On Friday, October 21, the Norris Group proudly presents its 9th annual award-winning black tie event I Survived Real Estate. An incredible lineup of industry experts will join Bruce Norris to discuss perplexing industry trends, head-scratching legislation and opportunities emerging for real estate professionals. Proceeds for the event benefit Make a Wish and St. Jude Children’s Research Hospital. This event is not possible without the generous help of the following platinum partners: HousingWire, PropertyRadar, the Apartment Owners Association, the San Diego Creative Real Estate Investors Association, InvestClub for Women, MVT Productions, the San Jose Real Estate Investors Association, Inland Empire Real Estate Investment Club, Think Realty, and White House Catering. Visit www.isurvivedrealestate.com for event information and tickets.
Bruce Norris is joined this week by Tom Salomone. Tom is a realtor from Coral Springs, Florida and is the 2016 president of the National Assocation of Realtors. NAR, the voice of real estate, is America’s largest trade association representing over 1 million realtors involved in all aspects of the residential and commercial real estate industries. Tom has been licensed in real estate for more than 40 years. He is the second generation realtor as well as a broker/owner of Real Estate Two Inc., a firm specializing in residential real estate. Over the years Tom has been named realtor of the year multiple times and served the industry in many capacities over his 40-year career. Tom is experienced in both business and sports in order to serve his community through a number of different organizations, including the Boys and Girls Clubs of America. He has been a member of the Chamber of Commerce, a Coral Springs charter school business sponsor. As a water control district supervisor he has coached over 46 sports teams in local city leagues and been a member of the Amateur Athletic Union in the United States Specialty Sports Association. He volunteers with organizations to prevent heart disease and cancer. He attends the St. Andrews Church and is a proud father of two sons, TJ and Bryce and husband to his lovely wife Diana.
- When did Tom first come into the business of real estate?
- What major transitions did he notice in his 40 years of real estate, and how did this affect what he did?
- Why is it hard for people today to receive financing?
- What is the current bill being considered now that is aimed at veterans?
- What is the current state of the real estate market, and is anything big expected to happen soon?
- What advice would he give to those preferring to rent as opposed to owning?
Bruce asked Tom if his two sons are going to be in real estate. Tom said TJ lives in Nevada and is a proud father himself of Tom’s firth grandson. He actually has his own web design company as well as is a marketer who works for multiple real estate companies generating leads for the company. Bryce lives in Pittsburgh and is in the insurance industry. He works as an affiliate for a big real estate company. Neither sells real estate as Tom does, but they are both in related fields. It is all part of the family.
Bruce asked Tom when he first came into the business. He said in 1974, he had just graduated high school on a Sunday when his dad had him enrolled in real estate school that very night. Tom said he was going to college in a couple months, and his dad told him he had better pass his test on the first try. Thankfully he did and received his New Jersey real estate license when he was 18. He learned a little during his four years in college and went to work full-time in New Jersey. By 1980 he had a broker’s license in New Jersey and had an opportunity to get down to Florida and open up a company there. Just recently he celebrated 36 years working in Florida.
40 years plus is a long time, and you see a lot of transitions. One of the first transitions that happened was in the late 70s to 1980-81 when interest rates exploded. Bruce asked how this affected what they did as realtors since we are all the way down below 4% now. Bruce does not think it is appreciated by the current crop of buyers at all. Tom said over a long period of time you see so many changes. He remembered when interest rates were 18%, but back in those days there was still a lot of FHA and VA loans that were assumable without qualifying. They sold a lot of houses where someone would assume the first mortgage, and in many cases they had enough cash to make up the difference between the first mortgage and the purchase price. If they did not, they had a couple options. Sometimes the owners held a small second, and if that was not possible there were a lot of lenders who specialized in second mortgages. The buyer could assume the first, put down some cash, and get a small second from the lender.
Tom thinks people got spoiled along the way because back then the agents who were productive had to be real creative in the way they were putting together transactions. When those rates were higher, he sat in a meeting in Florida with 5-6 vice-presidents of major savings and loan banks, all of whom told everyone in the audience that you would never see single-digit interest rates again nor 30-year fixed mortgage rates. Ironically, a lot of those vice presidents all went out of business with the savings and loan crisis. They could not have been further from the truth. Today you still have interest rates in the 3s and 4s as well as 30-year mortgages. All the experts got it wrong back then.
When Bruce was deciding to become a real estate investor, the timing was good for that in one sense. However, he had to refinance a home he owned free and clear and the rate was 17 ½% fixed. About 2 ½ years later he refiid it at 12 and thought it was the coolest thing. Today people get upset if their rate is at 4 instead of 3 ½ and wait until they decrease. Bruce asks them how lucky they are since these were bragging rights for a long time. Sometimes perspective helps people make better decisions.
Tom had mentioned something Bruce thought would have helped the downturn be much less damaging. This would be the ability to take over a loan the way FHA assumptions used to be done. This was $35, no qualifying, and bringing the loan current. Bruce wishes we would create the loan product from scratch right now. He really thinks whatever has been accomplished, both reigning in financing and having the lowest homeownership rate in decades, has been achieved. However, he does not see how that will be helpful going forward. If you create a nothing down loan product where the loan has simple assumption attachment to it where it can walk to the next buyer if a default should occur. You could even hold a foreclosure sale differently in the event of the loan going bad where the opening bid is a late payment and they take it over subject to.
Bruce thinks you can turn this whole industry around and give a lot of people a first chance to own without a down payment or risk. Tom said unfortunately when Dodd-Frank came out the suggestion was that no one could ever get a loan if they did not have a minimum of 20% down. The National Association of Realtors has been fighting ever since to loosen the stringent requirements so many banks have. A lot changed with Dodd-Frank, and we do not ever want to see another downfall like we had in the last 8-10 years. We want to have a sustainable environment, but everybody would agree we have 180 degrees the opposite. People were possibly given loans who should not have received them.
Today there are so many people who are really qualified to own a home, and they cannot get financing. In the last 24 months they have seen some successes as an organization as well as a lot of the upfront fees associated with FHA loans eliminated to make it more affordable to get in. This was the especially the case for first-time homebuyers. They have found that condos are a fist-level entry to homeownership to a lot of people. They had a condo built in Washington that makes the qualifying for condominium complexes much easier and simpler to the finance avenue.
Another bill they are very concerned about right now involves the veterans in the country. On one hand we just got $4.2 million released by HUD to go to veteran homeless centers across the country. At the same time, for veterans who are in good positions to buy properties. There are loan limits, and if an individual qualifies they can have a loan no matter how much they need to borrow. In many areas, veteran loan limits are $417,000, and this is not right. For any veteran who qualifies for whatever the number is, there should not be a cap on VA loan limits.
We have a bill that has gone through the House that Tom supported, and he hopes it will pass the Senate so that we can say to veterans that there is no limit to a loan you can get as long as you qualify for it. On a daily basis, the National Association of Realtors is lobbying in Washington for property owners across the country. It is a never-ending battle because every day somebody else wants to do something that will affect property ownership and people getting financing to have the American dream. This is something they take very seriously and have a full staff of some of the best lobbyists in Washington.
One of the things that drives Bruce crazy is misconceptions. Bruce is really attached to charts and is an investor who really pays attention to trends. When the idea came that we needed to have 20% down, Bruce dug up charts and tried to see how loans performed over a course of many decades. It turns out there is no difference in the performance of a 20% Fannie Mae down and a VA zero down. Tom’s research department actually showed results that in many cases performed better than some of the 20% loans in those areas. We always say real estate is local, but other documentation showed they provided to the legislators showing the percentage down did not necessarily equal foreclosure or good history on a loan. The information provided actually was very important in getting the 20% removed from Dodd-Frank.
Looking forward, it looks like not a lot will happen until an election. However, after that there may be an attempt to look at the goodies real estate has. Some of them may be under attack, and Bruce asked Tom which ones he feels are under scrutiny where we could raise some revenue if we do away with it. Tom said there are three things on which they are definitely keeping an eye. We want to protect the mortgage interest deduction for property-owners, state and local taxes, exchange provisions such as 1031 exchanges. Those three are definitely on their radar and being monitored daily. At this point in the year, Congress is unlikely to pass any kind of tax reform. However, a lot of legislators are developing tax reform proposals for next year. They believe there will be some major discussion in tax reform next year, and we do not want anything that will hurt homeownership.
We are coming out of a real bad time. Statistics show existing-home sales rose in June, which was their last month of completed research. This was for the fourth consecutive month. First-time homebuyers were up from 30% to 33%, so everything is going in the right direction at this point. They really do not want to see anything stymie that momentum, and the last thing we need to do is to have housing not continue to go forward. For anybody who has watched America for decades, housing normally is the one thing that leads the country out of a depression or a recession. They will continue to fight and lobby for property owners and try to make sure that nothing is taken away.
Bruce said one thing that may be under scrutiny is the $250-$500,000 exclusion from tax on the home. Bruce asked if this is a target, which Tom said is something where they consider any kind of taxes grouped in under real estate. Being in California, Bruce can relate to people having resort properties and second homes. A lot of people feel second home mortgage interest deduction may be under attack. When you talk about the misconception of people not understanding something properly, the average legislator unfortunately believes when they hear of a second home they are thinking of a beautiful property someone may go to in Florida or California with a vision already in mind.
There are people visiting Florida who come from up north to see a 900 or 1,000 square foot condominium for a month vacation. They are also trying to protect that mortgage interest deduction on second properties. The individuals who have hunting cabins in the center of the state are hard-working people who go here to enjoy a little vacation. They do not differentiate when trying to protect property owners. Property-owners means everybody. All of these things will likely come under attack.
Anything that generates money when any legislature is trying to balance the budget could cause some low-hanging fruit they can just pluck and try to balance the budget with it. They have been very successful over the years protecting property owners, and they feel confident that next year they will do the same thing when the lawmakers are looking for tax reform proposals. When Bruce was growing up, the Holy Grail was to own a house. Bruce was married at 17 and would save $20 in a can each week for a down payment. He remembered closing on the first time he owned a home. The first he mowed his grass he felt like a man for the first time because he had his name on a deed. It was that important to him.
Bruce asked Tom what he would say to the people who are convinced that ownership is no big deal and they can rent. Tom said they should first listen to what Bruce said just now. Tom has been selling real estate now for over 40 years. There is nothing like being at a closing for that first-time buyer. They do a tremendous amount of research, and it is interesting what they come up with in their research. You have results in research, and even those who are ardent believers in the American dream of homeownership. Sometimes they are pleasantly surprised by some of results.
They have concrete research that shows homeownership equals kids getting better grades in school. The families are better involved in their communities too, which make the communities better. Interestingly enough, for kids that live in a home in a community there is less teen pregnancy and the properties themselves exude pride and ownership. Anybody would agree that an owner takes better care of his or her properties than a tenant does. When you start thinking about what it means to kids, they are rooted in the community and get better grades.
Statistics also show that kids in a home where the parents own the property and take care of the property have better health. With all these things combined, there is absolutely no question that property ownership is desired.
The one word used the most today is millennials. A lot will say they are a generation of renters as opposed to owners. However, research shows a majority of millennials are renting right now but would love to be owners. In many cases their student debt load they have coming out of college hurts them in qualifying for a mortgage. Student debt is something that is really high on Tom’s and other’s radar right now and they are talking to legislators about different ways they can assist young kids so they can get into property-ownership.
Thank you for joining us this week for the real estate radio show with Christopher Thornberg. The Norris Group would like to thanks its gold sponsors for supporting I Survived Real Estate: Auction.com, Coachella Valley Real Estate Investors Association, Coldwell Banker Town and Country, Elite Auctions, In a Day Development, Inland Valley Association of Realtors, Jennifer Buys Houses, Keller Williams Corona, Keystone CPA, Las Brisas Escrow, L.A. Green Designs, LA South REIA, New Western, North San Diego Real Estate Investors, Northern California Real Estate Investors Association, Orange County Investment Club, Orange County Building Industry Association, Pacific Premiere Bank, Pasadena FIBI, Pilot Limousine, Real Wealth Network, Realty411 Magazine, Realty Executives Inland Empire, Rick and Leanne Rossiter, Sonoca Corporation, South Orange County Real Estate Club, Spinnaker Loans, uDirect IRA Services, Westin South Coast Plaza, Wholesale Capital Corporation, and Wilson Investment Properties Inc. See www.isurvivedrealestate.com for sponsor links and event information.
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