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The Norris Group Real Estate News Roundup 8/20/10

Sunday, August 22nd, 2010

Video Blog Sources:

Mortgage News Daily – “Mortgage Rates End Losing Streak After Reprices for Better” (8-19-10)

Wall Street Jounral –  “Redfin: Less Than Half of All Home-Sale Attempts Successful in ‘09” (8-16-10)

Housing Wire – “Bankrate: Loan Closing Costs Jump 36.6% Year-Over-Year” (8-17-10)

Housing Wire – “TransUnion: Housing Begins to Stabilize as Delinquent Loans Fall in Q210” (8-17-10)

DQ News – “Southern California Home Sales and Median Price Dip in July” (8-17-10)

Wall Street Journal – “Mortgage Delinquency Runs Slightly Higher in Dems’ Districts″ (8-19-10)

Today’s News Synopsis:

MDA Dataquick’s monthly study shows 6,773 new and resale homes closed escrows in Northern California last month. In the entire state, 35,202 new and resale houses and condos were sold. The California State Assembly approved SB 1178, which will extend anti-deficiency protection for consumers who have refinanced their original mortgage loans. The Census Bureau reports the number of people who own their homes free and clear has decreased, and the number of people in reverse mortgages increased 59 percent.

In The News:

Los Angeles Times – “Professional investors move into flipping foreclosed homes” (8-20-10)

“Hoping there are big profits to be made in the aftermath of California’s housing collapse, professional investors are flocking to the business of buying foreclosed homes at distressed prices. The investors, primarily private equity funds and groups of wealthy individuals, purchase the homes at public auctions, which are held daily on the steps of local courthouses. They refurbish the properties and try to sell them for quick profits.”

DQNews - “Bay Area July Home Sales Down Sharply; Median Price Slips From June” (8-19-10)

“Last month a total of 6,773 new and resale homes closed escrows in the nine-county Bay Area, down 19.1 percent from 8,373 in June and down 22.8 percent from 8,771 in July 2009, according to MDA DataQuick of San Diego.”

DQNews - “California July Home Sales” (8-19-10)

“An estimated 35,202 new and resale houses and condos were sold statewide last month. That was down 19.9 percent from 43,964 in June, and down 21.9 percent from 45,079 for July 2009. California sales for the month of July have varied from a low of 30,596 in 1995 to a peak of 71,186 in 2004, the average is 47,093. MDA DataQuick’s statistics go back to 1988.”

CBIA - “California Housing Affordability Declines in Second Quarter, CBIA Announces” (8-19-10)

“On a statewide basis, the HOI found that a family earning the median income could have afforded 58.4 percent of the new and existing homes that were sold during the second quarter, down from 60.8 percent in the first quarter.”

CAR - “California State Assembly passes SB 1178 protecting homeowners” (8-19-10)

“The California State Assembly today approved SB 1178 (D-Corbett) by a 49 to 14 vote, extending anti-deficiency protection for consumers who have refinanced their original mortgage loans and now are facing foreclosure. The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) is the sponsor of the consumer-protection legislation.”

Housing Wire - “Commercial Real Estate Hit with 41% Price Drop, Soaring Delinquencies” (8-20-10)

“National property prices on commercial real estate dropped 9.1% in June from last year, according to Moody’s commercial property price index. The rate declined 0.9% over the first half of 2010, and while prices remain 4.2% above the current recession low of October, they are down 41.4% from the peak in October 2007.”

Housing Wire – “Census Bureau Reports 59% Rise in Reverse Mortgages as Overall Ownership Falls” (8-20-10)

“The nation’s homeowners paid a median of $1,000 in monthly housing costs in 2009, while renters paid a median of $808 per month, according to the 2009 American Housing Survey released Thursday by the US Census Bureau and the US Department of Housing and Urban Development (HUD). Compared to 2007, the number of homeowners that owned their home free and clear decreased 1.3% to 24.2m in 2009 from 24.9m. The amount of regular and home-equity mortgages increased 1.4% to 50.3m from 48.7 in 2007. Reverse mortgages increased 59% to 252,000 from 159,000 while line of credit options decreased to 1.7m from 1.8m.”

Housing Wire – “REO Listing Agents – The Helping Hand That Isn’t Always There” (8-20-10)

“In some cases, interested buyers have been ignored (as documented in ’secret shopper’ campaigns). This is not to suggest that all or even most of the REO listing agents are doing a poor job, it is to suggest that as volume levels to some agents has increased there may be a direct correlation to declining service levels that should be understood.”

Inman - “Don’t buy Fannie-Freddie ‘Big Lie’” (8-20-10)

“While the Fed and the Obama administration insist that recovery is moving forward, the pattern of inbound data produces the same, queasy sensation as their denial in the fall of 2007 and the summer of 2008. New unemployment insurance claims hit a one-year high, to 500,000 last week. There was no dramatic spike, just steady deterioration. The Philadelphia Fed index yesterday stunned the remaining optimists: Expected to rise from a weak 5.1 in June, it fell to negative 7.7, weakest in new-order and employment components.”

Inman - “Mortgage rates go lower” (8-20-10)

“Rates on fixed-rate mortgages tracked by Freddie Mac hit new lows this week, with 30-year fixed-rate loans averaging 4.42 percent with an average of 0.7 point. That’s down from 4.44 percent last week and 5.12 percent at the same time a year ago, and is a new low in records dating to 1971.”

Looking Back:

One year ago, the delinquency rate for residential mortgages increased to 9.24%. A home buyer survey showed that 70% of women made up their mind to buy the day they first saw a home for sale, vs. 62% of men. 55% of women place more importance on living closer to extended family than to their job; only 37% of men felt the same way.

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 event 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.

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The Norris Group Real Estate News Roundup 8/17/10

Tuesday, August 17th, 2010

Today’s News Synopsis:

Statistics from MDA DataQuick show 18,946 new and resale homes were sold in Southern California in July. Frank Nothaft of Freddie Mac announced that refinancing activity has accounted for over 80% of conventional loan activity. National housing starts increased by 7.1 percent last month, according to the NAHB. The MBA expressed concerns that recent policy changes restricting seller concessions went too far and may damage the industry.

In The News:

DQNews - “Southern California Home Sales and Median Price Dip in July” (8-17-10)

“A total of 18,946 new and resale homes were sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties in July. That was down 20.6 percent from 23,871 in June, and down 21.4 percent from 24,104 for July 2009, according to MDA DataQuick of San Diego.”

NAHB - “Housing Starts Rise 1.7 Percent in July” (8-17-10)

“Nationwide housing starts inched up 1.7 percent to a seasonally adjusted annual rate of 546,000 units in July from a downwardly revised figure in the previous month, according to U.S. Commerce Department figures released today. The gain occurred entirely on the multifamily side, with single-family housing production falling 4.2 percent to 432,000 units.”

Housing Wire – “MBA Prefers FHA Seller Concessions Lowered to 4%” (8-17-10)

“In a letter to the US Department of Housing and Urban Development (HUD), the MBA said its members urge the federal agency ‘to ensure policies do not reach too far and needlessly discourage home buying at a time when the housing market is still fragile.’ Last month, HUD announced possible policy changes within the Federal Housing Administration (FHA) aimed at boosting capital reserves. The changes include reducing the limit on seller concessions to 3% from 6%; using a FICO credit score of 500 as a minimum for consideration in FHA programs; and lowering the maximum loan-to-value to 90% for all borrowers with credit scores less than 580.”

Housing Wire – “Fannie Mae Sees Housing Activity Flat in 2H” (8-17-10)

“The GSE also said continued uncertainty and a slower-than-normal recovery points to overall GDP growth of 2.5% for the rest of the year. In July, analysts at Fannie Mae’s economics and mortgage market analysis group projected growth of 2.8%, which was down from a June estimate of 3.2%. The agency expects the low, 30-year, fixed-rate mortgages to boost refinance activity but not result in any sort of refinance boom. The current average rate of 4.5% is expected to remain throughout 2010.”

Housing Wire – “John Burns: GSE Renting Options Will Increase Demand and Limit Supply” (8-17-10)

“The government should create an apartment real estate investment trust (REIT) to rent out foreclosed properties — a method that would avoid flooding the housing market with foreclosed properties, a real estate consultant said as President Obama’s ‘Future of Housing Finance Conference’ kicked off Tuesday. John Burns, CEO of John Burns Real Estate Consulting, said the government-created REIT would be self-sustaining via rental fees. The government-sponsored enterprises, Fannie Mae and Freddie Mac, would hire outside property-management firms to manage the rental properties, Burns said.”

Housing Wire – “Refinancing Accounts for 80% of Loan Activity over Last 2 Months: Nothaft” (8-17-10)

“Over the last two months, refinancing activity has accounted for more than 80% of all conventional loan activity, said Frank Nothaft, chief economist at Freddie Mac. In a Featured Perspectives report out Monday, Nothaft said Freddie Mac and Fannie Mae have purchased 1.4m refinance loans, including nearly 200,000 loans that have gone through the Home Affordable Refinance Program (HARP).”

Housing Wire – “Bank of America Merrill Lynch: Bearish Sentiment Eases” (8-17-10)

“BofAML, a unit of Bank of America, said the bearish sentiment for the global economic outlook and corporate earnings has eased. The most recent data show 5% of survey respondents expect the global economy will improve in the next year. In July, 12% percent of respondents predicted the world economy would deteriorate, BofAML said. But recession fears seem to have subsided, as 78% of fund managers surveyed last week don’t expect a double-dip recession. Still, 73% continue to see ‘below-trend growth and inflation.’”

Housing Wire – “TransUnion: Housing Begins to Stabilize as Delinquent Loans Fall in Q210″ (8-17-10)

“National mortgage loan delinquency rates for loans delinquent 60 days or more fell for the second quarter in a row to 6.67%, according to TransUnion’s quarterly trend analysis released Tuesday; a sign the housing sector is beginning to stabilize. The 1.48% drop in Q210 follows an 18.52% drop in Q110 for loans delinquent 60 days or more. Delinquent loans accounted for 6.77% of the all loans in Q110. The current delinquency rate is still up 14.8% from the same quarter last year when the rate was 5.81%.”

Housing Wire – “Private Sector Modifications Increase 10% in June” (8-17-10)

“The housing industry conducted 123,000 permanent modifications through private programs in June, a 10% increase from the 112,000 done in May, according to Hope Now, a private sector alliance of mortgage servicers, investors, insurers and nonprofit counselors.”

Housing Wire – “Bankrate: Loan Closing Costs Jump 36.6% Year-Over-Year” (8-17-10)

“The average origination and third-party fees on a $200,000 mortgage increased 36.6% to $3,741 from last year’s average of $2,739, according to Bankrate’s annual mortgage fee survey. Lender origination fees increased to $1,463, or 22.8%, in 2010 from $1,192 in 2009, while the average total third-party fees rose 47.2%, to $2,277 from the year-ago average of $1,547.”

Housing Wire – “Homebuyer Demand All But a ‘Standstill’: Altos Research” (8-17-10)

“The average national house price was $474,946 in July, according to the Altos 10-city composite price index. The index fell ’significantly’ from its high in the summer of last year, when buyers were taking advantage of the homebuyer tax credit. It has declined for the past 11 months. The tax credit expired in April.”

Bloomberg - “Home Depot Profit Tops Analysts’ Estimates as Sales Increase” (8-17-10)

“Net income increased 6.8 percent to $1.19 billion, or 72 cents a share, in the quarter ended Aug. 1, from $1.12 billion, or 66 cents, a year earlier, Atlanta-based Home Depot said today in a statement. Analysts projected 71 cents, the average of 23 estimates in a Bloomberg survey.”

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.

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186-TNG Radio – Daniel Phelan 8-7-10

Friday, August 6th, 2010

daniel-phelan

Daniel Phelan

CEO of Pacific Southwest Realty Services


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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 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 Daniel Phelan. Daniel is the CEO of Pacific Southwest Realty Services. He is responsible for this company’s mortgage operations. Pacific Southwest Realty Services is an investment firm focused on commercial real estate. It represents and advises both real estate clients and institutional investors in debt. It is involved in equity placement, strategic planning, property sales and loan administration.

In 2006, Daniel’s company was heavily involved in the financing of commercial real estate. His company financed $1.5 billion of commercial real estate per year for every year of the boom.

Daniel does not think that investors perceived a high level of risk in the prices they were paying for real estate during the boom. Prices had been steadily increasing since July 1993. Commercial real estate had a continuous growth pattern all the way to 2007. If you had only been in the business for 15 years and had only seen positive growth, then you probably wouldn’t feel at risk.

The lending side was probably looking at the boom similarly. There was a lot of competition, because Wall Street entered the market. There was a tremendous amount of debt capital in the market, and it was extremely competitively priced. These prices made real estate investments that much more enticing. People saw the need to get their capital invested in some form, and commercial real estate was perceived to be a safe investment.

In 2006 to 2007, down payments were reduced because of the confidence of the market. Borrowers were getting into commercial properties with only 20 percent. Historically, you could probably get most properties financed with 25 to 30 percent down. However, 75 percent is considered to be a more appropriate and safe number.

There are two tiers of debt. Most banks is recourse, but most non-bank debt is nonrecourse. 99.9 percent of the debt for life insurance companies and pension funds is nonrecourse. Because Daniel’s company works with these kinds of firms, they could only look to the real estate for satisfaction of a debt following a default. From 2005 to 2007, many banks backed off their recourse loans and went nonrecourse.

The source of capital during the boom came from portfolio lenders, such as life insurance companies and banks, and nonportfolio lenders, such as securitized lenders and Wall Street lenders. If you were trying to accomplish high loan to value with lower rates, then you probably got involved in the commercial mortgage backed securities market. You would expect a rate of 110-120 over treasuries. Those loans would be pooled into $2 billion pools, and then sold on Wall Street.

Mortgages made near 2006 are not doing well right now. Underwriting standards were very loose at that time. The default rates for those issuances are above 5 percent, and sometimes above 10 percent.

Mezzanine financing can be compared to second trust deed. It is a debt placed behind a first trust deed. It is used for taking cash out of a property, cover tenant improvements, or buy out existing partners to recapitalize the partnership.

During the boom, mezzanine debt could be taken at a 7 to 8 percent rate on the low end. The mezzanine debt today is going for above 10 percent. It is not available for the same loan to value rate. In 2006, you could get 90 percent loan to value. Today, you would be lucky if you got mezzanine debt for 65 percent loan to value. You may not be able to get it at all.

If you intend to occupy a commercial building, you could get 90 percent financing from a bank loan. This is only available to owner occupants, and it is only available in a purchase situation, not a refinance situation. If you were buying a multi-tenant investment property, you probably would get financing from life insurance companies. Banks are beginning to come back to the commercial investment market. With these deals, banks are looking for a full relationship with bank accounts and operating accounts. During the second quarter, the commercial mortgage backed securities market starting coming back. However, this market is not coming back quickly. Daniel’s company funded its first two cmbs loans since 2007.

Daniel’s company always looks at the operating history and income of a property, and then he makes a reasonable expectation of how well that property will operate over time. The projection for those properties is typically not very good. In 2006-07 we had not been hit by unemployment. Most tenants were performing well, and occupancy rates were above 90 percent.

Many commercial loans are coming due in 2012. These loans were underwritten in 2002. These loans are going to cause a big problem. In 2002, underwriting standards were not that “out of wack”. Prices have come down a lot, but they are still greater than what they were in 2002. Daniel think there is plenty of capital to refinance the debt on those properties, and in many cases, lenders are willing to roll over those loans. The bigger problem comes in during 2014 to 2017. During these years, you will have loans on properties with significantly diminished values. At that time, you may start having tenant default issues.

Construction on commercial real estate is not going to perform well. Daniel does not know of any bank that did a commercial construction loan in 2008-09. However, there are some banks now that are willing to loan on a multifamily property now.

Residential real estate is beginning to experience a large number of strategic defaults. Commercial loans are also beginning to default, but not as badly. Commercial property owners can make their payments so long as 70 percent of the tenants are making their payments. Commercial loans are made based on the ability of a property to make income. The commercial property owners that will experience difficulty are the ones that have let go of workers. They may have a large amount of space, but are only using a small portion of it. When their leases come due, these owners will probably move out to a smaller space. This will hurt larger commercial properties.

Most cap rates during the peak were around 6 to 7 percent. For multifamily properties and apartments, cap rates were around 5 percent. As of last year, most cap rates have moved up to 8 to 9 percent. The reason why we have not experienced a dramatic change in cap rates is because of Fannie and Freddy’s involvement.

Daniel believes we are going to see more problems in 2010 rather than improvement. Sales are going to start again, but they are going to have to pay 35 percent down rather than 25 percent.

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: 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, Personal Real Estate Investor Magazine, Realty 411 Magazine, San Jose Real Estate Investor Association, Tony Alvarez, and Westin South Coast Plaza.

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185-TNG Radio – Tommy Williams 7-31-10

Friday, July 30th, 2010

Tommy_Williams

Tommy Williams

2008 President of The National Auctioneers Association

Co-Founder Williams and Williams Auctions

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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 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 Tommy Williams. Tommy is the past president of the National Auctioneers Association and cofounder of Williams and Williams Auctions. He has conducted over 10,000 auctions in 48 states and Canada. He is an advisor to auctions conducted in Western Europe, South Africa and New Zealand.

The auction business extends to almost any category. The world’s largest takes place every day in New York, and we call it the New York Stock Exchange. Buyers and sellers meet there and someone is conducting the price.

There are different acceptance levels in different countries toward auctions and different industries. If Tommy was planning to sell livestock, he would sell it through auction. Auctions are the accepted method for selling livestock of any kind. Used cars and used heavy equipment are also commonly sold through auction. Rare collectible items are sold through auctions too. The problem is that people developed a negative mentality of real estate auctions after the Great Depression when foreclosure Sheriff sales were occurring. This has caused people to perceive auctioned real estate as depressed, but in reality, auctioning is one of the best way to determine market value for real estate too.

Bruce read an article about an auction for Pete Rose’s baseball bat. It sold for $156,000 and the auctioneers thought that was too little. You sometimes cannot know what something will sell for, and that is the purpose of an auction; it reveals what a buyer is willing to pay. Tommy believes we get ourselves into trouble when we try to twist the market place, and we need the natural market to determine true value. We tried twisting real estate and we got disastrous results. Bruce feels like we are in the phoniest market he has ever experienced in his life. The government is trying to artificially influence the market.

Six years ago, Tommy started selling homes in the bad areas of Detroit. Those homes were selling for $10,000 to $16,000. The sellers were angry and said that Tommy should not have sold their properties. The city officials even threatened to stop auctions. If you go back to those homes today, you will notice that they have all been bulldozed, because there was no demand to meet the supply. It is difficult for sellers to accept that their homes are no longer as valuable as they once were. If those homes were bulldozed, then that tells Bruce that the value of those homes was not even $10,000 fifteen years later, it was zero.

Tommy has many stories about investors who bought properties at a discount, and then sold through an auction for more than double what they bought those properties for just 90 days before.

Not all auctions are created equal. There is a company in California that buys homes in ballroom auctions, and then re-auctions those homes for a profit. Tommy auctions properties right in front of the house. History has proven to him that this method brings in the greatest net value. All real estate is local. The people within walking distance of your home are the biggest supporters you can have for that neighborhood. When people discover that you can walk down to a property and buy it for what you are willing to give, they become happy bidders. When you move a property to a ballroom auction, the auction may take place hundreds of miles from where the property is. This discourages local buyers, which are the best buyers, from coming.

The real estate market place changes very fast. An auction company as big as Williams and Williams is able to quickly look at trends in different states. Every month, Tommy’s company sells over 1,000 homes throughout the United States. These auctions allow him to determine when a disaster or boom is coming.

If a builder auctions a track of houses, the public will think the builder is in trouble. However, Tommy feels this is irrelevant. Auctioning might still be the best business decision they will ever make. They should go ahead with the auction, and allow their buyers to pay what they are willing to. Bruce can guarantee that in 2005-2006 builders never got full price for a house. The builders could not build fast enough, so they gave their 20 buyers a lottery number and then allowed the winner to buy for full price. If the builders had put those 20 buyers up against each other at an auction, who knows how much more those homes would have sold for. Auctions are incredibly value in an increasing market, because they allow you to see how much people think your house is worth at that moment. If you interfere, you put a sealing on your home value, which could be very low.

Tommy believes buyers often feel that auction results are manipulated. Tommy would blame the auction industry for that buyer mentality, because in the past, auctions have not been conducted in the right manner. If you are going to hire an auction company, check how long they have been in that location, and check their references. Talk to other people who used the company to sell in the past.

Online auctions are becoming more popular, and it can reduce the level of trust that a buyer will have in the auction company, especially if that auction company has a bad history.

Tommy auctions off a lot of privately owned properties. He did not start selling bank owned properties until about six years ago. His company is built around selling private property.

Too many people look at life in the short term. The auction profession has an unlimited amount of potential, and he would encourage any of his children to get into it. However, you have to enter this business with a long term plan. Before this year ends, Williams and Williams will begin to broadcast their auctions live, so anyone in the world can bid. This technology may cause some bidders to feel like they are being tricked, because they will not be able to see all the bidders making offers. Tommy is trying to obtain technology that will allow the bidders at the auction site to see the activity of the online bidders.

Bruce feels it is unfortunate that auction companies too often view each other as nothing more than competitors. Tommy believes there are many ethical auction companies out there, which he is willing to refer people to. We need to have a spirit of good will towards other people. When you are trying to tear down your competitor, you tear down yourself.

Lenders have come to the conclusion that they do not want to take a property back as an REO. These people would make a great team member with an auction company. Lenders are becoming more willing to accept the value given to them at an auction.

Tommy is now getting involved in the Assisted Sales Auction Program. This process involves a person who still owns and occupies a property, but is trying to accomplish a short sale. Bruce thinks that is a trend that makes a lot of sense. Bruce was on a panel with someone who was touting that they could get a sell done within six months through the HAFA program. This made Bruce laugh on the inside, because he wanted to say that he knew someone who could get the job done quicker.

Thank you Tommy for participating in The Norris Group’s radio show. Tommy will be on the panel for I Survived 2010.

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: 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, Personal Real Estate Investor Magazine, Realty 411 Magazine, San Jose Real Estate Investor Association, Starz Photography, Tony Alvarez, and Westin South Coast Plaza.

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183-TNG Radio – Tony Alvarez 7-17-10

Friday, July 16th, 2010

Tony-Alvarez

Tony Alvarez

Author and Investor

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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.

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182-TNG Radio – Tony Alvarez 7-10-10

Friday, July 9th, 2010

Tony-Alvarez

Tony Alvarez

Author and Investor

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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.

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177-TNG Radio – Rick Solis 6-5-10

Friday, June 4th, 2010

Rick Solis

Appraiser and Investor

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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 20th 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.

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The Norris Group Real Estate News Roundup 6/3/10

Thursday, June 3rd, 2010

Today’s News Synopsis:

Stats from Freddie Mac show the average rate for 30-year FRMs increased to 4.79 percent. Moody’s Investor Service reports commercial property values are down 42% from the peak in 2007. According to Trulia, many areas in the United States are now becoming cheaper to rent than own in. The US Department of Labor (DOL) received 10,000 fewer initial unemployment claims in the week ending May 29 than the previous week.

In The News:

Time - “The ‘Free Rent’ Approach: When Homeowners Just Stop Paying their Mortgages” (6-1-10)

“The average borrower in foreclosure has been delinquent for 438 days before actually being evicted, up from 251 days in January 2008, according to LPS Applied Analytics”

Los Angeles Times – “A foreclosure fix” (6-2-10)

“Banks foreclosed on almost 200,000 homes in California last year, and this year’s toll is expected to be even higher. State lawmakers have tried to encourage banks to do more loan modifications that help both sides, keeping borrowers in their homes while cutting lenders’ losses. Yet homeowner advocates say a serious problem remains. Overwhelmed and disorganized, lenders continue to foreclose on borrowers who are in the process of negotiating new loan terms. At a time when the market is flooded with repossessed properties, that’s just inexcusable.”

Mortgage Bankers Association – “Mortgage Refinance Applications Increase Slightly, Purchase Applications Decline Further in Latest MBA Weekly Survey” (6-2-10)

“The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending May 28, 2010.  The Market Composite Index, a measure of mortgage loan application volume, increased 0.9 percent on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index increased 0.3 percent compared with the previous week.”

NAR - “Pending Home Sales Surge Continuing” (6-2-10)

“The Pending Home Sales Index,* a forward-looking indicator, rose 6.0 percent to 110.9 based on contracts signed in April, from an upwardly revised 104.6 in March, and is 22.4 percent higher than April 2009 when it was 90.6. That follows gains of 7.1 percent in March and 8.3 percent in February.”

Orange County Register – “O.C. buyers grab 56% more new homes” (6-2-10)

“Buyers signed contracts to purchase 523 new homes in Orange County during this year’s winter quarter. That’s the highest number of sales contracts for any quarter since the spring of 2008.”

Orange County Register – “Realtors fight to expand loan protections” (6-2-10)

“At issue is a proposal that would forbid lenders from seeking unpaid portions of a refinanced mortgage after a home goes through foreclosure. Currently lenders can’t do that if the loan was issued at the time the home was purchased. In a law dating to the 1930s, the homeowner’s liability is limited to the amount the lender recovers from the property at a foreclosure sale — even if that’s less than the amount owed.”

Orange County Register – “Really? Problem banks list grows to 775″ (6-2-10)

“BAD DEBT: The FDIC’s confidential list of ‘problem’ banks grew to 775 in the first quarter, with U.S. banks collapsing amid losses on residential and commercial real estate loans. EXTEND AND PRETEND: At least 25% of commercial real estate loans are doomed to foreclosure, experts in Arizona say. Another 50% could go either way.”

Mercury News – “Mortgage rates up from yearly lows, Freddie Mac says” (6-3-10)

“Rates on 30-year fixed mortgages ticked up this week from the lowest level of the year. Freddie Mac said Thursday that the average rate rose to 4.79 percent, up from 4.78 percent last week. A year ago, the rate averaged 5.29 percent.”

Wall Street Journal – “Looking for Lending” (6-3-10)

“Compared to peak prices in October 2007, commercial property values are down 42%, according to Moody’s Investors Service Inc. Price index reports compiled by Moody’s and Real Capital Analytics Inc. show that as of March 2010, the cost of industrial and office space fell 32% in the last two years. Retail space also plummeted 28%.”

Housing Wire – “REIT Activity Picks Up in 2010 After Five Year Doldrum” (6-3-10)

“In 2005, publicly traded US REITs completed 6,351 acquisitions and 2,812 dispositions, compared to 360 acquisitions and 994 dispositions in 2009. The largest decrease in acquisitions was in the retail/other sector, which declined from 1,720 in 2005 to 65 in 2009, a decrease of 96.2%. The healthcare also saw a deep decline. In that sector, there were 103 acquisitions in 2009, compared to 402 in 2005, a drop of 74.4%.”

Housing Wire – “In Some Cities, Trulia Finds It’s Now Cheaper to Rent than Own” (6-3-10)

“The top areas where house prices worked out to be more expensive than renting were New York, Seattle, Portland, and San Francisco. Omaha, Neb., Oklahoma City, Okla., and Kansas City, Mo. also cracked the top-10 list.”

Housing Wire – “Jobless Claims Ease Ahead of May Unemployment Data” (6-3-10)

“The US Department of Labor (DOL) received 10,000 fewer initial unemployment claims in the week ending May 29 than the previous week, on a seasonally adjusted basis. The news of fewer initial claims arrives a day ahead of officially updated unemployment rate figures. Economists anticipate the fragile recovery added 55,000 jobs to private sector employment and 700,000 to total non-farm payrolls in May.”

Housing Wire – “May House Prices Show Highest Increase Since 2006″ (6-3-10)

“House prices climbed 6.8% in May 2010 from last year, the largest yearly increase since July 2006, according to a report from real estate data provider Clear Capital. In June 2009, Clear Capital reported a 19.3% drop in May house prices, a ‘far cry’ from the increase shown in this report a year later, said Alex Villacorta, senior statistician at Clear Capital. The rolling quarter-over-quarter number, which measures houses prices against those three months ago showed a 1.8% decline, an improvement from the 5% drop in April.”

Housing Wire – “Delayed Mortgage Liquidation Hikes Risk of RMBS Write-Downs” (6-3-10)

“The back-loading of defaults draws out liquidation timelines, impacting the expected losses to senior tranches of residential mortgage-backed securities (RMBS), according to Toronto-based credit rating agency DBRS. And in some cases, this raises the occurrence of write-downs by one-third, or 33%. Distressed loans move from 30 to 60 to 90-days delinquent and then follow the foreclosure timeline set forth in the appropriate state before entering REO status. Following this process, loans are liquidated from the RMBS trust.”

Housing Wire – “California Set to Vote on Foreclosure Mediation Bill” (6-3-10)

“Assembly Bill 1639 was introduced by a trio of Democratic members of the assemby — Pedro Nava (Santa Barbra), Ted Lieu (Torrance) and speaker emeritus Karen Bass (Los Angeles). If passed, the bill would establish the Facilitated Mortgage Workout (FMW) program. Through it, lenders are required to meet with borrowers to develop a modification plan before foreclosure. The loan must have originated before Jan. 1, 2009, and the home must be occupied by the borrower as a principal residence. The principal balance on the mortgage cannot exceed $729,750.”

Looking Back:

One year ago, MBA statistics showed that mortgage application volume decreased by 16 percent within one week. J.P. Morgan Chase, Goldman Sachs and American Express owed the government $38.4 billion. The FHA loan limit was raised to nearly $730,000 in Orange County, and was accepting 3.5% down on purchases.

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.

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176-TNG Radio – Rick Solis 5-29-10

Friday, May 28th, 2010

Rick Solis

Appraiser and Investor

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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.

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175-TNG Radio – Bill Shipp-Young 5-22-10

Friday, May 21st, 2010

Bill Shipp

Bill Shipp, California Real estate Investor

(Full Bio)

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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.

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