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The Norris Group Real Estate News Roundup 5/16/11

Monday, May 16th, 2011

Today’s News Synopsis:

MDA DataQuick reports 6,789 houses and condos sold in the Bay Area during April. TransUnion claims the national mortgage delinquency rate fell to 6.19% in the first quarter. The United States is expected to reach the $14.29 trillion debt limit Monday. National mortgage debt decreased by nearly $400 billion from 2007 to 2010, according to Frank Nothaft of Freddie Mac.

In The News:

MDA DataQuick – “Bay Area Home Sales Lose Momentum; Median Price Dips Below 2010 Level – Again” (5-16-11)

“6,789 new and resale houses and condos sold in the nine-county Bay Area last month. That was down 3.7 percent from 7,051 in March and down 3.1 percent from 7,003 in April 2010, according to San Diego-based DataQuick.”

NAHB - “Builder Confidence Unchanged in May” (5-16-11)

“Builder confidence in the market for newly built, single-family homes held unchanged at the low level of 16 in May, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today. The index has now remained at this level for six out of the past seven months.”

Housing Wire – “In these troubled times, more Americans come current on mortgages” (5-16-11)

“The first-quarter national mortgage delinquency rate decreased to 6.19%, according to credit-reporting agency TransUnion. The numbers are down 3.4% from 6.41% in the fourth quarter and down 8.6% compared to 6.77% a year earlier.”

Housing Wire – “US to reach debt ceiling Monday” (5-16-11)

“The United States is expected to reach its $14.29 trillion debt limit Monday, a turning point that has kept members of Congress debating for months.”

CAR - “April 2011 sales and price report” (5-16-11)

“Closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 499,830 units in April, according to information collected by C.A.R. from more than 90 local REALTOR® associations and MLSs statewide. April home sales were down 2.9 percent from March but up 5 percent from the previous year. The statewide sales figure represents what would be the total number of homes sold during 2011 if sales maintained the April pace throughout the year.”

Bloomberg - “Treasury Yields at Almost 2011 Lows on Concern Economic Recovery Is Weak” (5-16-11)

“Ten-year yields were little changed at 3.18 percent at 9:05 a.m. in New York, according to Bloomberg Bond Trader prices. The 3.125 percent note maturing in May 2021 dropped 2/32, or 63 cents per $1,000 face amount, to 99 17/32. The yield fell to 3.13 percent on May 13, the lowest since December.”

Housing Wire – “Outstanding mortgage debt plummets in three years” (5-16-11)

“Mortgage debt fell nearly $400 billion between the end of 2007 and 2010 as more Americans continued to pound away at their debt and turned to refinancing to reduce monthly mortgage payments, according to new analysis from Freddie Mac’s Chief Economist Frank Nothaft.”

Housing Wire – “Freddie offers closing cost help, agent bonuses on REO” (5-16-11)

“The government-sponsored enterprise held 65,000 REO properties at the end of the first quarter, but it sold a record 31,000 during the period, according to its financial supplement.”

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 5/10/11

Tuesday, May 10th, 2011

Today’s News Synopsis:

The NAR stated that home sales rose in 49 states during the first quarter. A study from the NAHB shows 72.8% of all U.S. homes sold last year were affordable for families earning the national median income. The Financial Crimes Enforcement Network said reports of mortgage fraud reached a record high. Trulia found that third-party syndicators of listings data which does not come from an MLS has an error rate of 21.3 percent for either a listing’s price or status.

In The News:

NAR - “Existing-Home Sales Rise in Most States in First Quarter; Metro Area Prices Mixed” (5-10-11)

“Existing-home sales continued to recover in the first quarter with gains recorded in 49 states and the District of Columbia, while 22 percent of the available metropolitan areas saw prices rise from a year ago, according to the latest survey by the National Association of Realtors®.”

NAHB - “New Data from NAHB Breaks Down Housing Affordability by Race/Ethinicity” (5-10-11)

“The HOI for all races/ethnic groups combined was 72.8 in 2010, meaning that 72.8 percent of all homes sold in the U.S. last year were affordable to families earning the national median income of $64,400.”

Wall Street Journal – “Reports of Mortgage Fraud Reach Record Level” (5-10-11)

“The Financial Crimes Enforcement Network, a Treasury agency, reported 70,472 ‘suspicious activity reports’ related to suspected mortgage fraud, up from 67,507 in 2009, or a 5% increase.”

Sacramento Bee – “Sacramento-area home prices continue their slide” (5-10-11)

“For the eighth straight month home prices dropped when compared to the same month a year prior. The March 2011 median sale price was down 7.5 percent nationwide in March when compared to March 2010. The drop was even more pronounced in the four-county region of Sacramento, Yolo, El Dorado and Placer counties where the median in March was down 10.42 percent year over year.”

Orange County Register – “A good time to buy an investment property?” (5-10-11)

“Before you answer the question as to whether now is a good time for you to purchase income property a few questions: Are you purchasing investment property for equity growth or for income? How long do you think you will hold onto to the property? Are you thinking of buying a single family residence or units?”

Bloomberg - “States Said to Alter Mortgage Accord as Banks, Republicans Balk” (5-10-11)

“U.S. states probing foreclosure practices revised a nationwide settlement proposal after banks and eight Republican attorneys general objected to mortgage loan principal cuts, two people familiar with the talks said. The provision of the original 27-page term-sheet submitted by the states and Justice Department would encourage defaults, the banks and eight attorneys general said”

Inman - “Trulia: Higher error rate in non-MLS sources of real estate listings data” (5-10-11)

“Trulia’s analysis found that third-party syndicators of listings data that did not come from an MLS had an error rate of 21.3 percent for either a listing’s price or status. Real estate professionals submit data to these sources but often don’t return to update their listings, Trulia said.”

Looking Back:

One year ago, Fannie Mae asked for $8.4 billion in government aid. Serious delinquencies among US Alt-A residential mortgage-backed securities (RMBS) declined in April. First American CoreLogic reported that underwater mortgages and borrowers with less than 5% home equity accounted for 28% of all residential properties. Statistics from Zillow showed more than a fifth of U.S. mortgage holders owed more than their homes were worth in the first quarter of 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.

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The Norris Group Real Estate News Roundup 5/3/11

Tuesday, May 3rd, 2011

Today’s News Synopsis:

The federal government claims Deutsche Bank commited mortgage fraud, and is suing the bank. LPS said 500,000 borrowers became current on their loans in the first quarter. Michael Fratantoni of the MBA predicts a full housing recovery is 3 to 4 years away. The combined sales of all broker-run transactions fell $226 million year over year.

In The News:

The Washington Post – “Federal government sues Deutsche Bank in NYC, alleging it committed mortgage fraud” (5-3-11)

“The federal government sued Deutsche Bank Tuesday, saying the bank committed fraud and padded its pockets with undeserved income as it repeatedly lied so it could benefit from a government program that insured mortgages.”

Wall Street Journal – “Banks Are Lending, but Pace Falls Shy” (5-3-11)

“Big banks eased lending standards and businesses sought more loans in the first quarter of the year, the Federal Reserve said. In its quarterly Senior Loan Officer Opinion Survey released Monday, the Fed said the share of banks ‘that reported having become more willing to make consumer installment loans rose to its highest level since the first half of 1994.’”

Housing Wire – “Half a million bad mortgages got better or foreclosed in first quarter” (5-3-11)

“Lender Processing Services (LPS: 28.60 +0.03%) said 500,000 ailing mortgage borrowers either came current on their payments or lost their home to foreclosure in the first quarter, according to a recent mortgage monitor from the Florida-based data provider.”

Housing Wire – “Shadow inventory will keep housing recovery at bay for three to four years” (5-3-11)

“A full housing recovery is three to four years off as the nation grapples with a shadow housing inventory of 4.5 million distressed properties, according to Michael Fratantoni, vice president of research and economics for the Mortgage Bankers Association.”

Bloomberg - “Commercial Property Prices May Fall, Apollo’s Azrack Says” (5-3-11)

“U.S. commercial property prices may fall within a year as building owners attempt to refinance $1 trillion in mortgages, according to Joseph Azrack, head of real estate for Apollo Global Management LLC.”

Orange County Register – “Home sales generating 7% less in 2011″ (5-3-11)

“The combined sales of all broker-run transactions fell by $226 million from the first quarter last year, when home sales generated a total of $3.35 billion – revenue divided between home sellers and their agents. During the first three months of this year, both sales and prices dropped from year-ago levels. The average price of an Orange County home sold through the MLS fell 2.8% in the first quarter to $540,856.”

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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219-TNG Radio – Mike & Randy Grigg 4-2-11

Friday, April 1st, 2011

Randy and Mike Grigg

President and Chief Auctioneer of Elite Auctions 


 

(Full Bio)

 

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This week Bruce is joined by Randy and Mike Grigg. Randy is the President of Elite Auctions. Mike is Randy’s son, who gradually got involved in the auction business. Mike has won awards for “Best Auctioneer”. He is very involved in real estate and charity auctions. 

Randy got involved in purchasing real estate while he was in the agriculture business. He started slowly, buying 1 to 3 houses per year. He continued doing this consistently for 25 years. During those 25 years, he learned how to deal with tenants and structure deals. 

Because Randy had a career, he considered his rental properties to be a side job. He rarely had trouble with his tenants and they stayed for a long term, so purchasing houses was not a distraction for him. After a while, the number of properties he owned grew fairly large, so he had to figure out a program to manage those properties. 

When Randy first began buying real estate, the most popular trainers were Mark Harrilson, Albert Lawry, Robert Allen, John Schaub, and Pete Coronado. Randy was living in Bakersfield during this time, and he felt that gave him an advantage. He paid $27,000 for a house in Bakersfield and his rent was $350. Today, that same house would sell for $45,000 and rents for $800 per month. Randy’s first investment houses had negative cashflow, but as values increased over the years, they eventually accumulated positive cashflow. 

95% of Randy’s home purchases were bought from the owner. He attracted sellers through ads in the paper. He bought a lot of houses by taking over the sellers’ loans. 

Randy chose not to buy and sell because he already had a career, so he did not need the immediate money. Also, a lot of work and time goes into rehabbing properties for resale. There are also occasional, unfortunate surprises that come up from low appraisals, which can take 5% away from your selling price. 

Randy’s beginning instructors told him to buy and never sell. However, Randy did sell a few of them. 

Bakersfield has had almost no appreciation. In 26 years, there has been no appreciation, but you can get a 50% lower interest rate, and there have been wage increases. The payment for a 2011 home purchase in Lancaster is 31% less than the payment equivalent in 1985. 

Some builders are currently investing their money in trust deeds, because they do not have enough work. Also, the builders are not offering market rates on many of the homes they are selling. 

Randy’s life did not change much when the housing market went from boom to bust, because he chose to hold his properties. However, he does wish he had sold some of his properties, because he feels his age makes holding onto property less valuable. 

Mike worked on some of Randy’s houses when he was younger. He feels it was a good experience, because he was exposed to areas he did not want to live in, which motivated him to provide himself with a better life. 

Mike wants to buy and hold properties and he thinks right now is the best time to do it. Bruce believes he can still wait a couple years if he feels the need to. Bruce believes it is good for people to gradually work their way into property buying, because there can be big consequences if you do not. Sometimes people come to Bruce asking for a $1 million investment loan, and when Bruce looks at their profit estimates, he finds they are completely wrong. 

Randy does not often buy and then rehab for resale. Most of his properties involve very little rehabbing. Most of the people that Randy puts into his houses have good income and poor credit, and most of them have a strong desire for homeownership. Randy puts these sorts of people into his homes, because they rent with the hope of eventually buying the home, and Randy is willing to sell the home to them should they wish to. 

Randy has had a few tenants for over 20 years, but the average tenant length is 6 years. It is John Schaub’s philosophy that you will not make money on a rental for the first two years. Vacancy is the biggest expense in land-lording, because you then have to re-prepare the home for a new tenant. 

Randy will finance any repairs his renters wish to do on his houses, but the cost of the repairs is probably market value. 

Many of Randy’s current purchases are made for other investors. Those properties come out of the MLS. The rest of his properties come from ball room auctions in Bakersfield. Occasionally, Randy has the chance to bid against the lender in an online auction. Many online auctions have almost zero competition. 

Randy’s website is www.sellwithauction.com 

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 2/23/11

Wednesday, February 23rd, 2011

Today’s News Synopsis:

The NAR said existing home sales rose 2.7% in January. The FHA’s REO inventory has increased 47% year over year.  A California judge upheld the rights of the Mortgage Electronic Registration Systems to the trust deed, granting MERS the right to foreclose. A Federal Reserve economist predicts the government will soon provide an alternative to the national homebuyer tax credit

In The News:

NAR - “Existing-Home Sales Rise Again in January” (2-23-11)

“Existing-home sales1, which are completed transactions that include single-family, townhomes, condominiums and co-ops, increased 2.7 percent to a seasonally adjusted annual rate of 5.36 million in January from a downwardly revised 5.22 million in December, and are 5.3 percent above the 5.09 million level in January 2010.”

Mortgage Bankers Association – “Mortgage Applications Increase in Latest MBA Weekly Survey” (2-23-11)

“mortgage loan application volume, increased 13.2 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 14.8 percent compared with the previous week. The Refinance Index increased 17.8 percent from the previous week. The seasonally adjusted Purchase Index increased 5.1 percent from one week earlier.”

Inman - “New CoreLogic market reports incorporate MLS data” (2-23-11)

“CoreLogic’s Listing and Market Activity Report — the first in a series of new products the company is developing to generate revenue from the data it receives from cooperating MLSs — provides key information including updated listings, comparable sales, property valuations, days on market, price trends and inventory.”

Housing Wire – “FHA REO inventory up 47% from one year ago” (2-23-11)

“The Federal Housing Administration held 60,739 properties repossessed through foreclosure on its books as of December 2010, up 47% from the year before.”

Housing Wire – “Freddie Mac finalizing major revamp of mortgage servicers” (2-23-11)

“Freddie Mac is in the final stages of changing how its 1,400 mortgage servicing companies handle its loans, and will implement a new scorecard measuring their performance. Furthermore, the government-sponsored enterprise is announcing that it will case review the way servicers treat delinquent borrowers, in order to ensure quality control.”

Housing Wire – “Bank failures hit 18-year high in 2010″ (2-23-11)

“The Federal Deposit Insurance Corp. held 884 financial institutions on its ‘Problem List’ as of the end of 2010, and the 157 insured banks that failed was the highest amount since 1992.”

Housing Wire – “MERS rights upheld in largest foreclosure state” (2-23-11)

“An appellate judge in California last week upheld the rights of the Mortgage Electronic Registration Systems to the deed of trust, giving MERS the right to foreclose, according to court documents.”

Housing Wire – “Fannie Mae to start grading mortgage servicers” (2-23-11)

“Fannie Mae will launch a new program for evaluating the performance of its mortgage servicers over the next 30 days. The Servicer Total Achievement and Rewards (STAR) program will gauge how servicers support the housing recovery and keep homeowners out of foreclosure.”

Housing Wire – “Fed economist pushes homebuyer tax credit alternative” (2-23-11)

“A Federal Reserve Bank of Cleveland research economist predicted Wednesday that the government would soon provide an alternative to the national homebuyer tax credit that expired in April.”

Bloomberg - “Existing Home Sales in U.S. Probably Fell in January From Seven-Month High” (2-22-11)

“Sales of U.S. previously owned homes probably dropped in January from a seven-month high, showing any recovery will take time to develop, economists said before a report today. Purchases decreased 1.1 percent from December to a 5.22 million annual rate, according to the median forecast of 73 economists surveyed by Bloomberg News.”

Looking Back:

The NAR predicts that the commercial real estate market will not recover until after 2011. In California, single family home sales decreased by 3 percent during January. The Standard & Poor’s index shows that national home prices increased slightly during December. 702 banks made the ‘Problem List’ for the FDIC in 2009.

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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208-TNG Radio – Norris Group 1-7-11

Friday, January 7th, 2011

Greg Norris

(Full Bio)

 

Craig Hill

(Full Bio)

The Norris Group

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This week Bruce is joined again by Greg Norris and Craig Hill. Greg is the vice president of TNG Auctions. He buys properties and resells them. Craig has been working with Bruce for 15 years, and is responsible for speaking to all potential borrowers for The Norris Group.

TNG gets many calls from new investors who tend to have some misconceptions. One of the biggest misconceptions these investors have is that they don’t need to use personal cash when using hard money loans. Craig suggests that borrowers have $30,000 for every $100,000 you desire to borrow. Also, many people believe that having credit issues will disqualify them, but credit issues can be ignored if they have an appropriate amount of cash. On the other hand, there are some investors with 800 credit scores and minimal cash reserves who will probably be disqualified.

If a house is worth $100,000, $75,000 should be the total between the purchase price and repairs. People do not understand that you cannot effectively invest in a house with very little money.

There are many lenders who will make a loan regardless of whether or not it will be profitable for the investor. The Norris Group offers investors another level of protection, because we have an appraiser with an investor background. Craig estimates that TNG’s appraiser prevents 2 to 3 investors every week from getting a bad deal. Once someone gets a deal, Craig prefers that the investor send him the property info immediately. There are many people who overlook details like “year built” or “lot size”. People treat investing in real estate like people who gamble in Vegas; they believe they cannot lose.

Sometimes investors start with something that is above their level of experience. In Bruce’s bootcamp, he takes his students to a home that is above their experience level, and asks them to estimate repairs, so they can learn to stay away from those homes. Craig has noticed that many investors tend to undervalue the cost of repairs and overvalue the sale price. People have come to Craig with an interest in buying property, but he can easily tell whether or not those properties are profitable by seeing who is selling them. If Craig notices that the seller is an experienced investor, that gives him a clue the property is not selling undervalued.

Relying on other people to give you all your buying, repairing and selling numbers is probably not a good idea, especially if those people are on commission. If an agent claims he can sell a property for a certain price which is contrary to Craig’s judgment, Craig suggests the realtor should not charge for the purchase of the property, and only take commission after the sale.

Appraisals have gotten better, in Greg’s opinion. This is partly because of a more stable market. Many short sales are pristine. To determine whether or not a property’s value is accurate, you need to look at all the properties sold within the last 3 months and pending sales. Sometimes you will see houses pending at a high number, but are also short sales; that is obviously not the right number. Sometimes the sold properties in the MLS are not actually sold. You need to know when to speak to a Realist about whether or not a sale occurred.

One of Greg’s most difficult jobs is to appraise a property for the future. He has to take into account which season he will be selling in. This winter has been odd for TNG, because half our properties are pending. Usually properties take longer to sell in the winter. Greg attributes this to the lack of inventory. There are not an overwhelming number of REOs on the market, so sellers still have some power. Also, TNG probably has the only fully repaired product. Greg has gotten better at pricing as well.

It is still hard to know what an appraiser will appraise a TNG house for. Currently, Greg’s least likeable appraisers work for VA, and FHA appraisers are now better to deal with, because FHA allows Greg to use appraisers that understand how to properly appraise a fully repaired house. Appraisers have recently taken a cut in their pay, so they may not look closely at your property unless you get their attention.

Getting a hard money loan is very costly. Craig has received calls from investors who hung up immediately after hearing his hard money interest rates. However, using hard money over a regular, cheaper loan gives you more freedom to do more and make more. One benefit of using hard money loans is that you don’t have to fear not finding necessary cash. When you have a business relationship with someone who is counting on your closing, you cannot go knocking around the neighborhood to find a quick $100,000.

There are some occasions where people receive a “yes” from a lender, but later get cancelled on. If TNG says yes to a deal, the deal is done and funded. TNG only gives borrowers a hard time during the initial process, so that we can know the deal is going to be profitable. This is why agents and escrows like working with TNG, because they know that if TNG gives a commitment, then the deal is going to work.

People might think that TNG’s business model is very simple and easy to replicate, but it isn’t. We have built good relationships with our business partners, which allows us to do business with ease. TNG even passes on a few deals just to maintain respect from its partners. Building a team that trusts you can take years.

When Bruce and Craig first met, the common idea of value was what someone paid for it. If a piece of property was said to be worth $90,000 but was sold for $60,000, then the value was believed to be $60,000. Bruce and Craig disproved this idea, but it was very difficult for Craig to approve Bruce’s loan.

All of Bruce’s seminars make it easier for Craig to do business, because many of TNG’s new clients know a lot about the company. Many of TNG’s clients have had the opportunity to hear Bruce speak, and they’ve researched TNG through our website. This helps Craig as a lender because not only do his clients know how TNG conducts its business, but they also know that we are trustworthy. Some of Craig’s clients trust TNG’s decision making ability more than their own, and that is why they work with him.

Greg’s favorite type of inventory are standard track homes. Greg does not like properties on large lots. Anything over 20,000 square feet is usually bad inventory. Also, he does not like areas that are poorly planned. For example, there are some neighborhoods where there may be one property built in 1960 next to another property built in the 1970s. There are exceptions to this, but Greg prefers to buy safer inventory with more mass appeal. Newer homes are typically more attractive, and they require fewer repairs. Greg has been surprised by how many people are still more attracted to larger homes. He does not mind buying properties on small lots so long as that kind of inventory is selling well in its area.

When Greg is estimating a property’s value, he tries to think of what a property’s resale value will be after 30 days. He has to consider what it will take to attract a buyer within 30 days. There are occasions when he must cut his values, because 5 REOs drop into the market at one time. Greg reviews his asking price once a week for every property TNG owns.

Greg has had a lot of trouble with pool homes. He has spent $25,000 on pool repairs, which wiped out his profit. However, pool homes are not always problematic, and Greg has profited from buying them.

Greg prefers to rely on his own knowledge at a trustee sale. Sometimes he receives friendly advice from other people, but not often.

For m ore 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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191-TNG Radio – Mike Novak-Smith 9-11-10

Monday, September 13th, 2010

Mike-Novak-Smith

Mike Novak-Smith

REO Agent


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September 17th, 2010, The Norris Group returns with its award winning event I Survived Real Estate 2010. The Norris Group has assembled an incredible line up of industry experts to discuss the state of REO from the inside. Topics will include regulatory intervention and aftermath, bulk buying, myths and facts, and opportunities emerging for real estate professionals. 100 percent of the proceeds support the Orange County affiliate of Susan G. Komen for the Cure. This event would not be possible without generous help from the following platinum partners: Foreclosure Radar and Sean O’Toole, the San Diego Creative Real Estate Investors Association and Bill Tan, Investors Workshops and Shawn Watkins and Angel Bronsgeest, Invest Club for Women and Iris Veneracion and Bobby Alexander, Claudia Buys Houses, The Business Press, Frye Wiles, MVT Productions, and White House Catering.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

For more information about The Norris Group’s California hard money loans or our California Trust Deed investments, visit the website or call our office at 951-780-5856 for more information. For upcoming California real estate investor training and events, visit The Norris Group website and our California investor calendar. You’ll also find our award-winning real estate radio show on KTIE 590am at 6pm on Saturdays or you can listen to over 170 podcasts in our free investor radio archive.

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The Norris Group Real Estate News Roundup 6/29/10

Tuesday, June 29th, 2010

Today’s News Synopsis:

Standard & Poor claims U.S. home prices rose 0.8 percent in April. According to the MBA, independent mortgage bankers and subsidiaries made an average profit of $1,135 on each loan they originated in 2009.  Congress is still debating over legislation that would eliminate the HVCC in 90 days if passed. The House voted 409-5 to extend the closing deadline for the tax credit to Sept. 30.

In The News:

Los Angeles Times – “Home prices rise in 20 major cities as buyers rush to obtain tax credit” (6-29-10)

“Prices rose 3.8% in April compared with April 2009 and were up 0.8% from March, when the data aren’t adjusted for seasonal fluctuations, according to the Standard & Poor’s/Case-Shiller index of 20 metropolitan areas. California cities continued to appreciate, according to the nonseasonally adjusted index, with Los Angeles and San Diego up 0.7% in April and San Francisco up 2.2%.”

Mortgage Bankers Association – “Production Profits Rebounded in 2009, According to MBA Study of Independent Mortgage Bankers and Subsidiaries” (6-29-10)

“Independent mortgage bankers and subsidiaries made an average profit of $1,135 on each loan they originated in 2009, compared to $305 per loan in 2008, according to the Mortgage Bankers Association (MBA)’s Annual 2009 Mortgage Bankers Production Survey released today.”

Housing Wire – “Senator Yanks Financial Reform Support Due to Last Minute Bank Tax Change” (6-29-10)

“Senator Brown sent a letter to sponsors Sen Christopher Dodd (D-CT) and Rep Barney Frank (D-MA) citing the addition of a $19bn bank tax included in the House, but not the Senate versions, as the reason for pulling support. The bill reconciled late last week.”

Housing Wire – “Amendment to Eliminate HVCC Still Alive in Financial Reform Bill” (6-29-10)

“An amendment to the Wall Street Reform Bill that would eliminate the Home Valuation Code of Conduct (HVCC) survived congressional debates last week, according to one representative’s office. A congressional conference last week took place to reconcile both versions of the House and Senate financial reform bills. As it stands now, the HVCC would be eliminated 90 days after the bill is signed.”

Bloomberg - “Volcker Rule May Give Goldman, Citigroup Until 2022 to Comply” (6-29-10)

“Goldman Sachs Group Inc. and Citigroup Inc. are among U.S. banks that may have as long as a dozen years to cut stakes in in-house hedge funds and private- equity units under a regulatory revamp agreed to last week. Rules curbing banks’ investments in their own funds would take effect 15 months to two years after a law is passed, according to the bill. Banks would have two years to comply, with the potential for three one-year extensions after that.”

Bloomberg - “U.S. House Extends Closing Deadline for Homebuyer Tax Credit” (6-29-10)

“The U.S. House of Representatives voted to give homebuyers who qualified for a federal tax credit more time to settle on their pending purchases. The House voted 409-5 to extend the deadline for closing home purchases to Sept. 30. The program initially required borrowers who signed contracts before April 30 to complete paperwork by July 1 to get a tax credit of as much as $8,000.”

Orange County Register – “O.C. brokers raking in more cash” (6-29-10)

“Dollars earned by brokers from Orange County home sales jumped 27.3% in May over broker revenues generated the same month a year ago. It was the first May in five years in which broker revenues increased from year-earlier levels, according to new data from the Southern California Multiple Listing Service.”

Orange County Register – “1 in 4 transactions a short sale” (6-29-10)

“Of the 2,778 homes sold through the MLS, 672 or 24.2% of them were so-called ‘short sales.’ By comparison, homes seized by lenders through foreclosure accounted for 13% of all May sales, or one out of every eight. Altogether, ‘distressed sales’ accounted for almost 40% of all homes sold through the MLS in May.”

Looking Back:

One year ago, the House of Representatives passed legislation that required new homes to be built 30 percent more energy efficient than mandated in the 2006 International Energy Conservation Code. The federal regulator for Fannie Mae and Freddie Mac claimed that home prices were bottoming.

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 1/15/10

Friday, January 15th, 2010

Today’s News Synopsis:

Statistics from 10 primary U.S. cities show that home prices declined by 1 percent. ABA expects economic growth to increase at 3.1 percent through 2010. The U.S. Treasury Department reports that 66,465 permanent modifications were made in December.  Chris Thornberg forecasts that home prices will dip again in 2011.

In The News:

Housing Wire – “JP Morgan Says Sell Mortgage Bonds as Fed Snaps Up Record MBS” (1-15-10)

“The spread of mortgage-backed securities (MBS) bonds yields to Treasuries is tight and likely to remain tight in the near-term, but swap spreads are currently 5-10 bps too narrow to greatly entice private investors, according to a JP Morgan Securities conference call on MBS and asset-backed securities (ABS).While private investors largely hold on the buy side, the government continues to buy up agency MBS as part of its $1.25trn agency MBS-purchase program.”

Housing Wire – “House List Prices Down 1% in December: Altos” (1-15-10)

“Altos Research’s listing price index declined 1% in December and 1.4% during Q409, but for the year, the 10-city composite price index was up 5.2%, the company said, adding it projects asking prices to continue to decline during the winter 2010 months.”

Housing Wire – “ABA Expects Economic Recovery Will Fuel Job Growth in 2010″ (1-15-10)

“High unemployment and constrained consumer spending will keep the speed of recovery in check, but ABA economists indicated real gross domestic product (GDP) will grow at an annualized rate of 3.1% throughout 2010. It’s half the historic rate of GDP growth seen after previous deep recessions, leaving the unemployment rate fairly high – but below 10% – at year-end.”

Housing Wire – “HAMP Servicers Permanently Modify More Than 66,000 Mortgages” (1-15-10)

“Servicers participating in the Home Affordable Modification Program (HAMP) completed 66,465 permanent modifications through December, according to a report from the US Treasury Department. It’s more than double the 31,382 permanent modifications reported through the month of November. More than 40,000 more active modifications need only the borrowers signature to become permanent, totaling 112,521 permanent modifications approved by the servicers.”

Housing Wire – “JP Morgan Posts Q4 Profit Despite Mortgage Losses” (1-15-10)

“JP Morgan said it made approximately 600,000 mortgage modification offers to homeowners and approved 120,000 modifications during 2009.”

Housing Wire – “Treasury Raises Cap on HAMP to $35.5bn” (1-15-10)

“The US Treasury Department raised the total amount of potential capped incentive payments for the Home Affordable Modification Program (HAMP) from $27.7bn to $35.5bn, according to the latest Troubled Asset Relief Program (TARP) report.”

Bloomberg - “U.S. REITs Poised to Boost Dividends After Raising $33 Billion” (1-15-10)

“A dozen U.S. real estate investment trusts, part of an industry that raised $33 billion last year, likely will increase their next quarterly dividends. Public Storage, Annaly Capital Management Inc., and Inland Real Estate Corp. are among those that may boost payouts, data compiled by Bloomberg show. Vornado Realty Trust said this week it would resume paying its dividend fully in cash after a year of issuing it partially in stock. ”

Inman - “RPR courting MLSs” (1-15-10)

“By promising not to compete with MLSs — and allowing them an opportunity to make a quick exit from RPR if they aren’t satisfied with the results — company executives say they are out to sign up half the nation’s roughly 900 MLSs by the end of the year.”

Orange County Register – “Home sales, prices seen falling in 2011″ (1-15-10)

“Orange County-based homebuilders were told Thursday that the recession may be over, but the future for the economy and the housing industry remains uncertain. As if to underscore that point, economist Chris Thornberg released a forecast projecting that after modest gains this year, home sales and prices will dip again in 2011 because of rising foreclosures and interest rates.”

Looking Back:

One year ago, the NAR announced that sales on homes priced above $750,000 had decreased by nearly 50 percent. The rate for 30-year fixed mortgages dropped below 5 percent. The CBIA claimed that new home sales in California were “glacially slow”. Statistics from the Federal Reserve showed that jobless claims were rising.

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The Norris Group Real Estate News Roundup 12/21/09

Monday, December 21st, 2009

Today’s News Synopsis:

PMI Insurance Group predicts that 2010 will produce a moderate increase in economic production. According to John Burns Real Estate Consulting, real estate investor activity now exceeds 2005 levels. Moody’s reports that commercial real estate values have decreased by 36 percent from last year. A total of 140 banks have been seized this year.

In The News:

Tennessean - “Glut of shadow properties could hurt housing prices” (12-20-09)

“A supply of 1.7 million homes headed for sale because of foreclosure or delinquency looms over the U.S. housing market, which could dampen progress toward recovery should the Obama administration fail in its efforts to aid struggling homeowners, researchers said.”

Dr. Housing Bubble – “Southern California and the MLS Myth: Why the MLS does not Provide an Accurate Picture of Housing Inventory. Shadow Inventory, Foreclosures, and Fantasy Housing Numbers.” (12-20-09)

“In Southern California last month 20 percent of all buyers went with all cash. Each MLS is geared to local markets but again many argue that the MLS forces membership into the real estate circles.”

San Francisco Chronicle – “Commercial real estate on shaky foundation” (12-20-09)

“while most commercial real estate experts agree that in 2010 there will more loan defaults, scores more bank closures and limited construction lending, many observers do not believe that commercial mortgage defaults will derail the recovery.”

Housing Wire – “Mortgage Insurer Expects Housing Growth in 2010″ (12-21-09)

“PMI Mortgage Insurance Co., of PMI Group (PMI: 2.00 0.00%), does not expect an additional downturn in the US economy in the New Year, and even projects a ‘moderate’ pace of growth in 2010.”

Housing Wire – “Monday Morning Cup of Coffee” (12-21-09)

“According to John Burns Real Estate Consulting, existing home sales volumes are off 30% from the peak and have returned to 1998 levels. Perhaps even more worrying, the research states that existing sales volumes are driven by government initiatives, such as the expanded tax credit, aggressive FHA lending, Freddie and Fannie bailout, and Fed mortgage rate intervention. Additionally, investor activity now exceeds 2005 levels as a percent of total activity.”

Bloomberg - “U.S. Commercial Property Falls to Lowest in 7 Years” (12-21-09)

“Commercial property values in the U.S. declined in October to the lowest level in more than seven years as unemployment reduced demand for apartments, offices and retail space. The Moody’s/REAL Commercial Property Price Indices fell 1.5 percent in October from September to the lowest since August 2002. Prices were down 36 percent from a year ago and are 44 percent below the peak in October 2007, Moody’s Investors Service Inc. said in a statement. ”

DSNews - “Seven New Closures Push 2009 Failures to 140″ (12-21-09)

“The nation’s economic crisis has certainly left its mark on the banking sector this year. These latest institutional seizures push the failed bank tally for 2009 to 140 – an exorbitant increase compared to 25 in 2008, only three in 2007, and none in 2006 and 2005.”

Housing Wire – “More Servicers Bring HAMP List to 99″ (12-21-09)

“The US Treasury Department added 11 new servicers to the Home Affordable Modification Program (HAMP), pushing the total number of participants to 99, according to the latest Troubled Asset Relief Program (TARP) transaction report. Under HAMP, the Treasury allocates capped incentives to servicers for the modification of loans on the verge of foreclosure. Currently, the 99 servicers could receive a potential $27.4bn in capped incentives, but the Treasury plans to spend $50bn on the program.”

Inman - “Short sales show steady growth” (12-21-09)

“National bank and thrift servicers completed 22 percent more short sales during the quarter ending Sept. 30 than during the previous three months, and 127 percent more than the same quarter a year ago, federal bank regulators said today.”

Looking Back:

One year ago, California real estate sales decreased by 24 percent within one month. Governor Schwarzenegger rejected an $18 billion proposal for California expense cuts and tax increases. Barney Frank announced plans to release $350 billion from the bank-rescue package. The Federal Reserve bought $308.5 billion in commercial paper and lent $631.8 billion under eight credit programs.

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