On Friday, September 22, the Norris Group proudly presents its 10th 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. All proceeds from the event benefit Make a Wish and St. Jude Children’s Research Hospital. This event would not be possible without the generous help of the following platinum partners: HousingWire, Coach Fullerton, Coldwell Banker Town and Country, PropertyRadar, the Apartment Owners Association, the San Diego Creative Real Estate Investors Association, InvestClub, Las Brisas Escrow, MVT Productions, Inland Empire Real Estate Investment Club, Realty411, and White House Catering. Visit www.isurvivedrealestate.com for event information and tickets.
Bruce Norris is joined this week by Sean O’Toole. Sean is the founder and CEO of PropertyRadar.com. Prior to launching PropertyRadar, Sean successfully purchased and flipped more than 150 residential and commercial foreclosures. Leveraging 15 years in the software industry, Sean used technology as a key competitive advantage to build his successful real estate investment track record. Sean has always strived in start-up environments. As such, he became a key contributor at Xing Technology, acquired by Real Networks, ISI Global Center, acquired by Global Crossing, and Icarian Inc., acquired by Workstream.
- What made Sean start-up PropertyRadar, and how has it changed with the industry?
- How are they expanding beyond their initial market of realtors and real estate investors?
- How does taking pictures of the property do better for your marketing?
- How is an owner with several properties different from someone who only owns one?
- What are the current trends with trustee sales in California?
- What is the strange occurrence happening right now with volumes and prices?
- What is Sean’s take on policies initiated to prevent the full brunt of the crash?
Sean nearly lost his first home to foreclosure 20 years ago. With the help of local realtors, they were able to negotiate a short sale with a lender and move on. Years later, after a successful career as a Silicon Valley entrepreneur and executive, Sean returned to the foreclosure market as an investor. It did not take him long to realize the foreclosure data and tools he was forced to rely on were sorely lacking. In purchasing over 150 foreclosures, it also became clear to Sean that the marketplace itself was fragmented in ways that harmed consumers and real estate service providers. He pulled together a development team from his days in technology and got to work on it. Since then, the business has not been the same.
Aaron has a quote on Sean’s website: “We use PropertyRadar every day, and the amount of data is stunning. Technology has completely changed this business for the prices and no-brainer.” It really has been a game-changer. When Sean got involved in the foreclosure business, he was in it in Riverside. Following data was a full-time gig, and the changes were not known until you started calling the sale. It was a tedious job. Sean just did a survey of all their trustee sale investors, and better than 90% of them started after the Crash. This meant they had no experience with what it was like prior to this. In a way, it was a shame because they had no idea how to appreciate and thought it was normal. The normal cost of the data was not hundreds of dollars a year, but hundreds and hundreds of dollars a month.
Sean said one of his early customers was able to redeploy two full-time people costing him more than $4,000 a month for the price of a $50 subscription. There were a lot fewer people working, and the entry barriers were a lot higher. Even though the price range was cheap, it really came down to all the chasing of the data and technical knowledge you needed. It was not in the least automated, so ForeclosureRadar was a game changer. It changed the ease and expense of doing it to a point that we now have a lot of competitors. The prices reflect that, and the amount of money the lenders get for properties is a percentage of what they used to get.
In a way, Sean was trying to get into the business as an investor and found it flawed. Because of his background, he could fix it. Most investors do not even think about this and think they are stuck with it. It would have taken a technology expert to want to get into the business for this to happen. There are plenty of people running around Silicon Valley trying to solve other people’s problems, and they do not always do a good job of it. Sean said at least three other competitors launched at the same time he did. However, they were the only one who survived. Foreclosure Point and Foreclosure Trackers were two that did not.
Sean still has the best foreclosure information, and it has expanded beyond this. Bruce asked Sean what he thinks sets the foreclosure information apart. Sean said unlike the big consumer sites or even the professional sites, they do not just track the recording of new notices but also what happens at the trustee sales each day. This includes opening bids, postponements, cancellations, and sales. Sales is a good example of where they will pick up when one happens, whether to a third party or a bank, on the day of the sale. The folks who only track ¾ notices won’t see that until there is a trust deed 2-3 weeks later. They then call all of these REO sales bank-owned properties even though a good percentage of them are bought by third party investors. This is pretty misleading, but it was the way it was always done before PropertyRadar did it differently.
Now the business has expanded way past trustee sales, which means the trustee sale buyer is one segment of consumer who are provided services. Bruce asked what some of the other categories are of people to which he provides. Sean said from the beginning a lot of their customers use them essentially for marketing to local homeowners. This could be a homeowner in distress who wants to buy the house before it goes to foreclosure or a realtor marketing to somebody underwater for a short sale. This has been a primary part of their business. When they expanded from ForeclosureRadar to PropertyRadar, they took into account every property and homeowner rather than those in foreclosure that they really expanded that marketing aspect.
Today, they are really expanding beyond their initial market of realtors and real estate investors through small, local businesses. They are also adding lots of new data that big businesses have had for a long time. They are trying to level the playing fields for the small, local people so that they can compete against this onslaught of big business. As far as Sean is concerned, it is destroying the fabric of America. They just set up a 3.0 version of their site, where they added phone numbers, demographics data such as age and whether they have children, estimated income and net worth, and social media profiles. This can be done now as you are driving and looking at a vacant house.
There are different marketing cases, and one of his favorites is Driving For Dollars. With this, as you are driving down the street you see every property that is in foreclosure as well as how old it is and how many square feet it is. Here, you want to be in the passenger seat and not driving. It is like a GPS showing all this information as you drive down the street.
Bruce said when he was buying properties directly from people in the late ‘80s, he had one of his sons take a picture of every house in a certain zip code in Riverside. They would do a mailer to those areas; and when someone called, he would have a picture of the property. When they called up, Bruce would tell them the specific look of the house, and it shocked them. It set him apart because it showed he actually knew the area and was interested in that specific house. It was an all-summer gig for his son, and he only had a picture of the front of the house. What Sean has is all the properties at the tip of your finger. It has gotten to the point where it is mind-boggling how much access to information there is.
In Sean’s newest version, it has a street view mode so that you can not only look at the specific house but also up and down the street. You can also switch to bird’s eye view. Bruce used to have foreclosure classed and would have collected mailers from other investors. Some were pretty awful because the content was “Dea” and almost as bad as occupant since it was not personal at all. It was just the name that was in the information they had. What Sean does is to edit the information where he can put in somebody’s name. If you know somebody goes by something other than their formal name, you can include that and it appears more personal.
Sean wanted people to be able to add their own phone numbers and email addresses. They could even make edits where necessary and add other people. Each time they looked at a property and built a relationship with that homeowner, whether it was through personalizing it or adding notes, they could have the additional context they would not have normally been able to get. Days or even years later when they came back to the property, it would still be there. Another tool is you can see what all the properties are the owner has, whether it is one or multiple properties. This is something they are still working on since matching is really hard. However, we will likely see improvements over a period of time. If you find a homeowner, the goal is to show every other property they also own.
Someone who owns 4 or 5 homes is a different customer than somebody who only owns one home. Even if you are an investor reaching out to tell someone you want to make an offer on their house, you will approach that conversation differently that someone who owns only one house that is underwater. If someone owns one of many houses, they are a sophisticated investor partner. Your conversations and marketing should be different depending on your client.
Bruce gave an example of someone he worked with who owned two houses, one he lived in and the other across the street that was exactly the same. He was tired of the latter since he had a renter who had done some damage to it. He had an $80 grand house, and Bruce bought it for $35. When he was signing the paperwork, he said he could not touch his other house for less than $85. It was a less-than-model match. He had priced it over what it was worth, but he was selling Bruce the one across the street for $35 since he could care less about it anymore. He just wanted out of it. It was not even late or a foreclosure; he was just tired of dealing with the management. However, that is the difference in attitude of somebody who has more than one. This is a big difference.
The hardest part about coming into this business for Sean is that he is the son of a logic professor, and the aforementioned story did not even make sense to him. He did not understand how he could ever come to that conclusion when it was the same model. Over the years he has had all these deals that make absolutely no sense to him but made perfect sense to the person on the other side. Often times he has talked to two or three other realtors, and all they did was put up roadblocks. Sean walked in as an investor and bought it for pennies on the dollar. He had a really hard time with this, and it did not make sense to him.
Bruce gave another story involving a house in Corona. It was worth $140, and he had a $70 grand loan on it. He was just running an ad in the local paper at the time, and someone called him up saying he wanted him to take over the payment. This was not what Bruce thought it was going to be; and when he went there it was actually in decent shape and in a nice area. He owed $78 on it, and he did not want any money for it. Bruce asked him why he does not just list it, and he looked at Bruce like he had a hole in his head. Bruce did not understand why he was going to deed the property for no money down, but he had the guy do it for him. As they were doing the paperwork, he was trying to understand why it was a good decision for him. He said it was the only payment he had in his life. He gets a $10 grand a month income from a building that was in his family, and he never owed any money in his life. This was why he just wanted to go rent, even if the rent was $1300 and Bruce had a payment of $700. Bruce agreed and they signed the paperwork.
Sean said he was terrible at door knocking and talking to folks. He would always try to talk them out of a deal rather than into it. Bruce said he liked the fact he was able to do this because he found when people fought him, they really are going to be a seller to an investor. It is like they already thought through and planned everything out. Sometimes the decisions are so skewed from what you would do that you almost have to double check and make sure it is what they want to do.
Bruce and Sean went on to talk about trends with trustee sales in California. He asked what 2017 looks like compared to 2016. Sean said they seeing flat to slightly down, and this is what they have been seeing for some time. He does not see much end to this trend. There is a lot more bubble talk these days than there was two years ago. However, he sees about a 20% correction in the market, and a little increase in foreclosures would be a healthy thing for the market and economy overall. This could get volume up again.
Another thing they are seeing is that volumes are down even though prices are up. This is something that they see continuing due to a lack of supply and people not wanting to move around as much. Bruce had a heckler in one of his audiences, and it was fun listening to him because he did not know anything about what he was saying. Sean and Bruce are data based and have a good idea what they are talking about and why, while this guy didn’t really know and thought he did. One of his points was that there was so much shadow inventory and Bruce would have no idea, while Bruce said he knew someone who counted all this and therefore really did have an idea. The shadow inventory was not there like the heckler was trying to say.
Bruce asked Sean if he has ever run into people who insist on things happening behind the scenes that have just not shown up yet. Sean said yes and that he has some empathy for them, but it is no longer in houses and banks sitting on houses. If you look at Nevada where they stopped doing foreclosures, there are likely people who have been sitting in houses for a decade who have not made a payment.
Bruce next asked Sean his take on the policies initiated to prevent the full brunt of the crash. Ironically, Bruce had Nevada in mind when he came up with this question. Sean said it is hard to argue with the short-term results. The mindset we live in these days is to trade our future for short-term results. This is really what politics is about these days, and it is really unfortunate. Where Sean has empathy for the person who says they do not know how bad it is; when you peel the onion and see how much MBS the Fed took on it is not the life historical standards to a healthy economy.
Bruce wondered if we have created a new rule book. It is like a playbook where what you do depends on what happens. If you are in Nevada and upside-down on your equity position, in the next cycle you would saying, “Don’t foreclose on me.” They are not going to walk away, but sit there and not make their payments until the value comes back up. Then they will worry about it. This is the most amazing example. Sean is familiar with Nevada because he provides service there, and Bruce is not that familiar with it. However, if you do not foreclose on anybody and nobody moves, you create a building boom when you have a housing shortage. Prices are going up, and there are unintended consequences here. What are people being taught, and what does this mean for society as a whole. Sean said every time they launch a product and make changes, they always have a couple customers who are really anti-change.
Places like Nordstrom, whose motto is “the customer is always right,” really put us on the wrong track as a society. People can demand and expect people to give them their money back even when they were the ones who were wrong. The policy works for places like Nordstrom where it is really only a few people who wear the shoes for six months, wear them out, bring them back, and expect the full refund. Sean said there is a part of him that says the customers who are really nice and ask for a refund when it is against their policy, these are the ones who should be helped and not the ones who are demanding and mean. Somebody needs to change the mentality people have; and unfortunately, it is still a “squeaky wheel gets the grease” world.
Sean O’Toole will be one of our speakers on our panel at I Survived Real Estate 2017. The Norris Group would like to thank its gold sponsors for supporting I Survived Real Estate: First Lending Solutions, Guaranteed Rate and Nathan Chabolla, In A Day Development, Inland Valley Association of Realtors, Jennifer Buys Houses, Keller Williams Corona, Keystone CPA, LA South REIA, Michael Ryan, New Western, North San Diego Real Estate Investors, Northern California Real Estate Investors Association, Orange County Investment Club, Pacific Premiere Bank, Pasadena FIBI, Pilot Limousine, RealWealth Network, Rick and LeeAnne Rossiter, the San Jose Real Estate Investors Association, San Francisco Bay Real Estate Networking Summit, Sonoca Corporation, South Orange County Real Estate Club, Spinnaker Loans, Think Realty, uDirect IRA Services, Westin South Coast Plaza, Wilson Investment Properties, Inc. See www.isurvivedrealestate.com for event information.
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