply told him to do what he did, such as reverse engineering the foreclosures he watched down at the sales and to go to different libraries and read the codes on foreclosures and a book by John Beck on foreclosures. Greg really wanted Ward to teach him, but unfortunately Ward had to tell him he wasn’t a teacher or trainer. Greg was actually lucky he caught him in the first two talks since he was probably not going to give anymore after that. Ward gave him his phone number and told him if he had any questions to call him. He wanted Ward to train him when he would not even know where to start. He had not even thought about training anybody and would not know how long it would last.
In the end he agreed if he did train him it had to be three days. One day would be on basics, the next on title record searching, and the third day would be taking him to the recorder’s office and having him demonstrate to them that he had mastered title searching skills. He would also have to teach him formulas to figure out where to stop the bidding, which is known as the Best Bid. Greg said he would do anything Ward asked him to do, and he told him his wife didn’t really want him doing it since they didn’t need to create their own competition. Greg said he would sign anything his attorney came up, but he would never come into Ward’s area of San Diego. To this day, he never has come to his area.
They kept talking between each other, and finally he started speaking for other speakers since he enjoyed it so much. Somehow Greg would find out where he was speaking and would be at this event. Finally, he told him it would take three days and would not balloon it into a longer time period. He could not give three days to somebody for nothing, and Greg said he would not expect him to do that. Ward’s wife told him to charge $1,000, which he thought was crazy. She said this was the point and that Greg would say no. If he is still living at home, he is not going to have $1,000. He came back and gave him this price, and Greg said this was fine. He ended up training him in what he called his jack-in-the-box training.
He had nothing set up for it, not even a classroom. He went out to the stationary store and bought a small white board and tripod. He put this beside his desk and called it jack-in-the-box training because as he went through it, he would see a good formula a go through the file to dig it out. Ward gave Greg a folder containing about 30 forms as a well as a copy of his own resource manual he created to keep track of all the tricks he learned himself. Greg went right back and used his dad’s 401k money to buy two properties. Within about a month, his father was so flabbergasted with the deals that he did not want to resell them but keep them. He also did not want to refinance them, so all of a sudden Greg’s mom called Ward to convince his dad to refinance the properties or sell them so Greg could get going again. Unfortunately, his dad would not. Greg went to get a job at First American Title Company since Ward told him he would not talk to him again if he went back to janitoring. When he took the job, Ward told him that he sucked them dry and was right in the middle of the castle. Ward, an atheist, and Greg, a born-again Christian, are the closest of buddies, and at the end of the day he has been fairly successful and is worth millions.
Greg took something and just ran with it, and he has a tremendously maniacal work ethic Ward has not seen in anybody else. Seven days a week, from 6 in the morning to nine at night, he would be working. He decided after two years that he had learned as much as he possibly could. Ward implored him to leave on good standing and wanted him to have an open door between himself and First American, which he did. They even let him keep his key to the company after he left. This meant he could go in to use the computer and all the other services, which Ward thought was cool for him. His dad also ultimately relented, and he now has a pile of cash. Before he did this he started a foreclosure notice service up in Orange County since Ward told him there was only one there originally. He told him to create a service, and they would build it up to be his service he would own. He could then sell the company for $60, $80, or $100,000. He could then use this cash to get into the business. He said they would work together and he would help him as much as he possibly could, and off they went.
Ward would go up to Orange County about once a month on Saturdays, which became known as the “help day.” He would go up there about 8 in the morning and leave at 6. They would use the community room at a bowling alley since his wife was quite a bowler. He learned they had community rooms they let you use for free if you had a group of people who might be eating in the restaurant. This also included free parking, and these were door buster kinds of meetings. Unfortunately, nobody was doing this kind of thing. However, you could not come in unless you were subscribing to Greg’s service and were a paid-up subscriber.
Annually Ward has a gathering for all of his students if they wish to come. Usually about 100-120 show up, and most of them are successful in the business. These people are the doers. There are so many types of people in the business; those who have the brains, the money, and are motivated. However, when it gets right on down to brass tax, it is absolutely flabbergasting to Ward that the people he thinks will take off don’t ever seem to do it. The people who come to these meetings are usually those who are doing something in the business; and they love fraternizing. They have had people get married who met at these reunions. They have also had all kinds of business people get together to combine their tasks and money.
Ward has been training people for a long time and has seen people who have all the ability who don’t use it. Bruce wondered what the ingredient is for the people who do use it versus the ones who don’t. Ward said he almost thinks it is because they are not desperate enough. Ward did not get into the business originally when he knew there were foreclosures. He poked at it in 1976 and saw he didn’t have the time; then he did it again in 1978. He waited another four years after this until 1982, and he had absolutely nothing going for him. It was a blessing in disguise that he had no job where he was making a lot of money. He had a job where he was making a lot of money at it, but he could not stand it since it was so boring and did not use all of his native abilities. However, you don’t want to go out and bet on yourself to try something else.
Bruce asked how the industry has changed since the downturn. There has been a big price damage, and for a few years prices were going down like a rock while not many lenders were cutting loose with properties. Bruce wondered what the first good year after the downturn was for people in the trustee sale business where there were margins and properties. Ward said he would think that 2006 was the time it seemed to come unraveled. From 1996 to 2006, this was the time period when things were fantastic. In the old days when Ward started in 1982, there were only three people who showed up all the time to bid. Every once in a while you would have a new person show up, hang around for about a month, and you would never see him again. Even then we were over 1 million population, and even then most people did not even know how to spell the word foreclosure. They had everything to themselves and would present to the newcomers who came. These people became part of the regulars, and this became the popular thing.
All of a sudden they hit a critical point where foreclosures were in the newspaper, on television, and even movie scripts are being made out of them. This cheapened them and made people think that anybody could get into foreclosures and it couldn’t be that difficult. They would have people show up to bid and buy terrible properties. They bought something in which they did not even know all the liens against it.
Bruce wondered if there is much protection at a trustee sale if you are about to make a mistake and the fellow bidders will come to your aid. Ward said no and that there is no way of this happening. Ward said he once did it and was rebuffed for it, and he said he could understand why. There was an older gentleman who Ward was suspicious may not have known he was bidding on a second. He thought he was bidding on a first, which made it a bad situation. He walked up to him and asked him if he had done his research, and the gentleman just told him he had everything handled. This person ended up losing thousands of dollars on this property. It is natural for people to think you are trying to throw them a curveball in a very competitive environment on the foreclosures. They think if you went down there to bid, then why would you be telling a complete stranger some important information. Ward just gave up doing this after a while. Bruce said it is interesting he even attempted it in the first place. He said he did not do it once, but a couple times.
Here we are now in 2013, and news article come out now about price aggression and price increases. At the same time, however, there is not a lot for sale in the MLS. Bruce asked Ward what he makes of this market and where he sees opportunities for investors to make money. Ward said he has a steady stream of his paces and had an open door policy with his trainees, telling them they could call him until they died regarding any questions regarding their training course. This open door has allowed him to really keep up with the tempo as time goes on. He asked the guys what is happening now, what their biggest problems are, and what they wish they could take away. It seemed to be prospering by looking into the niches, in the areas that are not the most obvious. This includes bidding at the foreclosures of junior liens, seconds, properties with IRS liens, properties that are older than ten years, and anything that the hedge fund guys and newbies turned their nose up. Often there is a gem in this pile. If they just have a mom and pop operation low overhead, make $30-$40,000 on the deal and stitch together 8-10 of those a year, then this is a good deal firm.
Bruce asked if the easy access to information changed trustee sale business. Ward said it absolutely has. He saw this very early in the game and seriously thought of buying a foreclosure notice service company and then just closing it. He and his wife had a discussion, and she told him what would happen is somebody else will open one up in the vacuum. Are you going to keep buying everybody who starts a foreclosure notice company? Sean O’Toole has a fabulous service that deals with these kinds of things, and the more fabulous the service is for the average man, the worse it is for a pro. If everybody knew what Ward knew, they would be competing against themselves. This is why Ward has a saying, “What you think is good is bad, and what you think is bad is good.” Ward really believes this; and this started way back in the days when personal computers came out and everybody was jumping up and down with joy over them. Ward already predicted it was not going to be good.
Bruce asked if it was a good time to accumulate dingbat investments and also what these even are? Ward said a dingbat is a niche in the rental market. Everybody thinks that a tenant is a tenant. This could not be further wrong. Ward made a timeline for a person’s life and showed that from 0-25 you are just growing and learning. You then join the work force from 25-65, the forty years when you have a lot of disruption in your life. This includes marriage, having kids, and changing jobs. This manifests itself with people wanting to move for all these reasons. From 65 you are retired, have your gold watch, and you will probably not get married or have kids after this age. Things settle down and there are far fewer disruptions. Ward loves renting to people from 65-85 since this is the absolute sweet spot in a rental market. This tenant wants exactly what Ward wants, which is no surprises, no changes, he just wants to be left alone and not bothered. Ward rents to single retired seniors, especially if they are on Section 8. He then has the guarantee that the government is going to cover their rent or at least the bulk. Usually 16.2 years is how long a tenant stays, and it is always a one-bedroom, one-bathroom house.
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.
