The Norris Group's Blog

152-TNG Radio – Hugh Bromma 12-12-09

Aaron Norris (The Norris Group) — Thu, 17 Dec 2009 14:15:22 -0600

This week Bruce is joined once again by Hugh Bromma. Hugh is the CEO for Entrust Group. The Entrust Group was founded in 1981. Hugh is recognized as an industry spokesperson in the self-directed market. Entrust provides tax enhanced services such as self directed IRAs, and qualified plans to tax payers. Entrust manages over $4 billion worth in assets.

Bruce begins by asking if any big changes are coming up in 2010 that will affect what people may do with their IRA. Anyone who wants to convert a traditional IRA to a Roth IRA may do so without any income caps. These converters may pay taxes over 3 years for the amount that they convert from their traditional IRA. Before, the income cap was $100,000, even if the traditional IRA was for a couple. Now a person with a very large IRA may convert to a Roth.

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Click HERE on the player launch below to stream our shows as you surf the web.
Visit our Radio Archives to download shows in mp3 format.
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When you use a Roth, you do not pay any taxes. With a traditional IRA, you pay taxes as soon as you get distributions.

The government chose to formulate the Roth program because it allows them to be paid in advance. This program has made the traditional IRA fundamentally obsolete for people who want to pay taxes upfront on an asset that they know will depreciate dramatically.

To make the conversion from the traditional IRA to a Roth, you must pay taxes on both a federal and state level. Some states may have higher taxes than others. There are times when making a conversion is a bad decision. Anybody who contemplates a conversion should speak to a tax professional, because everyone’s tax situation is going to be different. One must determine whether it is advantageous to pay taxes up front or over time. If you have an asset in your IRA with a very low market value, but will appreciate tremendously, then it is probably a good idea to convert that asset.

If you are unsure of the value of your assets, then you should have it appraised, or you should hire a broker who will provide you values on comps.

Leverages are permitted when transferring from an IRA to a Roth. The debt is going to be a true non-recourse to the individual. The title and the debt of the properties in the IRA will be paid for, and signed by, the retirement account. There is an unrelated debt financed income tax, which may be paid on that debt portion. You must pay tax on the money that you borrow from your IRA, but the amount will be relatively insignificant.

The Roth IRA was established in 1998. Hugh Bromma has an expertise that Bruce does not think most people understand. Bruce has never been asked, “What are you doing with your Roth?” This surprised Hugh.

If you have an established Roth IRA, you cannot make a direct contribution to your Roth if your income exceeds $100,000. In 2010, if you drag a maximum contribution to your traditional IRA, then you will be able to pay the tax and make that direct contribution. This change in 2010 will be permanent.

Bruce did research on the highest tax rates in the U.S. since 1913. He was shocked to discover that 80 percent of the time, the top tax rate was over 60 percent. This scares Bruce and Hugh, and they fear that some high tax changes will take place in 2011.

At 59 and a half, if you have an established 5-year Roth IRA, then you can start taking distributions without penalties. If you start taking distributions prior to 59 and a half, or from an unestablished Roth, there is a 10 percent penalty for premature withdrawal. If you die, then your Roth IRA will still be subject to an estate tax.

With a Roth IRA, you cannot get a second home for personal use. Secondary homes may only be used for investment purposes. You cannot live in it, use it, personally repair it, or do property management on it. Cousins and in-laws are allowed to use a secondary home, but not your son, daughter or wife. You are also prohibited from hiring a son-in-law from rehabbing the home. The rules state that you are not allowed to receive a current benefit from your Roth assets. This rule includes yourself and someone that is related to you. Also, if you have ownership in an IRA or Roth then you may not use funds outside of that account for rehabbing or loan payments. If you do make a mortgage payment using money outside of your IRA, it is considered an excess contribution and it is reportable to the IRS. You will be forced to withdraw that mortgage payment by the next year, or you will be penalized for 6 percent of the amount of the infraction.

It is also against the rules to put money from your Roth account into a company that you are a manager of. If you own 10 percent or more of such a company then you are subject to penalization.

If people try to find a way around the rules, they are almost guaranteed to get caught. Some people who try to commit illegal transactions lose the entire value of their IRA. However, it is not considered a criminal act to commit an illegal transaction. Illegal transactions are punished through extreme taxes. Illegal transactions are a great benefit to the IRS, so there is no need for the IRS to prosecute.

Bruce thought of a creative transaction that might occur between two people: There are two investors who know each other, but are not partners in any business. They both buy properties at trustee sales. Buyer A buys a house using his own money, and then gives Buyer B the option to buy it for a dollar more than he paid. Buyer B fixes it, sells it, and the proceeds over the cost go to the Roth IRA of the other guy, and then the buyer receiving the benefit returns the favor. Bruce asks Hugh if this is an okay transaction. Hugh says that they must consider whether or not their transaction could be seen as a sham from the IRS. This transaction could be considered a sham, because its intent is to avoid paying taxes. It gets down to intent and Bruce decides to scrath that plan.

Bruce brings up leveraging with Options. Bruce talks about optioning land in the coming years and how that would be structured. Bruce knows someone who made $30 million on that plan, but it wasn’t in a Roth. If he had made that transaction in his Roth then the transaction would be legal. Options are one of the best uses for Roths. Options is one of the best plays that savvy Roth IRA investors use to increase their accounts.

Bruce’s Roth could have enough money to do a real estate transaction every month. He could fix properties and resell them 12 times every year. This may or may not be a problem with the IRA. If you are doing this kind of work professionally, and you are perceived as a dealer, then it is not illegal to do it within a retirement account. However, there may be dealer issues outside of the IRA. This is typically not a problem. One of the obligations you have for your individual retirement account is to make a lot of money. If you are using that money to make 10 option plays every year, then you will probably not have any issues. If someone uses their IRA to hire sales people for their property sales, then they will be labeled as a dealer. Richard Lipton has written a few articles on this subject.

If someone has a buy-sell operation with employees, but also has a Roth that does the same activity on a smaller scale, then that would probably be okay. Hugh is not completely certain about this, depends on their mood, but he considers the IRS to be reasonable in the tax courts.

Spec building is allowed with Roths, as well as land ownership and trust deed investment. Entrust needs a complete package before it cuts loose with an investor’s funds. The package is up to the IRA owner, but Entrust needs to make sure that you have an asset that can be titled in the name of the trust for an individual retirement account. Unfortunately, sometimes people will try to buy or sell a note, but they then discover that their note is actually a private placement or some other sort of asset. Buying an existing note and investing in a trust deed that is currently initiating involves the same fundamental process.

Bruce asks Hugh to describe the term “checkbook access”. A checkbook IRA is an LLC that is usually sold to someone from a lawyer. It is a single member LLC that is allowed to be owned by an individual retirement account. That LLC is run by the IRA owner. Hugh has discovered that many people use this system to make prohibited transactions. Entrust has developed a Real Checkbook IRA in which a person receives a debit card and a checkbook, which becomes an asset of their IRA. They may then buy their investments using that methodology.

Hugh Bromma’s website is www.theentrustgroup.com. Bruce and Hugh will be teaching together at an investment seminar on January 2nd.

The Entrust website can be found at www.theentrustgroup.com. January 22nd, Hugh and Bruce will be teaching together.

We’d like to thank Hugh Bromma and Entrust for sponsoring I Survived Real Estate 2009. Thank you!

151-TNG Radio – Hugh Bromma 12-5-09

Aaron Norris (The Norris Group) — Thu, 17 Dec 2009 14:11:53 -0600

This week Bruce is joined by Hugh Bromma. He is the CEO for Entrust Group. The Entrust Group was founded in 1981. Hugh is recognized as an industry spokesperson in the self-directed market. Entrust provides tax enhanced services such as self directed IRAs, and qualified plans to tax payers.

Bruce has known Hugh for a long time, so this interview is long overdue. The Entrust website is one of the most informative web sites that Bruce has ever seen.

When Entrust started in 1981, Hugh was the only person working for company other than his consultant. The consultant did financial industry consulting, but he was not in the IRA business. Hugh dealt with the IRAs and qualified plans. There are currently about 200 employees in Entrust. The company has over $4 billion in assets, and approximately 50,000 clients.

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4 Ways to Listen

Click HERE on the player launch below to stream our shows as you surf the web.
Visit our Radio Archives to download shows in mp3 format.
TNG Real Estate Radio Show is now on iTunes! If you have iTunes installed click HERE or simply do a search for "The Norris Group" while in iTunes.
If you use an RSS Reader: Click Here

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The first book Hugh wrote was “How to Invest in Real Estate Using Your IRA or 401K”. That book was written in 2003. Hugh himself invests in real estate in California.

The growth of Hugh’s company has grown far greater than he had expected. Part of his company’s plan was to create individual retirement accounts that are available to everyone. Entrust is the only company with a franchise who does this.

Entrust is a record keeping and administrating company for individual retirement accounts and qualified plans. Its emphasis is for self-directed investment in real estate, notes, and private placements. In 1975, ERISA made it possible to make a self directed decision for retirement funds. Before 1975, companies had defined benefit plans. ERISA made it possible to have defined contribution plans and 401Ks, which allowed individuals to defer money into the plan that their employer has provided.

In a defined benefit plan, there is supposed to be a check for everyone in a predetermined amount. If someone makes a mistake, and money is lost from a year or two, then problems can occur. When there are losses, or insufficient funds, then the employer has to find a way to make up for that lost money. Sometimes a defined benefit plan can be closed, and then rolled into a defined contribution plan, so that the pension is no longer defined. This means that people will lose their defined benefit plan, and a large sum of their retirement fund. The people losing their retirement plans cannot stop their pension managers from doing this. A city in Northern California declared bankruptcy, because 90 percent of its income was lost in a fixed cost of retirement.

In the end, the ERISA did not make most people wealthier. Self-directed does not always mean that good decisions are always made.

Entrust does not give investment advice, but it does give people a lot of education. However, Entrust will often refer their clients to experts for advice. Bruce thinks that is a great service. Entrust does not often have to worry about people opening up accounts who do not know what to do with their money. Entrust emphasizes education before their clients open an account.

Entrust is an administrator and record keeper for custodian banks. This means that banks hire Entrust to keep records for individual retirement accounts. Many custodians suggest investments to their clients, and the investment advice they give you will most likely be directed toward their area of expertise.

People can easily discover the status of a bank fairly easily. If a bank is having problems, and if they’re ratings are low, then you may have to worry about that bank going out of business. Many of those banks will be absorbed by an FDIC selected bank.

Most custodians do not know the rules and regulations for their business, which is why they use Entrust. Entrust acts as a decision making filter for custodians.

Webinars have become incredibly popular, and many of Entrust’s offices do weekly webinars. You do not have to worry about audience interaction during a webinar. Most of the people attending Entrust seminars are sophisticated individuals, who know how they want to use their money, and know what a self-directed IRA is, and want to be more informed about what they can do with their account. Most of the people attending these seminars are not beginners, and some have had accounts for 20 years. Beginners are encouraged to attend introduction seminars.

There are some limitations on self-directed IRAs. Collectibles such as gems, works of art, beverages, collectible coins, stamps, and antiques are not permitted. Self dealing transactions are also not permitted. Any investment from which the investor may receive an immediate benefit is not allowed. Precious metals such as gold, silver, and platinum are allowed. However, you cannot hold these precious metals within your home. If someone does choose to illegally hold a precious metal, then it becomes a distribution at the market value as of December 31st of the year in which the transaction took place. It is distributed to the individual, and it is taxed, and it may include an excise tax, as well as other penalties. These taxes may be as costly as 150 percent of the value of each bar of gold.

Small rules change relatively frequently. There are private letter rulings and prohibited transaction exemptions that change the interpretation of the established rules. Primary Code changes do not happen very often. There have been about 10 code changes in the last 20 years.

In Hugh’s newsletter, there was an article that said, “Never let a good crisis go to waste”. Bruce asks if self-directed investors are more likely to buy at a bottom, or if they are more likely to invest according to a trend and be damaged by it. Hugh says there are investors that have an understanding of trends, and they are able to predict a good time to buy into the market. There are some investors that are not educated, and will injure themselves by investing during a trend. Hugh says that investors are now beginning to invest in real estate again. Hugh knows this because lots of people are obtaining more cash for real estate deals. Many people believe that we are near the bottom.

Approximately 1.5 to 2 percent of all U.S. dollars in retirement accounts are in self-directed IRAs. The other 98 percent of the retirement money is invested into stocks, bonds, mutual funds, certificates, and insurance products. Those decisions are not made by the people holding the retirement fund, the decisions are made by someone in the qualified plan market. 80 percent of the people who makes those decisions will never change their investments for the entire life of their 401K, so they will never be able to take advantage of a low or high market. They have to hope that they will retire during a market peak.

The most common retirement vehicles for self-employed individuals are SEP IRAs, or individual 401K plans. They can set aside anywhere from $46,000 to $51,000 per year for earned income. There is no percentage limitation on how much of your income you can put into those 2 plans, so long as you do not invest more than that maximum limit.

The Entrust website can be found at www.theentrustgroup.com. January 22nd, Hugh and Bruce will be teaching together.

150-TNG Radio – Craig Hill 11-28-09

Aaron Norris (The Norris Group) — Mon, 30 Nov 2009 17:34:30 -0600

This week Bruce is joined once again by Craig Hill. Craig has been handling The Norris Group’s hard money loan business for over ten years, and he is a trustee investor.

Many new investors think that it is easy to get into the real estate buying business. To reduce risk, The Norris Group uses Rick Solis to appraise properties through the eyes of an investor. Sometimes new investors will find a property, and they think they have a good deal, but then Rick will look at the property and find problems with their deal. For an example, an investor might try to buy a property in an area with comparable sales located on 8,000 square foot lots, but the property they are trying to buy is on a 4,000 square foot lot. That 4,000 square foot difference could make a $20,000 dollar difference. Rick can easily spot these devaluing problems and save these new investors money. Craig has received multiple responses from investors who are thankful for Rick’s services.

A new investor wants to get their first house under their belt. One of the things a new investor may do is try to prove that a house is a good deal, rather than let the evidence speak for itself. These people might feel that if they can just buy a house and sell it for a profit then everything will be a little bit better. Those are the kinds of people that will typically make a mistake. When people are trying to make up for lost time, they often try to do too much too quick. You cannot become a millionaire in one deal, but you can ruin your finances in one deal. Craig has met many people who tried to be too aggressive, and then lost a lot of money. During the boom, people felt like they couldn’t lose, and they didn’t want to believe that the up cycle would end. Now people are starting to have success again, and Craig fears that they will go back into that same mentality. Craig warns that you should be able to handle a rental property. If a rental property is going to ruin your life then you shouldn’t be investing.

If someone came to The Norris Group with a great deal on a $1.2 million dollar house, The Norris Group would probably not help that investor, because there is a lot of risk involved in that deal. If an investor discovers that his $1.2 million house is not really worth $1.2 million, or if the investor starts making $7 grand payments, they can severely damage themselves.

If Craig had to choose between a borrower with a high credit score and low cash reserves, or a borrower with a lower credit score and more cash reserves, he would choose to loan to the borrower with high cash reserves. When you are dealing with investments, you need to have cash. If an investor doesn’t have enough cash reserves, he may want to think that he can make the investment work with only six months worth of reserved payment. His property may take more than six months to pay off, and his credit will not help him, because The Norris Group’s program is not credit based. They cannot get a loan to improve their situation. If a person has a lot of cash reserved, it makes it better for both the investor and the lender.

Many unexpected problems can occur when you invest in a house. Craig bought one house to fix up and flip, but the sewer immediately needed to be fixed. If an investor cannot handle those kinds of surprises, then she is jeopardizing herself.

If Craig had to choose between a borrower with cash into the deal, or a borrower that got a superior discount in the purchase who is looking for a zero down loan, he would still choose the borrower with cash in the deal. There might be a reason why the other client got a superior deal that won’t reveal itself until later. Also, the zero down investor may not be capable of handling the monthly debt on the investment. If you have $50,000 in cash reserves, you will be much more comfortable making an investment. When you do not have that kind of cash in reserve, you may feel a need to make a deal, and that causes problems. People often get caught up in the idea of making a property investment, but their ideas may not work out in reality.

If Craig had to choose between a borrower who is an experienced investor with a 650 FICA score and has a proven track record with The Norris Group, or a new borrower with a 750 FICA score and the same amount of money, Craig would choose the experienced investor with a good record. Many people have had troubles within the past few years, so a 650 FICA score may mean that they have also had trouble, but they are working through it. A track record with The Norris Group is important, because that experienced investor respects their business relationships. Dealing with a lender who knows their track record allows them to do their business, and if their investments are their livelihood, then they will probably not sacrifice their relationship with their lender.

When loaning to an owner occupant, there is never an intention to develop a relationship for future business. An owner occupant might be taking a severe risk with the $20,000 they take in a loan.

If Craig had to choose between a borrower with a job, good credit score, and a money partner, or a borrower who is a self employed, full time investor using their own money, Craig would choose the self employed investor. People who use money partners are historically known to cause problems. They may not take into account that surprises will come up, such as unexpected repairs or a delay in the selling process. The Norris Group will do business with money partners, but Craig is much more involved with those people. Craig often requires the partner to sign the deal along with the borrower, because they need to know that a property is a responsibility.

If Craig had to choose between a borrower who is a cocky and experienced investor with lots of money, or a new investor with less money and a humble attitude open to learning, Craig would probably choose the humble investor. He strays away from the know-it-all attitudes. Craig has had thousands of conversations with investors, and he has a good sense for the kind of person who will work hard to protect his investment. The cocky, know-it-all investor is often a one-time deal. The cocky investors will often call Craig, give him a big conversation about how this deal is an opportunity for him, but their “deal” is really only borderline. Sometimes these cocky, experienced investors will be trying to use Craig after their other lenders reject them.

Over the years, Craig has developed a good sense for when people are not telling him all their problems. When you have had thousands of conversations with borrowers, you develop a sense for conversation patterns, which lead to certain outcomes. It would be difficult for Craig to have an original conversation at this point. He has probably heard what any new investor will tell him many, many times. The Norris Group does not want to do deals with just anyone who can qualify. The Norris Group wants to do deals with people that make good matches with the company. Craig deals with both borrowers and investors, and he wants to make sure that his deals are winning deals for both ends.

The Norris Group does not work with pooled trust deeds and never will. If you used pooled money, you have much less control. When an investor buys a trust deed, he knows the property it’s going to be on, the amount, and he knows what the appraisal on the property is worth. The investor can easily find out what his investment is. With pooled funds (fractionalized trust deeds), the manager of the pool has a lot of discretion. You might have some possible investments that you would not take if you personally inspected them.

The reality of what is happening to your investment can be masked in a pooled trust deed. In a pooled trust deed, you make regular payments. You can make these regular payments for a long time, but by the time your investment is not worthwhile, your investment may be upside-down. With an individual investment, you are receiving monthly payments from one person on one trust deed, so you would know after 30 days if the borrower was 30 days late.

There are some lenders who do not require monthly payments, but Bruce always does. He wants them to know that they have a debt, and it prevents them from getting overextended.

A pooled investment might attract a smaller investor. The Norris Group does not usually give out loans that are only worth $30,000 to $40,000. A person who has $50,000 they want to invest, but they require the $500 dollar payment every month to live on, then they are not a good candidate for a trust deed.

Bruce asks Craig to explain how he makes people feel comfortable investing. Craig likes to show people examples of what The Norris Group does. Craig sends new investors a copy of a The Norris Group appraisal, so they can see what The Norris Group does to calculate value. Once Craig makes people feel comfortable with what they are lending on, they are anxious to invest in a trust. The majority of the people that work with The Norris Group trust deeds want to ramp their investment up as high as it can go. When they do ramp it up, the majority of them have chosen that as one of their main investment vehicles. Many people who deal with trust deeds have a diversity of investments. They do not want to put all their eggs in one basket.

The Norris Group sees trust deed investments as a great way to offer diversification of a retirement account. You can also diversify your trust deed investments by selecting multiple areas.

The Norris Group has a new 8-year loan program for investors who plan to buy and hold a property as a rental. This new program has opened up a new investment at 9% for 8 years. This program is great for people who have IRA money, or money in 401Ks, because they can earn 9% tax free. The nice thing about this 8-year program is that the loan is intended to go on for an extended period.

Craig can be reached at 951-780-5856. He will be glad to talk to you about borrowing money. See Craig's full biography HERE.

149-TNG Radio – Craig Hill 11-21-09

Aaron Norris (The Norris Group) — Mon, 30 Nov 2009 16:58:56 -0600

This week Bruce is joined by Craig Hill. Craig has been handling The Norris Group’s hard money loan business for over ten years, and he is a trust deed investor himself.

Bruce begins by asking Craig what the difference is between Craig’s California private lending business and other lending businesses such as Bank of America or FHA. Craig says that there is not as much of a difference as people think. The main difference is that you are lending to a different client and for many reasons. Craig has the ability to lend within a shorter time frame, and he will lend on properties that banks would lend on due to conditions. Craig’s business deals to people who have more need for a quick loan.

The funding source in Craig’s business is very different from a bank. Banks have a pool of money, but with Craig’s hard money, there is an individual who has money to lend and they get a good return on the loan they end up making.

Hard money lending is a generalized term for private money and private loans. The Norris Group is a private broker for investors. Hard money has a negative connotation to it because it can be expensive and, in the past, it was given to people with bad credit.

When Bruce and Craig first met, Craig was working for another company in Orange County. Bruce asks Craig what his typical client looked like in that environment. Most of Craig’s clients were delinquent on their trust deeds. They had poor credit because of some sort of problem they had been affected by. Hard money was a way for those people to get rid of some of their problems, and move on.

When Bruce and Craig met, Bruce was an investor. He had found a couple properties, but he had maxed out his credit line. Bruce had never met with a hard money lender, and Craig had never met with an investor. If you have a house that is worth $100,000, hard money lenders are typically willing to lend 60 to 70 percent of what that house is worth. Bruce had two houses that he wanted a loan on, but he was only asking to borrow 50 percent of what those houses were worth. This made Craig realize that working with Bruce was a great opportunity. Craig had a hard time finishing those loans though, because at that time, people had the mentality that a house was only worth as much as what you were willing to pay for it. Even if two houses were appraised at equal value, the lender would have still wanted to lend to the person in foreclosure.

In the 1990s, there was usually a first deed on a property when a hard money was asked for. Most of the hard money loans that Craig did at that time were between $10,000 and $25,000. 80 percent of the home was typically covered in the borrower’s first loan, and Craig gave them a small loan behind that first loan. The interest rate was typically 15 percent. Most of the companies that did hard money dealt with brokers. Craig’s company worked with brokers who would refer loans to them. If there were 10 or 15 points, those brokers would receive half of that value. There were a few more people involved in the transaction.

Bruce’s company does not rely on referrals. The Norris Group has a great network, so they do not need to use referrals. Craig had to frequently persuade brokers that it was better for borrowers to get a $15,000 second loan. The brokers wanted Craig to give them a new $80,000 first loan, because that generated more income. With The Norris Group, Craig does not have to worry about this problem, and he can choose the best option for each client.

Most hard money loans are still very referral based. If you are not talking directly to the borrower, a broker may not give you all the information you need, to make the best decision for the client. The broker may try to make you believe a false story.

Bruce and Craig quickly became comfortable with talking to each other, because they were dealing with the same people. Bruce was talking to people in foreclosure who wanted to sell their homes, and Craig was talking to those same people about making a loan.

Investors had come to Craig before Bruce, but it was with a concept rather than a property. People would ask Craig what he might do in made-up scenarios, but Bruce was the first person to come to him with his two properties. Craig thought Bruce’s idea gave a lot of security to the investor. After Craig’s experience with Bruce, he chose to only give loans to investors. The second investor Craig dealt with was Mike Cantu, and this loan plan worked well for Mike as well.

Mike Cantu is still borrowing from The Norris Group. That consistency would not occur for a loan business, or for people who were invested in trust deeds. People who loan to those kinds of borrowers will have to work very hard just to get them to borrow money once. Lenders who deal with investors will only have to find a few people who can borrow 40 or 50 times a year for them. It did not take Craig very long to realize that this was a very sensible business plan.

Most people think of the investors as the risky borrower, and the occupant as the safe one, but this is not true. Bruce asks if there are different rules for loaning to occupants. There is more protection for occupants, and there are different regulations on loan amounts. When Craig is doing a loan for an investor, he understands that the investor needs money to fix a home and sell it. When you give a loan to an owner occupant, you probably never know why that person needs the money, and Craig has been shocked in the past by the ways owner occupants will use their loan money.

Hard money loans are not a cheap resource. An owner occupant would not want a hard money loan unless they have no other choice. An investor taking a hard money loan probably has the option to use another loan option.

When checking to see if an investor is qualified for The Norris Group’s hard money loans, Craig checks their credit, the amount of debt leverage they have, and cash reserves. Someone with good cash reserves is a good candidate for hard money loans. Most investors take these loans for single-family residences and small units. The Norris Group is currently not offering loans on land, and tends to stay away from commercial real estate. In the future, The Norris Group may give loans for construction. Craig asks people how they found the property and how long it has been on the market. If an investor finds a property that has been on the market for 60 days with no price change, Craig will be cautious, because there is probably a reason why that property has not been sold.

Some passive investors are really looking to get involved in the market by getting properties flipped to them by a wholetail investor who passes it on to them for a small fee. The fees being tacked onto these deals sometimes wipe out a lot of the profit. Most wholesalers get a nominal fee for the work they have done. Craig recently talked to a man who was buying a $400,000 house for $349,000. He though he had a good deal, until he discovered that the original buyer had just paid $249,000 for it.

It is very important to predict real estate cycles. We are currently in a good cycle, but you still have to be careful when buying. If the cycle is going up, lenders can do deals according to a loan to value scale. In the current cycle, Craig stays away from deals that can take 6 months to complete, because a lot of things can change within 6 months. In the last six months, investors have had a “can’t lose” mentality. This can be problematic, because if investors feel like they cannot get a bad deal, then they may pay too much. The Norris Group encourages people to not get involved with long-term project houses, unless they have experience. Craig often asks his client if they have a background in construction. Craig thinks that a new investor should not try buying a house that has been red tagged by the city.

There are many people who come to The Norris Group expecting to receive a loan, because they have attended clubs and seminars in the state. Other people have told them that they can get a loan without a credit score, and without a down payment. This is not true. Craig has disappointing conversations with these people, but most of them are thankful, because Craig informs them on how they can get qualified for a future loan. Some of these people will put everything they have into a deal because they’ve been told that it is easy. This is a difficult and volatile time for real estate, yet people are willing to go “all in” on a property investment. People are coming from a 2006 mentality, where any property you got your hand on would get you a big check, but now things are much more difficult than that.

Craig can be reached at 951-780-5856. He will be glad to talk to you about borrowing money.

Bruce speaks with Craig Hill about the hard money loan business, how they met, how they work together, and what Craig brings to the table as a money partner. The Norris Group only loans in California so The Norris Group offers local insights and prides itself on a very good track record. Video on the program can also be seen at http://www.thenorrisgroup.com/hard_money_loans/ and more on trust deed investment in california can be found at http://www.thenorrisgroup.com/trust_deed_investments/

In 1984, Craig took his first job in the lending industry working for Vanguard Mortgage as a loan officer and loan manager. While employed there, he met and began funding REO purchases with Bruce Norris. When Bruce officially started the Norris Group in 1994, Craig came aboard as both loan officer and investment manager and never looked back. Since that time, they have arranged over $150 million dollars worth of investor loans.

148-TNG Radio – I Survived Real Estate 2009 11-14-09

Aaron Norris (The Norris Group) — Mon, 30 Nov 2009 16:51:16 -0600

This week The Norris Group Real Estate Radio Show and Podcast presents Part 9 of I Survived Real Estate 2009. This is the final installation of the audio for this event.

This week The Norris Group Real Estate Radio Show presents Bruce Norris’ segment of I Survived Real Estate 2009.

Delinquencies have exploded. From July 08 to July 09, we have gone from 5.3 percent to 9.7 percent delinquencies. The inventory of REOs has gone down, because banks have not taken back as many as they should. Some people have not made payments in 14 months. Trustee sales have also declined during this same time period. We had 28,795 trustee sales in July 08 and then we progressed to the 9.7 percent delinquency rate. We are currently 306,000 trustee sales short of where we should be. That averages 25,000 homes going out per month in the future. We have not peaked at delinquencies, and according to reports, we will soon be at 13 percent delinquencies. At 13 percent, we will be releasing 70,000 homes per month. Bruce does not believe that we can have a positive market if these statistics are true.

FHA is going to have a large number of defaults next year. They once had a 203K loan for investors in which investors could buy a property and include the repair bill in the loan. A lot of people would use this kind of loan and they would buy up to 7 homes and use them as rentals. Bruce thinks this would help clear up a lot of inventory.

Bruce thinks that Fannie and Freddie programs should be expanded so that qualified buyers can get unlimited loans. We are currently stuck at 10, and many investors are capped out because they exchanged their homes out of California and moved their investments to another state. Those investors cannot sell their property and come back to California.

We are currently giving away homes for 8,000 dollars. That money is coming from tax payers. Bruce thinks that we should just let people take these homes for no down payment. We will have people walk away, but the next buyer will be able to easily take it. Under this kind of proposed program, it would not matter if the buyer qualified or not because this loan can be continually passed down. These houses could go to investors with a 5 percent interest rate. This program would not have foreclosure, because the problems would be solved by the next buyer. The people who have recently foreclosed on their homes will not be able to qualify for homes, which may keep them out of the market for the next few years. We could just reintroduce these people as buyers if they did not have to qualify. This is not a program that we have never seen before. We are trying to solve this problem by selling the next house to the owner occupant who was shoved into home buying by the nonsense financing of 05 and 06.

We are already doing zero down deals. When Bruce sells a property, he usually pays part of the closing cost. The person getting 3.5 percent down on a 100 grand purchase is getting an 8,000 dollar check; that is better than nothing down. If you just had nothing down and these people qualified, we would get rid of a lot of homes.

Bruce and many other investors believe that we need to get rid of the FHA 90 day flip rule. When an investor fixes a property, which may only take 3 to 4 weeks, and they sell it within 90 days, the investor is believed to be guilty of fraud. The lender has to pay the cost for this, because the investor will subtract the amount that he or she must pay the lender for the property. We need to start looking at investors as people who can help this problem. At some point, we must either choose to not foreclose, or we must pay catch-up in a painful market.

Bruce thinks that we can absorb a higher interest rate and still have a good real estate market, because the combination with the cheap price could absorb a double digit interest rate, just like in the 70s. Thornberg says that a 1 percent increase in the mortgage rate means a 10 percent decline in prices. Bruce disagrees with this, because between 1974 and 1980 we had a tripling in real estate prices and interest rates doubled.

Thornberg tells Bruce that he is talking about the real mortgage rate, which is the mortgage rate minus the rate of inflation.

Bruce asks Thornberg what the statement “Unemployment is a lagging indicator” means. Thornberg says that means that “the labor markets are the last to go into the toilet and the last to dry off.” Bruce asks if that means “when labor improves, every other category of real estate should have already started to improve”. Thornberg says that residential real estate leads commercial. Now, we keep waiting to hear about the collapse in the commercial market, but we are not seeing this at all. Thornberg says that this sort of lead and lag mentality can be exaggerated.

This is why Bruce brought this up, because in the last cycle, employment improved in California from 1994-96 but we did not have a price increase until 1997. If we do not have price increases, builders will not build anything. Bruce asks if you can have an improved labor market if builders do not have any work to do. Thornberg says that these two factors do kind of work together. The prices started to go up after the labor increases from 1994-96. Thornberg reminds Bruce that in the early 90’s we lost zero space, defense, and migration. In that market, the real estate was hampered by the excess supply. Thornberg takes issue with the idea that we should subsidize the building of new homes, because he believes that we have too many homes. Thornberg believes it would be a bad idea to subsidize the construction of homes when there is already too much inventory. Bruce says that some builders have been fixing existing inventory, and Thornberg believes that is all the builders can really do.

Robert Toll made 700 million dollars between 2000 and 2007 because he was selling too many houses at too high of a price, and now he wants tax payers to bail him out.

Bruce Norris asks Rick Sharga if people foreclosed for different reasons in 2008 versus 2009. Rick says that the reasons are not as different as the press would lead you to believe. The media has jumped ahead to the next wave of foreclosures. We are looking at a 3 wave foreclosure tsunami. The first wave began in the first quarter of 2006, because of the subprime meltdown and ARMs. The MBA numbers suggest that 33 percent of the new foreclosures are unemployment. That means that 2/3 of the foreclosure activity is not employment related.

What we are really seeing is increasing levels of foreclosure activity from the first wave, which is being made worse from the second wave. The second wave is about to pick up steam. If unemployment peaks around the first quarter of next year, we will see the foreclosures related to that peak around the 3rd or 4th quarter next year. That will be just in time for them to be augmented by the next wave. This next wave will be caused by the option ARMs. Many loans are going to reset, and people will owe more on their reset loans than their original loans.

Strategic defaults are going to be a problem. In the past American culture, people honored their contracts and chose to make their payments. Now people are realizing that the house they bought is worth half of what they owe, and they are wondering if it is in their family’s best interest to keep paying. If someone is only 10 percent upside-down on a loan then they will probably stick with the loan, but if they are upside-down by 50 percent then they will probably default.

Thornberg asks people if their credit or their equity will hear quicker. Thornberg says that most of these people will have their credit heal faster. Sharga responded to Thornberg with a story about a Coldwell Bankerk agent that was fired. This agent counseled her customers to default on their current loan after qualifying and buying a second house. Bruce feels that there is still a lot of character being shown in California; a state with a 9.7 default rate that has had a 50 percent value drop.

An economist from the building industry claimed that California needed to build 230,000 homes, but John was only able to build 70 homes this year. Economists who say things like this ruin the credibility of the people in their industry. Bruce feels that people owe more to their industry than they give. Bruce thinks that now is a good time to buy property even though he thinks property values will go down. There is a combination of good interest rates and prices that make paying for properties an easy thing to do. Bruce thinks that the price declines that are coming will mostly affect the “as is” inventory, because loans will not be available to homes without kitchens. Right now, investors are not being rewarded for the $35,000 they spend on repairs. The appraisal business is using a broken model which does not allow for proper adjustments on repaired properties. Every sale we have is an anomaly. The neighborhoods that Bruce is buying and selling in contain homes that are worth $60,000, but buyers want Bruce’s property at $130,000 because it has a kitchen and financing. If investors are going to make these improvements in the real estate market then they need to be rewarded for their efforts. The appraisal model being used right now is telling buyers that their decision to buy a repaired property is unwise. This hurts the market because fixed homes make neighborhoods more valuable. If these homes are left unfixed then more foreclosures will occur. Joseph agrees with Bruce’s opinion that the appraisal process is broken. There is no magic number in appraising that makes it impossible to make a line item adjustment impossible. If an appraiser is going to make an adjustment worth more than 10 percent of the sales price, then they need to give an explanation for that. When there are multiple offers on a property, then an appraiser should consider those offers in their property evaluation. Unfortunately, the underwriters are not allowing these adjustments to take place.

For the final segment of the show, Bruce asks each speaker what they feel the biggest problem in real estate is. Joseph believes that real estate’s biggest problem is appraisal management companies that hire incompetent people who are not qualified and do not have enough experience. Those people make bad decisions and they ruin deals.

Patt says that it is hard to tell what the biggest problem is. The biggest problem for Patt and many other realtors is getting inventory out of the market place. There are too many short sales that no one knows how to sell. When someone performs a search on the MLS and finds that 75 percent of the properties are being labeled as “subject to short sale”, you have a problem. 90 percent of the time, those sales will not close. The foreclosed homes are easy to get rid of, because a bank owns them, and they have answers for someone who wants the property.

Tommy thinks that the biggest problem is the tremendous volume of deteriorating, empty homes. These homes need to be put into the hands of investors or home owners as quickly as possible, and Tommy thinks that auctions do that very well. John Young agrees that we need to get through this inventory as quickly as possible. Previously in the show, Bruce proposed multiple solutions to the inventory problem such as zero down deals. He believes that this problem will not be solved by just one helping factor.

David Kittle believes that the biggest problem in real estate is the people who are making laws who do not understand the business, and have never run a business.

Rick Sharga believes that the entire real estate “ecosystem” is imbalanced. Valuations are imbalanced because we have less professional and competent appraisers who are under valuing properties. There is a freeze in the capital market, because lenders are afraid to risk lending money on homes that may not have proper valuations. Hundreds of thousands of homeowners are under water on their loans, and there is too much inventory for the market to buy. He does not believe that there is one central problem that has caused this real estate mess. Real estate is a boom-bust phenomenon. When times are good, it is very good, but when times are bad, it is very bad. 2001 to 2006 was a phenomenal time for people in the industry, but because of that boom, they are suffering from a terrible crash. From a long run perspective, we are dealing with a mess of rules, regulations, subsidies and taxes. Local governments are constantly pushing all sorts of taxes on builders. Those taxes drive up prices on homes, and as a result, a constituency cannot afford those homes. Then they try to subsidize the price of a home by having an FHA mortgage. You do not want a loan on a house to be a normal loan, so you make it a no recourse loan, but then third party appraisers are more important than what someone is trying to buy a home for. We keep creating problems by trying to fix problems. Christopher believes that we need a massive deregulation of the market. We need to clear these regulations so the market can work efficiently. Bruce hopes that the investor will have the chance to influence congress. Right now, investors are a very important solution to this problem, but they are currently having trouble. If investors are able to get financing, they will be able to fix homes and prevent them from returning as “for sale” inventory. If investors cannot get financing, then they must either leave these homes alone or they must pay for these homes with cash. Unfortunately, investors have a limited amount of cash to spend. The video of the live event is not being aired online HERE. You can visit isurvived2009.com to learn more about our sponsors and speakers. Here are the speakers involved in the event:

Bruce Norris

President The Norris Group

David Kittle

2009 Chairman Mortgage Bankers Association

Pat Vredevoogd Combs

2007 President National Association of Realtors

Tommy Williams

2008 President National Auctioneers Association

Christopher Thornberg

Principal Beacon Economics

John Young

Vice President California Builders Industry Association

Joseph Magdziarz

Vice President Appraisal Institute

Rick Sharga

Senior Vice President RealtyTrac

To Benefit:

I Survived Real Estate 2009 Sponsors

A huge thank you to all of our sponsors who made this event possible.

Platinum Sponsors

Gold Sponsors





Tony Alvarez - The REO Mentor		Mike Cantu
		Awesome Limousines
	National Association of Real Estate Investors

147-TNG Radio – I Survived Real Estate 2009 11-7-09

Aaron Norris (The Norris Group) — Wed, 11 Nov 2009 17:11:07 -0600

This week The Norris Group Real Estate Radio Show and Podcast presents Part 8 of I Survived Real Estate 2009.

This week The Norris Group Real Estate Radio Show presents Bruce Norris’ segment of I Survived Real Estate 2009.

Robert Toll made 700 million dollars between 2000 and 2007 because he was selling too many houses at too high of a price, and now he wants tax payers to bail him out.

There is a proposal being supported by 16 senators to increase the tax credit to $15,000 dollars for next year. The current $8,000 dollar tax credit started at $15,000 dollars, but it was then taken down to $7,500 dollars, and then it was increased to $8,000 dollars. MBA is supporting an open $15,000 dollar tax credit. That includes owner occupied and second homes. Every time someone buys a house, they spend an average of $7,500 dollars. That money goes into places like Home Depot, Lowes, Porter Paint, and furniture companies. MBA’s economist estimates that if the $15,000 dollar tax credit was approved today, then an additional 400,000 purchases would take place over the next year. $7,500 multiplied by 400,000 is a lot of money. David Kittle would argue that when these people begin to buy these homes that they would most likely be buying a foreclosure. The government is going to have to spend money to bail out that market anyway, so David thinks this is a better option. Christopher Thornberg believes that this proposal is ridiculous, because you cannot expect the government to continuously subsidize everything. However, Christopher does think that there is a reason for governments to provide these opportunities, because the market can get into a death spiral. Temporary credit causes a short term burst in sales to stabilize the market, but then you must stop subsidizing and let the markets fix themselves. One year ago, Fannie and Freddie were put into conservatorship. They were not too big too fail. If the government had allowed everything to fail, things would have been ten times worse than they are right now, but these problems would be over by now. We need to allow businesses to fail. Independent lenders are going out of business, because they cannot get warehouse line capacity. This is because the Obama administration has put on a capital requirement which forces these lenders to put a dollar into reserve for every dollar they lend. One year ago, we had 120 facilities that gave warehouse lines to lenders, but we now have only 12. As individual mortgage bankers go out of business, all the money is being funneled to Wells Fargo, Chase, BB&T, Bank of America, and Citi. Bruce asks Joseph Magdziarz who has the final say as to what a property is worth. Is it the appraiser, the review appraiser, the underwriter, or is there a boss of the underwriter. The problem with government subsidies is that we cannot find the real market. When subsidies are affecting the market, we cannot find the true demand and supply balance. An appraiser usually has the opportunity to observe the property. An AVM is just an awful valuation model that may tell you which appraisal should be reviewed based on statistics. Joseph thinks that it is wrong for lenders to use AVMs to turn down an appraiser’s opinion. You should stay with you appraiser’s opinion, or you should get a review appraisal done. Unfortunately, that is not going to happen. We must remember that government intervention only postpones the eventual. We need to have a free market. Joseph talked to five major builders in his market area. Most of them build 700 to 800 homes per year. One had taken 3 permits out this year, and he told Joseph that he never wants to own lots and subdivisions. He hired The Appraisal Institute to come up with a pricing mechanism, but he wanted a real value, because he did not believe that he could build his properties for what he could sell them. In most companies, the underwriter has the final say in the value of the property. Bruce asks if there is a boss of the underwriter who can trump the underwriter’s decision. The speaker claims that his company does not do this, but this may be true in other companies. One of the problems that Joseph has come across is that many of the underwriters are not certified, yet they are responsible for second guessing someone who is trained in appraisal. Bruce asks what happened to the buyer’s ability to look at the market and say, “I’ve seen all the vacant houses that are listed for $75,000 and I want to buy this property at $135,000.” The system is trumping the buyer’s decision as if they have no idea what they are doing. Bruce provides an example of how this problem is affecting his company. Bruce bought a property in Moreno Valley for $50 grand and he fixed with $35 grand. When he attempted to sell the property, he got six offers within 48 hours for $120 grand to $122 grand. From Bruce’s perspective, that states market value. There were six buyers looking at all the market inventory and they thought Bruce’s property was a better deal than the other property’s priced at $120 grand, and they also thought his property was superior to the properties being sold at $75 grand. The appraisal for Bruce’s property came in at $102,000, and the review appraisal came in at $85,000. Bruce would not have been rewarded for his efforts if he sold the property at $85 grand, so he no longer makes the effort to buy and sell in Moreno Valley. The consequence for this is that there could have been a $120 grand comp for the entire neighborhood to enjoy, but now they have a $50 grand comp to look at, because they did not let the buyer determine what market value is. Bruce chose to keep this property and rent it for $1,150 dollars. The value of owning a house is being topped at half of rental value. Bruce thinks that is ridiculous. Tommy tells Bruce that this problem would not have occurred if the property had been sold through an auction. Auctions are not contingent on financing. Most of the homes that Tommy sells are financing, but the buyer already knows what they are qualified for. In Tommy’s entire life, he has never had an appraiser dispute a house price that was sold in an auction. Christopher Thornberg says the problem is that the banks worry about the appraisals, and they are not under the assumption that buyers are concerned about the appraisals. If we allowed a system where we had recourse mortgages again, then we would have deals in which buyers could buy houses above the appraisal value. However, the buyer would have to sign a deal which would allow banks to take the buyers assets if the buyer goes bankrupt. Bruce interrupts Thornberg, exclaiming that what Thornberg is proposing is that the appraisal system is correct. Bruce feels that we must respect the buyer’s decision more than that. Thornberg explains that the bank does not know that Bruce had six offers. They are under the assumption that there is only one accepted offer, and the appraisal came in at less than that offer. The bank is worried that if the buyer cannot pay his mortgage, which is half of rent, then they must turn around and they can only sell that property for $85 grand. If the buyer could sign a secondary note, making the deal a full recourse loan, then it shouldn’t make a difference. Bruce asks John what the percentage of his sale price to his cost is in this market. The sticks and bricks costs about $50 dollars per square foot, but that does not include the land and the additional fees. In Fontana, John has built homes in the last 5 years that are now repos. John’s company tried to sell to people who were qualified and had good FICA scores. At that time, Wells Fargo was very nervous about the Alt A and subprime loan. John’s competitors would sell to anybody including investors and people who were not occupying the properties. The federal first time homebuyer tax credit allows you to get the credit regardless of whether or not you paid any taxes. The state program only gives you as much credit as you have already paid in taxes. John must decrease his prices to encourage buyers to buy his homes. His homes are more expensive than foreclosures, so he must show the value difference between his homes and foreclosures. John says that builders are not building 225,000 homes as Chris mentioned previously. Builders are currently only building about 40,000. John’s company will only build about 70 homes this year. The video of the live event is not being aired online HERE. You can visit isurvived2009.com to learn more about our sponsors and speakers. Here are the speakers involved in the event:

Bruce Norris President The Norris Group

David Kittle 2009 Chairman Mortgage Bankers Association

Pat Vredevoogd Combs 2007 President National Association of Realtors

Tommy Williams 2008 President National Auctioneers Association

Christopher Thornberg Principal Beacon Economics

John Young Vice President California Builders Industry Association

Joseph Magdziarz Vice President Appraisal Institute

Rick Sharga Senior Vice President RealtyTrac

To Benefit:

I Survived Real Estate 2009 Sponsors

A huge thank you to all of our sponsors who made this event possible.

Platinum Sponsors

Gold Sponsors





Tony Alvarez - The REO Mentor		Mike Cantu
		Awesome Limousines
	National Association of Real Estate Investors

146-TNG Radio – I Survived Real Estate 2009 10-31-09

Aaron Norris (The Norris Group) — Wed, 11 Nov 2009 17:07:16 -0600

I Survived Real Estate 2009

Fundraiser for the Ornage County Affiliate for Susan G. Komen for the Cure

(Full Bio)

This week The Norris Group Real Estate Radio Show and Podcast presents Part 7 of I Survived Real Estate 2009.

This week The Norris Group Real Estate Radio Show presents Bruce Norris’ segment of I Survived Real Estate 2009.

Robert Toll made 700 million dollars between 2000 and 2007 because he was selling too many houses at too high of a price, and now he wants tax payers to bail him out.

California has a 9.7 percent default rate, and its home values have dropped by 50 percent. Bruce thinks that shows a lot of character, and that there are still plenty of people honoring their contracts. SOMEONE believes that if they had purchased a home that turned out to be a terrible deal, he would be furious with his banker and the appraiser. The buyer on our system has always been on an island by himself. The Realtor does not have a fiduciary responsibility to the buyer unless they are contractually working with the buyer, the lender has underwriting standards but is not responsible for the buyer to make the payments, and the guys at Bear Stearns apparently did not have any fiduciary responsibility either. SOMEONE’s realtor told him that if you don’t have someone to write a mortgage for you, then use this person. That has worked very well with our system, because everyone played by the rules, but within the last five years, all the rules seem to have flown out the window. Bruce asks David why 60 to 70 percent of loan modifications fail, and if principal reductions should be part of loan modifications. The lender does have a fiduciary responsibility, because they have buy-back agreements. There are many loans coming back from Fannie and Freddie, and they are asking the lenders to take them. The lenders do have responsibility, but the broker does not. There is recourse for the buyer in situations in which the buyer has committed fraud, and 80 percent of the loans going into foreclosure, in California, have fraud committed on them. That means that loan officers, Realtors, appraisers knew what they were doing. Even many borrowers are knowledgeable of the fraud that is occurring. David gives an example of a gardener who was told that if he stated an income of 15,000 dollars a month and falsely claimed to own a nursery, rather than his true income of 1,500, that when the value of his property went up the person helping him get the loan would split the money made on the deal. Bruce recently talked to the president of a company in California who just bought a pool of mortgages for 335 million, and their face value was 25 cents or less on the dollar. He was in the subprime business, and he is probably responsible for creating the same paper that he is now buying and making a fortune on. David thinks that is shameful. David thinks that Barney Frank is one of the most intelligent people in Congress, but his policies are wrong. A year ago, 8 out of 10 of those subprime loans were still being paid on time, but now that number is 7 out of 10. It was not the products that were bad, but the subprime product was given to the wrong people. 50 percent of the 30 percent who have failing subprime loans will not lose their homes. That means that 85 percent of the people who got a subprime loan will not lose their house, but the media pushes it the other way. David thinks that some loan modifications should include principal reductions, but not all. People in David’s industry once manually underwrote loans, and people had to qualify. That is what we are doing today, and we are making the best loans that we’ve made in 15 years. People are asking lenders and servicers to use tools in a way that they were never designed to be used. Loan modification, forbearance, and workout programs were meant to be used on a case by case basis, but now we are trying to use these programs as mass market products. Now people are looking Obama to wave a magic wand over all the problems that are occurring. Short sales were supposed to be a rare occurrence for when someone has fallen on bad financial times at the same time as their house lost value. Now we are wondering why we cannot ask a single loan officer to do 100 short sales per day, and that is how many files they are getting. The tools we were using to fix this problem were not meant for the volume of activity we are seeing. Tommy believes that auctioneers can help fix that problem, but they have to sell at the proper value. Most people who have invested in the stock market have an equity that is off by 30 percent. Yet stock investors don’t think that the government should come up with some sort of modification or a cramdown for those sorts of mistakes. Tommy believes that people should know that real estate does not always go up. We have sold the concept that when you buy a home it will go up in price, and people have speculated on that concept, which is what caused all the problems we are currently seeing. Bruce asks Pat if the reason for buying homes has changed. Pat says that it depends on where you live. All real estate is local. In the crazy market areas, some people began to look at real estate as an investment. In places like Michigan, home prices were not sky rocketing, so people simply viewed homes as a place to live in. Pat agrees with Tommy’s perspective on how this real estate problem came about. Realtors have contributed to this problem by telling people that they can easily flip properties. Christopher Thornberg believes that NAR hires economists to go out and produce ridiculous research, so that it can be used to support prices. The NAR never stood up in 2005 or 2006 and told everyone that there was a housing bubble. Pat believes that the NAR had very valid research. Thornberg debated economists from CAR and NAR who were telling him that there was no bubble. He frustratingly tells Pat that people should not view the NAR as an innocent victim on the sideline that was hit blind sighted by crazy people in California. Pat disagrees with Thornberg’s statement. She believes that the NAR’s economists did research in a credible way. Tommy Williams moved to Oklahoma in 1985 immediately after he had experienced radical real estate devaluations in Western Illinois. He sold a farm at auction that brought 3,500 dollars an acre, but before he moved to Oklahoma, he resold the same farm for 1,200 dollars per acre. He met a lady who was trying to sell her house and he told her that her house would not sell for what she owed on it. She told Tommy that she had never heard of such a thing as a house that sold for a lower value than what it was bought for, and that she was going to tell congress that there should be a law forbidding homes to be sold for a decreased value. Christopher Thornberg jokingly asks if the woman trying to sell her house was Nancy Pelosi. The 8,000 dollar tax credit was good for the industry. Bruce asks Pat if we would get the same result on a program involving a qualified buyer with no down payment. Pat is not sure if that kind of program would work. The NAR has seen a lot of qualified buyers sitting on the fence, because the media is saying that prices are going down. The buyers were unsure that they will be making a good investment. Now that the 8,000 dollar tax credit has come in, many of those fence sitters have chosen to enter the market. These new buyers are looking at low interest rates, choice in the market place, and affordability, but now there is less choice because the market is improving. Bruce asks Pat if we need to induce these buyers with a check. Pat would have said no six months ago. It bothers her to think that we need to pay off people to enter the market. There is a proposal being supported by 16 senators to increase the tax credit to 15,000 dollars for next year. The current 8,000 dollar tax credit started at 15,000 dollars, but it was then taken down to 7,500 dollars, and then it was increased to 8,000 dollars. MBA is supporting an open 15,000 dollar tax credit. That includes owner occupied and second homes. Every time someone buys a house, they spend an average of 7,500 dollars. That money goes into places like Home Depot, Lowes, Porter Paint, and furniture companies. MBA’s economist estimates that if the 15,000 dollar tax credit was approved today, then an additional 400,000 purchases would take place over the next year. 7,500 multiplied by 400,000 is a lot of money. David Kittle would argue that when these people begin to buy these homes that they would most likely be buying a foreclosure. The government is going to have to spend money to bail out that market anyway, so David thinks this is a better option. Christopher Thornberg believes that this proposal is ridiculous, because you cannot expect the government to continuously subsidize everything. Chris thinks that this kind of spinning can cause the market to get into a “death spiral.” The video of the live event is not being aired online HERE. You can visit isurvived2009.com to learn more about our sponsors and speakers. Here are the speakers involved in the event:

Bruce Norris President The Norris Group

David Kittle 2009 Chairman Mortgage Bankers Association

Pat Vredevoogd Combs 2007 President National Association of Realtors

Tommy Williams 2008 President National Auctioneers Association

Christopher Thornberg Principal Beacon Economics

John Young Vice President California Builders Industry Association

Joseph Magdziarz Vice President Appraisal Institute

Rick Sharga Senior Vice President RealtyTrac

To Benefit:

I Survived Real Estate 2009 Sponsors

A huge thank you to all of our sponsors who made this event possible.

Platinum Sponsors

Gold Sponsors





Tony Alvarez - The REO Mentor		Mike Cantu
		Awesome Limousines
	National Association of Real Estate Investors

145-TNG Radio – I Survived Real Estate 2009 10-24-09

Aaron Norris (The Norris Group) — Fri, 06 Nov 2009 14:29:44 -0600

I Survived Real Estate 2009

Fundraiser for the Ornage County Affiliate for Susan G. Komen for the Cure

(Full Bio)

This week The Norris Group Real Estate Radio Show and Podcast presents Part 6 of I Survived Real Estate 2009.This show can be downloaded from: http://www.tngacademy.com/mp3s/145-TNGRadio_I_Survived_Real_Estate_2009_10-24-09.mp3

This week The Norris Group Real Estate Radio Show presents Bruce Norris segment of I Survived Real Estate 2009.

Bruce asks Thornberg what the statement Unemployment is a lagging indicator means. Thornberg says that means that the labor markets are the last to go into the toilet and the last to dry off. Bruce asks if that means when labor improves, every other category of real estate should have already started to improve. Thornberg says that residential real estate leads commercial. Now, we keep waiting to hear about the collapse in the commercial market, but we are not seeing this at all. Thornberg says that this sort of lead and lag mentality can be exaggerated.

Robert Toll made 700 million dollars between 2000 and 2007 because he was selling too many houses at too high of a price, and now he wants tax payers to bail him out.

Strategic defaults are going to be a problem. In the past American culture, people honored their contracts and chose to make their payments. Now people are realizing that the house they bought is worth half of what they owe, and they are wondering if it is in their familys best interest to keep paying. If someone is only 10 percent upside-down on a loan then they will probably stick with the loan, but if they are upside-down by 50 percent then they will probably default.

Bruce begins by discussing the declining housing inventory. A declining inventory typically means that the market is doing well, because you have multiple offers being placed on homes. We currently have the highest affordability rates in the history of California. The volume of sales has gone up to normal, but we have high unemployment. Delinquencies have exploded. From July 08 to July 09, we have gone from 5.3 percent to 9.7 percent delinquencies. The inventory of REOs has gone down, because banks have not taken back as many as they should. Some people have not made payments in 14 months. Trustee sales have also declined during this same time period. We had 28,795 trustee sales in July 08 and then we progressed to the 9.7 percent delinquency rate. We are currently 306,000 trustee sales short of where we should be. That averages 25,000 homes going out per month in the future. We have not peaked at delinquencies, and according to reports, we will soon be at 13 percent delinquencies. At 13 percent, we will be releasing 70,000 homes per month. Bruce does not believe that we can have a positive market if these statistics are true. FHA is going to have a large number of defaults next year. They once had a 203K loan for investors in which investors could buy a property and include the repair bill in the loan. A lot of people would use this kind of loan and they would buy up to 7 homes and use them as rentals. Bruce thinks this would help clear up a lot of inventory. Bruce thinks that Fannie and Freddie programs should be expanded so that qualified buyers can get unlimited loans. We are currently stuck at 10, and many investors are capped out because they exchanged their homes out of California and moved their investments to another state. Those investors cannot sell their property and come back to California. We are currently giving away homes for 8,000 dollars. That money is coming from tax payers. Bruce thinks that we should just let people take these homes for no down payment. We will have people walk away, but the next buyer will be able to easily take it. Under this kind of proposed program, it would not matter if the buyer qualified or not because this loan can be continually passed down. These houses could go to investors with a 5 percent interest rate. This program would not have foreclosure, because the problems would be solved by the next buyer. The people who have recently foreclosed on their homes will not be able to qualify for homes, which may keep them out of the market for the next few years. We could just reintroduce these people as buyers if they did not have to qualify. This is not a program that we have never seen before. We are trying to solve this problem by selling the next house to the owner occupant who was shoved into home buying by the nonsense financing of 05 and 06. We are already doing zero down deals. When Bruce sells a property, he usually pays part of the closing cost. The person getting 3.5 percent down on a 100 grand purchase is getting an 8,000 dollar check; that is better than nothing down. If you just had nothing down and these people qualified, we would get rid of a lot of homes. Bruce and many other investors believe that we need to get rid of the FHA 90 day flip rule. When an investor fixes a property, which may only take 3 to 4 weeks, and they sell it within 90 days, the investor is believed to be guilty of fraud. The lender has to pay the cost for this, because the investor will subtract the amount that he or she must pay the lender for the property. We need to start looking at investors as people who can help this problem. At some point, we must either choose to not foreclose, or we must pay catch-up in a painful market.

Bruce asks Christopher Thornberg if he expects the dollar to lose value, and how the value of the dollar impacts interest rates. As the trade deficit gets wider, the dollar goes up. Now the trade deficit is going to close, so the dollar will get weaker. There is very little doubt that the dollar will weaken. Interest rates are undoubtedly going to go up. The federal reserve has increased the money substantially and that money is going to cause inflation. The Federal Reserve is either going to let inflation happen, which will raise interest rates, or they will fight inflation by selling the long range securities they bought, which will also raise interest rates. One way or another, interest rates are going to go up. In the shorter run, it will be faster to allow inflation to occur, because that would bail out the asset markets. In 1982, the mortgage rate was 18 percent, because of the fear of inflation. Bruce thinks that we can absorb a higher interest rate and still have a good real estate market, because the combination with the cheap price could absorb a double digit interest rate, just like in the 70s. Thornberg says that a 1 percent increase in the mortgage rate means a 10 percent decline in prices. Bruce disagrees with this, because between 1974 and 1980 we had a tripling in real estate prices and interest rates doubled. Thornberg tells Bruce that he is talking about the real mortgage rate, which is the mortgage rate minus the rate of inflation. Bruce asks Thornberg what the statement “Unemployment is a lagging indicator” means. Thornberg says that means that “the labor markets are the last to go into the toilet and the last to dry off.” Bruce asks if that means “when labor improves, every other category of real estate should have already started to improve”. Thornberg says that residential real estate leads commercial. Now, we keep waiting to hear about the collapse in the commercial market, but we are not seeing this at all. Thornberg says that this sort of lead and lag mentality can be exaggerated. This is why Bruce brought this up, because in the last cycle, employment improved in California from 1994-96 but we did not have a price increase until 1997. If we do not have price increases, builders will not build anything. Bruce asks if you can have an improved labor market if builders do not have any work to do. Thornberg says that these two factors do kind of work together. The prices started to go up after the labor increases from 1994-96. Thornberg reminds Bruce that in the early 90’s we lost zero space, defense, and migration. In that market, the real estate was hampered by the excess supply. Thornberg takes issue with the idea that we should subsidize the building of new homes, because he believes that we have too many homes. Thornberg believes it would be a bad idea to subsidize the construction of homes when there is already too much inventory. Bruce says that some builders have been fixing existing inventory, and Thornberg believes that is all the builders can really do. Robert Toll made 700 million dollars between 2000 and 2007 because he was selling too many houses at too high of a price, and now he wants tax payers to bail him out. Bruce Norris asks Rick Sharga if people foreclosed for different reasons in 2008 versus 2009. Rick says that the reasons are not as different as the press would lead you to believe. The media has jumped ahead to the next wave of foreclosures. We are looking at a 3 wave foreclosure tsunami. The first wave began in the first quarter of 2006, because of the subprime meltdown and ARMs. The MBA numbers suggest that 33 percent of the new foreclosures are unemployment. That means that 2/3 of the foreclosure activity is not employment related. What we are really seeing is increasing levels of foreclosure activity from the first wave, which is being made worse from the second wave. The second wave is about to pick up steam. If unemployment peaks around the first quarter of next year, we will see the foreclosures related to that peak around the 3rd or 4th quarter next year. That will be just in time for them to be augmented by the next wave. This next wave will be caused by the option ARMs. Many loans are going to reset, and people will owe more on their reset loans than their original loans. Strategic defaults are going to be a problem. In the past American culture, people honored their contracts and chose to make their payments. Now people are realizing that the house they bought is worth half of what they owe, and they are wondering if it is in their family’s best interest to keep paying. If someone is only 10 percent upside-down on a loan then they will probably stick with the loan, but if they are upside-down by 50 percent then they will probably default. Thornberg asks people if their credit or their equity will hear quicker. Thornberg says that most of these people will have their credit heal faster. Sharga responded to Thornberg with a story about a Coldwell Bankerk agent that was fired. This agent counseled her customers to default on their current loan after qualifying and buying a second house.

Bruce feels that there is still a lot of character being shown in California; a state with a 9.7 default rate that has had a 50 percent value drop. The video of the live event is not being aired online HERE. You can visit isurvived2009.com to learn more about our sponsors and speakers. Here are the speakers involved in the event:

Bruce Norris President The Norris Group

David Kittle 2009 Chairman Mortgage Bankers Association

Pat Vredevoogd Combs 2007 President National Association of Realtors

Tommy Williams 2008 President National Auctioneers Association

Christopher Thornberg Principal Beacon Economics

John Young Vice President California Builders Industry Association

Joseph Magdziarz Vice President Appraisal Institute

Rick Sharga Senior Vice President RealtyTrac

To Benefit:

I Survived Real Estate 2009 Sponsors

A huge thank you to all of our sponsors who made this event possible.

Platinum Sponsors

Gold Sponsors





Tony Alvarez - The REO Mentor		Mike Cantu
		Awesome Limousines
	National Association of Real Estate Investors

146-TNG Radio – I Survived Real Estate 2009 10-31-09

Aaron Norris (The Norris Group) — Fri, 06 Nov 2009 14:13:29 -0600

I Survived Real Estate 2009

Fundraiser for the Ornage County Affiliate for Susan G. Komen for the Cure

(Full Bio)

This week The Norris Group Real Estate Radio Show and Podcast presents Part 7 of I Survived Real Estate 2009. This show can be downloaded at: http://www.thenorrisgroup.com/blog/category/radio/

This week The Norris Group Real Estate Radio Show presents Bruce Norris' segment of I Survived Real Estate 2009.

Robert Toll made 700 million dollars between 2000 and 2007 because he was selling too many houses at too high of a price, and now he wants tax payers to bail him out.

Strategic defaults are going to be a problem. In the past American culture, people honored their contracts and chose to make their payments. Now people are realizing that the house they bought is worth half of what they owe, and they are wondering if it is in their familys best interest to keep paying. If someone is only 10 percent upside-down on a loan then they will probably stick with the loan, but if they are upside-down by 50 percent then they will probably default.

Bruce asks David why 60 to 70 percent of loan modifications fail, and if principal reductions should be part of loan modifications. The lender does have a fiduciary responsibility, because they have buy-back agreements. There are many loans coming back from Fannie and Freddie, and they are asking the lenders to take them. The lenders do have responsibility, but the broker does not. There is recourse for the buyer in situations in which the buyer has committed fraud, and 80 percent of the loans going into foreclosure, in California, have fraud committed on them. That means that loan officers, Realtors, appraisers knew what they were doing. Even many borrowers are knowledgeable of the fraud that is occurring. David gives an example of a gardener who was told that if he stated an income of 15,000 dollars a month and falsely claimed to own a nursery, rather than his true income of 1,500, that when the value of his property went up the person helping him get the loan would split the money made on the deal. Bruce recently talked to the president of a company in California who just bought a pool of mortgages for 335 million, and their face value was 25 cents or less on the dollar. He was in the subprime business, and he is probably responsible for creating the same paper that he is now buying and making a fortune on. David thinks that is shameful. David thinks that Barney Frank is one of the most intelligent people in Congress, but his policies are wrong. A year ago, 8 out of 10 of those subprime loans were still being paid on time, but now that number is 7 out of 10. It was not the products that were bad, but the subprime product was given to the wrong people. 50 percent of the 30 percent who have failing subprime loans will not lose their homes. That means that 85 percent of the people who got a subprime loan will not lose their house, but the media pushes it the other way. David thinks that some loan modifications should include principal reductions, but not all. People in David’s industry once manually underwrote loans, and people had to qualify. That is what we are doing today, and we are making the best loans that we’ve made in 15 years. People are asking lenders and servicers to use tools in a way that they were never designed to be used. Loan modification, forbearance, and workout programs were meant to be used on a case by case basis, but now we are trying to use these programs as mass market products. Now people are looking Obama to wave a magic wand over all the problems that are occurring. Short sales were supposed to be a rare occurrence for when someone has fallen on bad financial times at the same time as their house lost value. Now we are wondering why we cannot ask a single loan officer to do 100 short sales per day, and that is how many files they are getting. The tools we were using to fix this problem were not meant for the volume of activity we are seeing.

Tommy believes that auctioneers can help fix that problem, but they have to sell at the proper value. Most people who have invested in the stock market have an equity that is off by 30 percent. Yet stock investors don’t think that the government should come up with some sort of modification or a cramdown for those sorts of mistakes. Tommy believes that people should know that real estate does not always go up. We have sold the concept that when you buy a home it will go up in price, and people have speculated on that concept, which is what caused all the problems we are currently seeing. Bruce asks Pat if the reason for buying homes has changed. Pat says that it depends on where you live. All real estate is local. In the crazy market areas, some people began to look at real estate as an investment. In places like Michigan, home prices were not sky rocketing, so people simply viewed homes as a place to live in. Pat agrees with Tommy’s perspective on how this real estate problem came about. Realtors have contributed to this problem by telling people that they can easily flip properties.

Christopher Thornberg believes that NAR hires economists to go out and produce ridiculous research, so that it can be used to support prices. The NAR never stood up in 2005 or 2006 and told everyone that there was a housing bubble. Pat believes that the NAR had very valid research. Thornberg debated economists from CAR and NAR who were telling him that there was no bubble. He frustratingly tells Pat that people should not view the NAR as an innocent victim on the sideline that was hit blind sighted by crazy people in California. Pat disagrees with Thornberg’s statement. She believes that the NAR’s economists did research in a credible way.

Tommy Williams moved to Oklahoma in 1985 immediately after he had experienced radical real estate devaluations in Western Illinois. He sold a farm at auction that brought 3,500 dollars an acre, but before he moved to Oklahoma, he resold the same farm for 1,200 dollars per acre. He met a lady who was trying to sell her house and he told her that her house would not sell for what she owed on it. She told Tommy that she had never heard of such a thing as a house that sold for a lower value than what it was bought for, and that she was going to tell congress that there should be a law forbidding homes to be sold for a decreased value. Christopher Thornberg jokingly asks if the woman trying to sell her house was Nancy Pelosi. The 8,000 dollar tax credit was good for the industry.

Bruce asks Pat if we would get the same result on a program involving a qualified buyer with no down payment. Pat is not sure if that kind of program would work. The NAR has seen a lot of qualified buyers sitting on the fence, because the media is saying that prices are going down. The buyers were unsure that they will be making a good investment. Now that the 8,000 dollar tax credit has come in, many of those fence sitters have chosen to enter the market. These new buyers are looking at low interest rates, choice in the market place, and affordability, but now there is less choice because the market is improving. Bruce asks Pat if we need to induce these buyers with a check. Pat would have said no six months ago. It bothers her to think that we need to pay off people to enter the market.

There is a proposal being supported by 16 senators to increase the tax credit to 15,000 dollars for next year. The current 8,000 dollar tax credit started at 15,000 dollars, but it was then taken down to 7,500 dollars, and then it was increased to 8,000 dollars. MBA is supporting an open 15,000 dollar tax credit. That includes owner occupied and second homes. Every time someone buys a house, they spend an average of 7,500 dollars. That money goes into places like Home Depot, Lowes, Porter Paint, and furniture companies. MBA’s economist estimates that if the 15,000 dollar tax credit was approved today, then an additional 400,000 purchases would take place over the next year. 7,500 multiplied by 400,000 is a lot of money. David Kittle would argue that when these people begin to buy these homes that they would most likely be buying a foreclosure. The government is going to have to spend money to bail out that market anyway, so David thinks this is a better option. Christopher Thornberg believes that this proposal is ridiculous, because you cannot expect the government to continuously subsidize everything. Chris thinks that this kind of spinning can cause the market to get into a “death spiral.” The video of the live event is not being aired online HERE. You can visit isurvived2009.com to learn more about our sponsors and speakers. Here are the speakers involved in the event:

Bruce Norris President The Norris Group

David Kittle 2009 Chairman Mortgage Bankers Association

Pat Vredevoogd Combs 2007 President National Association of Realtors

Tommy Williams 2008 President National Auctioneers Association

Christopher Thornberg Principal Beacon Economics

John Young Vice President California Builders Industry Association

Joseph Magdziarz Vice President Appraisal Institute

Rick Sharga Senior Vice President RealtyTrac

To Benefit:

I Survived Real Estate 2009 Sponsors

A huge thank you to all of our sponsors who made this event possible.

Platinum Sponsors

Gold Sponsors





Tony Alvarez - The REO Mentor		Mike Cantu
		Awesome Limousines
	National Association of Real Estate Investors

I Survived Real Estate 2009 Video - National Leaders Converage to Discuss Legislation and Stimulation in Today's Market

Aaron Norris (The Norris Group) — Wed, 21 Oct 2009 10:51:02 -0500

I Survived Real Estate 2009 was recorded live and aired online where over 5,000 watched the night of the event. Below, you can watch the event from the comfort of your computer. If you enjoy the production and the content, please consider donating a small amount to our I Survived Real Estate 2009 breast cancer walking team. Our walk takes place Sept. 27th in Newport Beach. Any amount helps and we've currently we’ve raised over $56,000. We're the #1 group fundraiser! Donate by CLICKING HERE. The files below are extremely large and require a fast Internet connection to stream. [playlist id=2 width=425 height=500]

I Survived Real Estate 2009 Panel

In this video are the following presenters:

Bruce Norris President The Norris Group

David Kittle 2009 Chairman Mortgage Bankers Association

Pat Vredevoogd Combs 2007 President National Association of Realtors

Tommy Williams 2008 President National Auctioneers Association

Christopher Thornberg Principal Beacon Economics

John Young Vice President California Builders Industry Association

Joseph Magdziarz Vice President Appraisal Institute

Rick Sharga Senior Vice President RealtyTrac

To Benefit:

I Survived Real Estate 2009 Sponsors

A huge thank you to all of our sponsors who made this event possible.

Platinum Sponsors

Gold Sponsors





Tony Alvarez - The REO Mentor		Mike Cantu
		Awesome Limousines
	National Association of Real Estate Investors

Appraiser Joseph Magdziarz - The Norris Group Real Estate

Aaron Norris (The Norris Group) — Fri, 28 Aug 2009 15:14:35 -0500

This week Bruce is joined by Joseph Magdziarz. He is the current Vice President of the Appraisal Institute and he will become the President Elect in 2010 and President in 2011. He has been associated with the Appraisal Institute for 38 years.

Bruce begins by asking if Joseph if he considers business nowadays to be usual or unusual. Joseph has seen similar conditions in the late 80s and early 90s, but for many people, this is a new experience.

Bruce asks Joseph to explain what is similar about our current market and the market of the late 80s. The declining prices of real estate but the cause of these declines is significantly different.

Something radically changed a few months ago in the appraisal business. The Home Valuation Code of Conduct (HVCC) agreement between the Attorney General Cuomo and Fannie Mae and Freddie Mac caused this change. A few years before the HVCC came out, Joseph was lobbying with Congress about the pressure being put on appraisers to make inflated home appraisals. People were happy with many appraisers, because they received high appraisals, but this problem put ethical appraisers out of business, because they would not cooperate with people who wanted their home values inflated. Some of the new people coming into the business may have given into the pressure to make bad appraisals because they did not have the established relationships with lenders that some of the well known appraisers had.

The goal number for an appraiser is market value. Bruce asks if that is still the goal that appraisers are shooting for. Joseph says that is what appraisers are trying to estimate but some of the values coming out are closer to distressed asset value rather than market value.

Bruce asks if something has changed in the appraising process or if the changes are coming in after the appraiser states a market value and someone attempts to correct them. The definition of market value has not changed since 1989. The methodology has not changed either. Joseph thinks that many appraisers have not experienced a distressed market such as the market we are currently in. The HVCC, and the lenders’ choice to move much of their business to appraisal management companies, have caused a lot of problems.

This is one of the first markets we have had in 10 years in which we have declining prices. It is legitimate to have a 90 day old comp that is worth less today than it was when you first got it. Bruce asks if the big problem is that we do not have enough fully repaired homes as comps in comparison to vacant REOs. Jospeh says it’s very localized. Joseph says this is a big problem in some parts of the country, but the real problem occurs when all the occurring sales are foreclosures and short sales.

The definition of market value is the meeting of the minds between a buyer and a seller, each equally motivated and knowledgeable, and without undue pressure. If you have a bank with many foreclosures, they are more motivated than a typical seller would be. They will often dispose of those assets at a lower price which makes none of those properties a valid comp. The motivation of the buyer and seller is important when evaluating market value.

TNG’s business is buying and fixing properties that need work. TNG typically puts $35,000 dollars into a repair job, and they typically end up with a property that is worth about $140,000. It is very hard to get $35 grand worth of credit. There seems to be a rule which only allows a ten percent credit limit for the kind of properties that TNG deals with. Bruce asks Joseph to explain this issue. Joseph explains that this issue relates back to a Fannie Mae/Freddie Mac guideline that says when you have an adjustment greater than 10 percent, you need to explain it. As the percent of adjustment increases, the sale becomes less comparable. There is no ten percent requirement. This is just a guideline, but unfortunately, some of the underwriters believe it to be a rule.

Bruce has had trouble with this guideline. For example, Bruce had 6 offers on a property being sold at 122,000, but then the appraisal came at 102,000, and then the review appraisal came in at 85,000. That is far from what 6 buyers thought the market value was. In the end, Bruce did not sell this property and he kept it as a rental home. If an appraiser is not able to honor the market decision of a buyer, then the market price in some areas will go down further for no good reason. Part of this problem goes back to the HVCC stating that there needs to be a firewall between people originating a loan and people doing appraisals. At this time, that firewall is the appraisal management company. One of the main complaints that Joseph is getting is that many appraisals are being done by appraisers who are not experienced enough in their geographic region.

Bruce asks how appraisers are assigned properties to appraise. Some companies broadcast assignments to everyone on their approved list, so the first person to sign up for the job gets it. The problem with the AMC is that they are not giving these jobs to experienced appraisers. The AMC is focused on getting these jobs done quickly rather than effectively. Better appraisers are missing out on jobs because they cost more. They are hiring people with not enough experience.

The Appraiser’s Institute company has 26,000 members. Each one of these members receives notifications saying that they need to have the proper experience necessary to get jobs done properly, otherwise the Appraisers Institute will take aggressive enforcement against any member who accepts a job that they are not qualified for. These members are also given information on how to turn in unqualified appraisers.

In July, the current president of the Appraisal Institute met with Congress to discuss this issue. He also reminded them a few years before that these problems were occurring, and they failed to act on those problems back then. These problems do not look like they will be dealt with until some time next year. A few bill are pending but nothing will be done until next year.

Bruce asks if the Appraisal Management Companies has to be run by someone with an appraisal background. This is a problem that the Appraisal Institute has been lobbying for as well. There are appraisers who have had their licenses revoked that are now supervising other appraisers. Joseph thinks it would be better if appraisers were required to be licensed within their state.

Bruce asks if communication is allowed between agents and appraisers who are working for Fannie or Freddie. Joseph says this is not forbidden. The loan officer is not allowed to communicate with the appraiser, but Realtors and management companies can communicate with appraisers. Appraisers have an obligation to verify information given to them about a sale. This is a misunderstood rule that Bruce has had difficulty with. Bruce has called appraisers who told him that he was not allowed to talk to them.

Bruce asks Joseph about what the fee was for an appraiser before HVCC and what that fee is now. This is one of the five biggest problems that the Appraisals Institute currently has. Not all appraisal management companies are the same. In Chicago, GAMCO uses Appraisal Institute members, and they give designated members 90 percent of the fee, and they give non designated members 80 percent of the fee. What Joseph has heard nowadays is that management companies are starting to take 50 to 60 percent of the fees. When that happens, the better appraisers refuse to work for those companies. That leaves the new appraisers with the ability to get into the business, and they may not be qualified. Joseph fears that these rules may cause some very knowledgeable people leaving the business. Another problem with management companies is that they require a 24 to 48 hour turn around time. This does not allow appraisers to get to know the market value of a specific market.

We now have the ability to use automated appraisals (AVM), but these automated appraisals are trumping appraisals made by actual appraisers. These automated appraisals are done on a statistical basis. The problem with these reports is that they do not use comparable sales. These automated appraisals essentially come up with a median value rather than a market value. These mechanical appraisers are not capable of looking next door to a certain property in order to obtain a better understanding of the value of the home being examined.

Joseph is can be seen September 11th at our I Survived Real Estate 2009 event.

Auctioneer Tommy Williams - The Norris Group Real Estate Radio Show

Aaron Norris (The Norris Group) — Mon, 24 Aug 2009 12:52:34 -0500

This week Bruce is joined by Tommy Williams. Tommy is certified by the Auctioneers Institute. He is the founding partner of Williams and Williams Auction Company. He served as president between 1986 and 2000, and he became board chairman in 2001. He has conducted over 10,000 auctions all over the world. Tommy is also part of our I Survived Real Estate 2009 expert panel.

Tommy Williams has done auctions in multiple countries such as Puerto Rico, Canada, and his company is working with companies in South Africa. Bruce thinks that bank owned properties are probably very prevalent in other countries as well so their auction business has probably picked up. What has occurred in the United States has occurred all over the world. Tommy thinks that it is amazing that a country so far removed from the United States, like South Africa, has gone through the same economic swing. The entire world is experiencing the real estate bubble bust.

The United States auctioning business has gotten better. The number of auctions have increased, and auction popularity has increased for many years as well. However, the auctions are not making as much money because the real estate market prices are not doing well.

In 2003-2008, the business for residential real estate went from $11.5 billion to $17 billion. The volume has gone up, but the pricing has gone down very far, so auctioneers have to sell larger numbers of units to achieve the same profit. In many areas of the United States, home prices are down 75 percent from their peak. Bruce recently bought two properties, from a lender, for 15 percent of the owed amount. This is not an unusual occurrence. In many of these cases, the original buyer had a very bad loan. Fraud is involved in many of these cases. A property that may have never been worth 10,000 to begin with may have been given a mortgage of 100,000.

It was common in the lower end of Moreno Valley to have a neighborhood in which each property was selling for $300,000, but now the price for those homes is generally around 100,000. The buyer and lending mindset was very different in 2005.

Bruce asks if the auction business has shifted to making the multi-property owner to be its main customer rather than the individual property owner. Tommy says that he hopes this is not true. He believes that if you want to build a successful auction company then you need to deal specifically with normal “end-user” buyer and seller. The focus of an auction company should always be to deal with private owners/investors. There are very few companies that deal with REOs, and that is not a long range way to build a business.

Deutsche Bank recently said that by 2010 or 2011, 50 percent of the owners in the United States will be upside down. That would have a profound effect on the amount of inventory that would be able to sign up for a one house auction. The most important thing about a house that is upside down is that the seller needs to sell their house. Either they cannot afford their house any more, or they have had a change in lifestyle such as a job transfer or a divorce. People need to sell their properties at the time they become a liability. If they go through a long foreclosure process then their property will deteriorate, and their neighborhood may deteriorate, and they will end up selling a property for less than they could have.

A Campbell Report that came out in which 1,000 agents responded to a questionnaire. These agents claimed that the biggest problem they were dealing with was a lender’s slow response to a short sale offer. It takes months. The auction business could help the lender decide what the value of a property is. Auctions can identity, with nearly absolute certainty, what the market place thinks a property is worth. If multiple people bid on a property, and the highest bid is $100,000 dollars, then you have discovered what the market value for that property is. It is frustrating to see lenders take such a long route to discovering the truth about the value of their property, and take a huge price hit in the process. Lenders have dealt with the problem of over valued homes in the worst way possible. Tommy had a neighbor who went through a divorce and had other life changes. This neighbor bought his property for about $650,000, and he started going delinquent on his payments. Tommy told him his house would sell for about $450 to $500,000 at that time. This neighbor believed Tommy to be correct, but his lender would not negotiate with him, so he went through the foreclosure process, and he eventually walked away from it. This home recently closed for about $370,000 and Tommy could have sold it for much more. Tommy has been trying to tell this story to congressmen and senators, so that these problems may be fixed in the future, but they will not listen.

This is one of the reasons why I Survived Real Estate 2009 is so important to Bruce. Every industry affects other industries. Fortunately for Tommy Williams, he has not had trouble with appraisers arguing with the price that homes have sold for at his auctions, because the value is proven by the market place. One of his colleagues sold their home, and their lender told them that they would not lend money on a home bought at an auction. The National Auctioneers Association immediately contacted them and asked them to explain this policy, but they would not. This problem did not occur with a small lending company.

The word “auction” has a bad meaning in the United States. Here, it means that you have a desperate seller. In 2004 to 2006, Bruce was receiving multiple offers on each of his “for sale” properties. If Bruce had thought to offer those homes in an auction, which would put each of those buyers in direct competition with each other, his selling prices would have definitely been higher. When the market is really over heated, that is when you want to have an auction for sure. Under desperate times, such as right now, the reason why you have an auction is because buyers will not show up if you use any other method.

On September 11, the builders will be attending the real estate event. Bruce thinks it would be a perfect partnership if builders started selling with auctioneers. Tommy has had this opportunity on two different occasions. At the time, everybody thought this was crazy, but the auctions were very successful. If Tommy was in the building business, he would launch his selling process with an auction. Bruce is planning on getting involved in building soon, and he plans on using auctions for selling his houses.

When you participate in the boom market, it is easy to sell, so you do not think about auctioning your home. Also, auctions are typically seen as an option that is only used in a tough market. The auction is viewed different ways in different countries. In New Zealand, auctions are one of the first options used for selling homes. Views towards auctions also vary in different states. States like Tennessee, Ohio, and Missouri have a much more positive view towards auctions than states like California.

Tommy has found it difficult to buy bulk properties within the last six months. There are opportunities out there, but good businessmen would not go after those opportunities.

We look forward to seeing Tommy Williams September 11th at I Survived Real Estate 2009.

Rick Sharga of RealtyTrac - The Norris Group Real Estate Radio Show

Aaron Norris (The Norris Group) — Thu, 20 Aug 2009 13:14:01 -0500

This week Bruce is joined by Rick Sharga, the Senior Vice President of RealtyTrac. Rick joined RealtyTrac in 2004 as the vice president of marketing. Rick is also a panelist for I Survived Real Estate 2009.

Bruce asks Rick “What services does RealtyTrac offer?” RealtyTrac publishes the largest database of foreclosure and bank owned properties in the country. They also put a lot of related information about those properties in the database including property characteristics, comparable sales, and loan history. It used to take much longer and more expertise to get into the investing business, but RealtyTrac has helped change this.

Rick Sharga congratulates Bruce on producing some of the best educational services in the country.

Realtors use RealtyTrac in a couple ways. Some agents subscribe in order to get up-to-date information on foreclosure activity in their neighborhoods. Others use RealtyTrac to post their properties for sale and to advertise their services to buyers. Appraisers and investors look at property regions to determine property values. You can also use RealtyTrac to check the future inventory of a market place by checking the number of properties in the trustee sale stage. Realtors also use this tool for broker price opinions and to discuss short sale processing.

RealtyTrac’s data goes back to 2005. In 2005, about 530,000 were given foreclosure notices. Over 1.5 million properties have received foreclosure notices through the first half of this year.

Besides the great depression, this is the worst down turn we have ever had. Even professionals who knew this down turn was coming were stunned by how quickly the down turn hit us.

Prices are also falling with the number of foreclosures. In the past, people were taught to honor their contracts, but now one’s financial well being encourages people to walk away from financial responsibility. In many cases, the only option is to execute a deed in lui of foreclosure. The other option is to take the next 15 years to break even on the property you’ve bought.

Bruce asks Rick if he thinks that people consider it more acceptable nowadays to simply walk away from a payment because they do not feel like making the payment. Rick thinks that foreclosures have become so common nowadays that now people are not bothered so much by walking away from their homes. There is discussion in the industry about creating a forgiveness program for people who have gone through foreclosure during this period because the lending programs participated in making this problem worse. Bruce thinks that might make sense because they cannot make houses fast enough to solve the problem. There is discussion about shortening the forgiveness period from 5 to 7 years to 2 or 3 years.

This cycle is unusual because in the past downturns have been caused by an economic occurrence, which then caused unemployment, which then caused foreclosures. This time foreclosures started the problems because home prices were too high and people could not buy a home unless they bought a toxic loan.

Unemployment forces a selling decision that did not exist before. Option ARMs are going to be coming fast for the next 24 months, and they have already experienced a price hit. Option ARMs when they are resetting are always upside down in Riverside. Option ARMs are resetting a little early too because people are making teaser payments.

These home owners have very few options. They have no equity, they cannot afford the higher mortgage payment, and even if they can, they have to decide if that is the best decision for their family’s financial future.

Bruce asks Rick how loan modifications are working out. Rick says that they have done nothing other than give us a lot to talk about. Servicers are only focusing on the length of the loan and the interest rate. The Obama plan does not compel servicers to do principal balance write downs, and it does not moderate their loss. The only way to modify loans effectively is to do a principal write down.

Bruce asks Rick what the ramifications are for giving people principal write downs when they have lied to receive the original loan. Rick is not sure if we will induce more foreclosures by doing this. He thinks we may be overstating the number of people who are in the circumstance. There were not many people putting 50 percent down on their properties in the early part of the decade. People were using ridiculously relaxed financing to obtain properties that they could not afford. Rick thinks that it may be better to do a long term deferral instead of a principal write down. This might keep the home owner at a rate that they could afford, and sometime in the future that amount would be payable. Equity sharing is also one of the options for solving this problem. This involves writing down the principal balance, and requiring sellers to give a percentage of their profit back to the lender. Rick does not think that home owners would be interested in that plan.

States that have non recourse loans in place have a higher percentage of homes that become bank REOs. However, Rick has not seen a comprehensive study on this. There is a lot of discussion right now about increasing the number of loans that have a recourse option.

The House of Representatives passed something recently that will mandate a lender who forecloses on a property to give the former owner a five year lease option on the house. This has not been passed by the Senate yet, but it is coming to them next. Bruce and Rick think that this bill will affect loan programs going forward. Rick says that this is a valiant attempt to help prevent people from ending up on the street but most lenders are not set up to be property managers. People wonder how this will affect their capital structure. How do they treat the loss on that property, how do they treat the asset value, and what does it do to the loan risk profile? It could be a higher risk because more people will default, and it could be a lower risk because lenders will see more revenue.

Bruce asks if moratoriums have worked. Rick says that the only thing that these moratoriums are doing is delaying foreclosures. This could extend the length of the down turn. Moratoriums do not accomplish what they were intended for.

There are probably 10 states that account for approximately 75 percent of the total foreclosures. Most of them are doing moratoriums.

Core Logic says that 9 percent of California borrowers are at least 90 days late. Bruce asks Rick how that affects his outlook for 2010. Rick thinks we have seen the end of the subprime problem. The two big variables are unemployment and how badly Option ARMs will default. RealtyTrac’s forecast is that we may hit a numerical peak this year, because the raw number of option ARM loans was not as large as the raw number of subprime loans, but 2010 will look very similar to 2009. We may see an increase in foreclosure activity. If unemployment extends, and if prices continue to decrease, then 2010 may be worse than 2009.

John Young of CBIA -- The Norris Group Real Estate Radio Show

Aaron Norris (The Norris Group) — Thu, 20 Aug 2009 13:09:47 -0500

This week Bruce is joined by John Young. John Young is the founding partner of Young Homes which is located in Rancho Cucamonga, and he is the Vice President of the California Building Industry Association (CBIA). He has been associated with the real estate business for 30 years.

Bruce begins by asking John to contrast 1990 to what we are currently experiencing. John believes that we are currently in a tougher cycle. In the 80s we had a17 percent interest rates, and yet our current cycle is still more difficult. We are going through a much greater decline in our economy.

Most of the people in the industry are survivors that hope to continue through this down turn, so that they may start building again. Membership in the builders associations is down 50 to 60 percent, budgets are down, and layoffs are occurring. The association consists of public and private builders. John’s company is private and they have had to lay off people who have worked for his company for 10-15 years. John hates doing that because many of these people who have worked for him for many years have talent and they have become like family to him.

The sentiment towards helping builders is positive right now. In the last fifty years, builders were often looked at as the guys who would pave over everything and then take their money and run. Home builders create a lot of jobs and there has been a domino effect occurring in our economy as each industry’s struggles are affecting each other. The car industry has had a huge effect on our economy, but John thinks that the real estate industry is even more influential.

Bruce asks John what the time frame for a building project typically is. In normal economic times, it often takes 3-5 years for builders to finish all the paper work, prepare the land, build the homes, sell them and close the deal. That is a very risky time frame because a building project requires a lot of financial investment and you may not finish at the right time.

Builders have been called the most optimistic people in the world, and when you are dealing with an investment that requires a 3-5 year investment you almost have to be. The mentality you have when you first buy a property changes multiple times through the selling process.

Bruce asks John if many builders were caught off guard when they discovered that there was no demand for the product they were selling near the beginning of the down turn, and when it became obvious that the market was slowing down. John noticed things were slowing down during the third quarter of 2006, but then things perked up temporarily in 07, so that made the builders feel optimistic.

Bruce asks if John has confidence in the people he relies on to tell him when things are about to change for the worse. John does have confidence in their management, but what caught John off guard was the magnitude of the decline.

Bruce is sure that the lenders were all caught off guard as well. Bruce asks John about how they responded to the downturn. Most of the banks are working with the builders to finish projects, but it all comes back to whether or not they had a guarantee. John wishes they would try harder though. Banks are trying to work with the builders.

Sometimes when you have a project that gets appraised for less than the lender originally anticipated, the lender will ask you to participate with more capital (margin call). Today, most companies cannot do that. They either do not have the cash or they need to retain that cash.

Regionally builders are more affected by downturns than national builders. John does think that regional builders have been hurt worse. Some builders will have a better chance to make it through this downturn because they work in multiple areas with different cycles. Larger builders also have better access to capital.

Bruce asks John what the mood is towards financing new projects. John says people are not interested in financing new projects. There are some exceptions, such as when a builder has land that has everything ready for building.

Bruce asks if somebody allowed John to have their shovel-ready lots, would he be able to build it for a profit. John says they are gaining maybe 1 or 2 percent profit on their shovel-ready lots.

Young Homes has built a couple thousand homes in Fontana over the last ten years and now those homes are competing with his new inventory because of the REO and short sale inventory.

Bruce asks if John ever considers getting rid of new home construction so that he can deal with the existing inventory. John says that is a good idea, and he has looked into it. Unfortunately, because of the size of John’s company, they cannot do that. They would have to change their entire business model to do that. However, there are smaller companies who have been able to modify their work force to do that.

Bruce asks John if the current unsold inventory of homes is still excessive. John says that it still is, but it has improved, and they are now almost finished with their inventory. The federal $8,000 dollar tax credit has helped John’s industry immensely but the state buying program has already run out of money. John’s company is currently working to get the federal program extended and the state he’s working on as well.

Bruce asks how the appraisal situation has affected builders. John says that now appraisal companies are managed differently, and the changes are not helping builders. The appraisers are using foreclosures and short sales as comps, which does not give builders fair market value. Too many foreclosures and short sales are being used. They are having to appeal almost every appraisal. So far the appeals have prevailed but it takes lots of effort and times.

See John Young at I Survived Real Estate 2009.

Christopher Thornberg -- The Norris Group Real Estate Radio Show

Aaron Norris (The Norris Group) — Thu, 20 Aug 2009 13:02:04 -0500

This week Bruce is joined by Christopher Thornberg. Christopher is an expert in the study of regional economies, real estate dynamics, and business forecasting. In 2006, he confounded Beacon Economics which is economic research and consulting firm that specializes in real estate markets, local economic development, and public and private policy issues.

Beacon Economics will be doing its first Los Angeles Forecast Conference in the last week of July. There will be a panel of CEOs representing health care and the financial industry who will be talking about the changes occurring in their industry. It will be their first annual event. They are partnering with the LA Chamber of Commerce and Pepperdine to make this event happen. Southern California is the economic center of gravity within this state, and the center of Southern California is Los Angeles.

Bruce asks if a company is looking to relocate would find California to be a leading option. There are some things you have to consider if you come to California. You have to worry about where your employees are going to live. Nowadays homes are much more reasonably price compared to a few years ago. Companies coming to California will be able to rent commercial property for a lower price per month as well. The prices have not come down as much as they should have though, because of the leasing situation, and because there are still some landlords who seem to be in denial about the shape of the economy. Residential and commercial property are two sides of the same coin, and yet they come at different stages of the business cycle. Residential leads the business cycle, and commercial lags it.

The commercial real estate market is about to feel the same hit that the residential market has taken, but it is taking more time to mature. Part of the reason the commercial market is taking longer to go down is because the banks are not pursuing bad debt. The banks have more incentive to be lenient towards people they have lent money to, because if you foreclose on a loan then you actually have to mark that loss down in your books, but if you do not foreclose then the FDIC will allow you to keep that on the books at face value. They call it extend and pretend.

In the residential market there are a lot of properties that have not begun foreclosure, and some people have not made payments for 18 months. There are some banks that are willing to delay the foreclosure process, and some banks just can’t catch up, and there is also a problem with moratoriums that are slowing this situation down. Christopher thinks that if you have a problem then you should be trying to work through it and move forward, but we seem to be fond of dragging this problem out. Some will tell you that you want this problem to be solved over time, because the economy is already so weak, but Christopher says that there is very little evidence that foreclosures significantly hurt the economy. Moratoriums on foreclosure make it a lot longer problem.

On Christopher’s website there is a quote saying, “It’s not what Wall Street troubles me to California, it’s what California troubles me to Wall Street.” When we had a big financial meltdown last year, many reporters called Chris saying “What does this mean for California?” Christopher laughed at this, because Wall Street has presented itself as the leader of all financial things, but that is nonsense. The stock market can change its direction in the afternoon if it gets afraid. California has been in a recession since 3rd or 4th quarter of 2007, yet Wall Street made many bad bets and it did not seem to affect the economy for close to a year. If you did have a true meltdown in the financial system then you would have massive deflation and things would be far worse than they are now. We had a depression expert in the Federal Reserve, and he wasn’t going to let that happen.

Trillion has replaced billion as the cost of solving problems, but Christopher says inflation does not seem to be a likely outcome of the spending we are doing. This is because a large portion of the money we are spending is being done through treasury bonds. That does not have an inflationary effect. What does have an inflation effect is the expansion of the money supply. The Fed, through its program of quantitative easing, has expanded its monetary base by 100 percent over the last year. If that money was to get into the real world then it would have an inflationary effect, but it hasn’t. Most of the money that the Federal Reserve has made has ended up in bank reserves. If the banks started lending that money then we would have an inflation problem, but Christopher thinks that if that ever happened that the Federal Reserve would start to get rid of that excess liquidity.

Bruce asks Christopher what the ramifications will be for 12 to 13 percent in California. Christopher does not think that unemployment is going to be a big problem. Unemployment is a lagging indicator. However, it does increase the amount of stress being put on the financial system. People over their heads in debt and underwater in their home but beyond that he doesn’t see a direct effect on the economy.

Bruce asks if he thinks lower wages will be an issue. Will renegotiation for lower union rates will come up? Christopher thinks it will have a little impact. Hours are already being cut for government and education jobs.

If California is one of the leading states in unemployment then it will affect migration patterns in the short run. The number one reason people move is for job opportunity. The number two reason is relative home prices. This means people will not have as much motivation to move into California for a while, but some people may start moving back into California because of the low home prices.

Builders couldn’t possibly be interested in creating building lots right now, so Bruce is worried that there will be a housing shortage around 2012 or 2013. Christopher thinks that is possible but he does not see us having an issue with single family housing. There are lots of lots ready out there, and as soon as someone sees the opportunity they will build. Christopher does think there will be problems with rental houses. When people start moving back, there will not be enough housing for low income families. Christopher hopes the state will make policy changes to encourage multi family production.

Bruce thinks that it might be a solution to give investors financing so that they can hold properties for a reasonable price because then the market would dictate what the rent would be. Christopher thinks we got into this mess because of too much financing but now there is not as much financing as people would like. Christopher wonders if there is a true market failure occurring right now or are people simply suffering from credit withdrawals. There was never too much financing for investors who buy and hold properties and eventually pay them off. The financing problems occurred when speculators and owner occupants got involved. If your goal is to find reasonable rentals, they are all over the place in Moreno Valley and San Bernardino, but the financing is not available for investors to get these homes. What seems like a sure deal to investors does not seem like a sure deal to the banks.

Bruce thinks that the number of bank owned properties is going to dramatically increase in the next year. Bruce asks if Christopher sees more price damage coming to California because of that. Christopher does not think that these bank owned properties are not going to really decrease prices but they will help hold prices down. There is pent up demand for housing. If you go to an auction, you will see people who want to buy foreclosed units. Bruce thinks that this is true in the short run.

Bruce wonders how we can have pent up demand when we have the most generous financing programs in existence. It is surprising to Bruce that there is this much demand when there are so many people who have been artificially allowed to participate before they were ready.

In Riverside and San Bernardino, rent is more expensive than the PITI payment. That has never occurred in California. This is occurring because there are many people who cannot qualify for mortgages because they already have a bad mortgage on their payment. Unemployment and foreclosures are at a record, so Bruce does not understand who is actually going to borrow the money to buy these homes.

Christopher thinks there are more potential buyers who smartly sat on the sidelines and waited for these opportunities to come up. There may be other people who are being co-signed by their parents. If you talk to bankers they will tell you that there are people coming through their doors who have a recent foreclosure, and they will look the other way because they know that these people have made a mistake and there is no point in turning down a potentially good loan. Bruce agrees with Christopher here.

Most of the mortgage market is being dominated by Fannie Mae and Freddie Mac. Unless Fannie and Freddie are willing to back mortgage product and buy them off of banks, there is going to be very little money available.

Current loan modifications in California do not change the principal balance. Christopher does not think these have any chance of working. You cannot expect to have a true recovery by simply modifying the payment. People are not fooled by these modifications. Even though we are modifying their payments, they are still in an incredible amount of debt. It will take many years for them to get rid of the debt they have taken on, and their credit score will heal faster than their equity position. In 2008, 7 out of 10 people who applied for a loan modification ended up in foreclosure eventually.

Bruce asks Christopher what he thinks will indicate that real estate is starting to get healthy. Christopher thinks that sales are important and mortgage delinquencies from the Mortgage Bankers Association. For California, about 9 percent of all mortgages are delinquent. That tells you that we are no where near the end of this problem.

We look forward to Christopher being on our panel for I Survived Real Estate 2009.

Thank You Delmae Properties for being Gold Sponsors for I Survived Real Estate

Aaron Norris (The Norris Group) — Mon, 03 Aug 2009 11:54:37 -0500

Thank you Dalmae Properties and Mike Chouinard for your Gold Sponsorship!
About Delmae Properties Delmae Properties is a California -based real estate investment company that is constantly searching for properties that offer unique opportunities. Delmae takes underperforming or undervalued assets and restores them to their best use and highest potential value. Delmae’s principle focus is distressed single-family properties but also invests in multi-family, condominium conversions, raw land development, and commercial properties.
Delmae strives to create multiple “win” situations on each transaction. We provide a “win” for the end user of the property because they have a location that has been completely renovated that they can occupy comfortably. We provide a “win” for the previous owner of the property because they no longer have the burden of managing a property that is not performing. We provide a “win” for our investors by providing excellent returns on their capital.

Thank You Elite Auctions for being Gold Sponsors for I Survived Real Estate

Aaron Norris (The Norris Group) — Mon, 03 Aug 2009 11:53:45 -0500

The Norris Group would like to especially thank Elite Auctions, now two-time supporter of I Survived Real Estate. The Norris Group successfully auctioned its office building in 2007 and have used Elite several times since. We appreciate their friendship and service. You can hear Randy and Mike Grigg on our radio show. You can visit their business at www.SellWithAuction.com

About Elite Auction

Elite Auctions was formed out of a need to sell residential real estate more efficiently. The owners of the company are investors who buy and sell property, primarily single family homes. They have since expanded and also sell commercial property, land, farms, and ranches using their proven competitive bidding strategy.

Obtaining the highest price in the shortest period of time has always been their priority. In traditional sales, where property is listed with the hope of attracting a buyer using the MLS and a sign in the front yard, the owners found that in most markets it takes much more to get the job done quickly. “Many times we had vacant houses that were fixed up. It was critical that our carrying costs (interest on acquisition costs, labor and materials for fix up costs, insurance and property tax expenses) be reduced by selling and closing as soon as possible after the rehab was completed.

Before we assisted others in selling their property, our own real estate was used as “guinea pigs.” After two years of selling our property using the auction method and after tweaking and adjusting our marketing program, we felt comfortable selling for others.

Our goal was to sell real estate quicker and more efficiently without sacrificing the net amount our clients receive at closing (compared to the traditional list and sell method).

Several of our clients are Realtors who make their living selling real estate. Due to the fact they come to us to not only sell their own properties but also properties for their clients, we must be doing something right.

Many people think when a property is offered for public auction, the resulting price will be much lower than if it was offered at a listed price. More than likely if the property is listed at exactly the right price the marketplace is willing to pay, and the market is properly reached, the property will most likely sell quickly. The problem is most properties are not listed at exactly the price the market is willing to pay… therefore most properties don’t sell or end up selling at a lot less than their potential.

Appraisals and comparable sales are just guesses of a property’s true value. Unlike a bar of gold or a share of stock, where price is set daily by supply and demand, any piece of real estate has its own unique value. Its price has little to do with value, people make value. Real estate is worth whatever people will pay. The auction method, together with our state of the art marketing program, where much more than the MLS and a sign are used to attract buyers, allows the price to match what the property is really worth. By creating both urgency and emotional competition using the auction method, we’ve found our clients avoid selling too cheap or sabotaging a sale by listing at a price that’s too high.

Hopefully this gives you some insight into how our service is designed.

Thank you for your interest in our company. Please feel free to contact us if you want more information or would like to sell your property quickly at the highest price the market will bear.

Thank You Inland Empire Investors Forum for being Gold Sponsors for I Survived Real Estate

Aaron Norris (The Norris Group) — Mon, 03 Aug 2009 11:52:30 -0500

Thank you Nick Manfredi and the Inland Empires Investor Forum.

About Inland Empire Investors Forum

The Investor’s Forum provides a monthly meeting location for real estate investment instructors and strategists to teach. We liken our meetings to a wine tasting event. With variety comes insight and awareness of ones own preferences. There’s lot’s of ways to do this business so we expect attendees to bring their thinking caps and judge for themselves. (Go to the “monthly meetings” tab for more info regarding attending).

We buy houses and apartments with private funds. We buy from owners as well as banks and other investors. Occasionally, sellers prefer to sell with terms and we can meet that need as well. We purchase through Forum Real Estate Investments Inc., an independent real estate investment corporation. Monthly meetings provide a “forum” by which local investors both learn, share contacts & opportunities, and network with one another. For more information visit www.ieinvestorusforum.com

Thank You Las Brisas Escrow for being Gold Sponsors for I Survived Real Estate

Aaron Norris (The Norris Group) — Mon, 03 Aug 2009 11:51:24 -0500

Thank you Clair Bartos and the Las Brisas Escrow team for your Gold Sponsorship. We couldn’t have done it without you!

About Las Brisas Escrow

When it comes to finances, buying or selling a home is usually the most important investment a person will make. At Las Brisas Escrow, we are dedicated to providing personalized escrow services tailored to your specific needs.

With a combined 45 years experience in the Escrow/Lending/Title/Real Estate Industries, we are confident you won’t find a more professional, personable, and expierenced escrow team!
Whether you are buying, selling, or refinancing your home, you can rest assured that Las Brisas Escrow is dedicated to providing you with the highest quality of service.

Our team has worked together for over 5 years, and has developed a family-style relationship built on honesty, integrity, teamwork, and professionalism. At Las Brisas Escrow, we treat each and every escrow as if it were our very own. You aren’t just a file to us…your part of the family! Visit www.lasbrisasescrow.com/

Thank You for being Gold Sponsors for I Survived Real Estate

Aaron Norris (The Norris Group) — Mon, 03 Aug 2009 11:49:54 -0500

Thank you so much Rosie Nieto and The L.A. Meeting & Event Center for your Gold Sponsorship.

About the The L.A. Meeting & Event Center

is the brain child of Naked Real Estate Investors Club Founder and Events Promoter, Rosie Nieto and RE/Max Commercial broker, Gary Haddick, CCIM.
Faced the continuous challenge of finding professional event space for their own trainings, seminars, and celebrations, they also tired of the continuously rising cost for hotel and convention center meeting space, they teamed up to form their own affordable, flexible meeting & events center that would be made available to other entrepreneurs needing meeting space for their own events. www.lameetingcenter.com

Thank You Mike Cantu for being Gold Sponsors for I Survived Real Estate

Aaron Norris (The Norris Group) — Mon, 03 Aug 2009 11:48:40 -0500

Thank you so much Mike Cantu for you own going support for The Norris Group. Mike is widely regarded as an expert in the art of rentals and property management. He’s gone from professional skate boarder to full time, successful investor over the years. We’re very lucky to call him friend.

Thank You Mortgage Equity Group for being Gold Sponsors for I Survived Real Estate

Aaron Norris (The Norris Group) — Mon, 03 Aug 2009 11:46:58 -0500

Thank you Philip Tirone and the Mortgage Equity group for once again sponsoring this unique and important event. You can learn more about Philip and his team atwww.themeg.net

About The Mortgage Equity Group

The Mortgage Equity Group (MEG) is in the business of simplifying the home loan process by assuming responsibility for your financial health as it relates to your mortgage decisions. We are dedicated to assisting you with the management of your mortgage, keeping abreast of interest rates, maximizing your credit score and minimizing your interest payments, and ensuring that your mortgage and real estate holdings blend well with all of your investments. We do this by leveraging a team of professionals equipped with tools, processes, and programs that make sure you meet your goals.

Philip X. Tirone

An expert in residential home financing, Philip X. Tirone has a unique background in difficult-to-obtain loans, having started his career working with borrowers with stated income and/or low credit scores. Philip founded The Mortgage Equity Group (The MEG) and specializes in educating borrowers to increase their credit scores so they qualify for optimal loan programs. A non-traditional mortgage company composed primarily of team members committed to providing each homebuyer with specialized time and services unique, The MEG complements traditional mortgage services with innovative programs aimed at reducing mortgage payments and maximizing buying power.

Philip excels at developing innovative strategies to simplify the mortgage process. He authored the 7 Steps to a 720® Credit Score, a book that teaches consumers to raise their credit scores and lower their interest rate. Most recently, he created The Home Loan Maximizer™, a program that allows home-owners to purchase larger homes while maintaining the same monthly payments. His Complete Financial Navigator™ analyzes his borrowers’ needs and financial picture, thereby helping borrowers overcome barriers to achieving their real estate goals. As a frequent guest lecturer at the University of California Los Angeles, Philip has authored and delivered numerous speeches about avoiding the “Mortgage Lifestyle Dilemma,” a phrase he coined to describe an emotional buying decision that results in overextension and a life that revolves around high mortgage payments.

Philip has been featured in the Los Angeles Times, New York Times.com, Wall Street Journal, Newsday, Woman’s World Magazine, San Francisco Chronicle, Bottom Line Magazine, Bankrate.com, among others. He was recently featured in the New York Times bestseller, Secrets of the Young & Successful. In 2008, he will be featured in Dan Sullivan’s new book, Industry Transformers, which identifies eight individuals having a profound impact on their industry by creating meaningful ways for clients to bypass bureaucracy and red tape.

Named Arizona State University’s Man of the Year in 1994, Philip currently resides in Los Angeles with his wife, Lily, daughter, Ava, and son Dominic.

Lupita Solis

Lupita Solis has 25 years’ experience as a processor/underwriter for mortgage companies, always working with top producers who carry heavy volumes. She formerly financed loans in resort destinations in Mexico under the purview of one the country’s top mortgage companies. She joined the Mortgage Equity Group two years ago, bringing to the table her dedication to providing specific and focused detail to each and every client. Fluent in Spanish, Lupita is current working toward her real estate license. She lives in Los Angeles with her husband and grandson.

Thank You NSDREI Association for being Gold Sponsors for I Survived Real Estate

Aaron Norris (The Norris Group) — Mon, 03 Aug 2009 11:38:48 -0500

A very special thank you to the North San Diego Real Estate Investors (NSDREI Association, Inc.) for becoming Gold Sponsors for I Survived Real Estate 2009. We appreciate your support and always look forward to working with your team. Special thanks to Eric and Linda.

About the North San Diego Real Estate Investors Association

North San Diego Real Estate Investors (NSDREI Association, Inc.) was formed in 2004 and is one of the premier real estate investing associations for both residents and non-residents of the San Diego area. Our mission is “to promote a supportive and inspiring environment for members to network, learn, grow, and take action to build personal wealth through real estate investing.” As a non-profit organization we have our member’s success in mind, and our profits are shared with our members via reduced prices and/or increased benefits. Please visit us on the web at www.nsdrei.org.

Thank You NORCALREIA for being Gold Sponsors for I Survived Real Estate

Aaron Norris (The Norris Group) — Mon, 03 Aug 2009 11:37:29 -0500

Thank you so much to the Northern California Real Estate Investors Association (NORCALREIA) and David Granzella for sponsoring a table at I Survived Real Estate 2008. David and the NORCALRIE club could not make it down to Southern California for the evening but instead donated the table to cancer survivors. Thank you David and NORCALREIA for your huge hearts and for helping make the event even more special.

Info on NORCALREIA: http://www.norcalreia.com/

About Northern California Real Estate Investors Association (NORCALREI)

NORCALREIA is Sacramento’s premier real estate investment club. NORCALREIA provides quality real estate investment education and resources for our members, guests and friends. Our emphasis and commitment to solid real estate investor education enables our members to make CALCULATED investment decisions for continued wealth acquisition and wealth retention in this rapidly changing market environment. Since 2004, our associations and relationships with successful investors and educators such as Bruce Norris, Jack Fullerton, Peter Fortunato, Jack Miller, Dave Wilson and many others have allowed NORCALREIA to provide its membership with the most current and essential real estate investment techniques, strategies, and industry analysis. The capstone of success is not merely monetary, but relationships fortified by honesty, integrity, consistency and hard work. In other words, “suit up - show up- be honest.” We invite you to build wealth and success together, as NORCALREIA provides you with real estate knowledge, and solutions for today’s real estate market!!

“Building wealth and relationships together”

David Granzella http://www.norcalreia.com/

Thank You Real Wealth Network for being Gold Sponsors for I Survived Real Estate

Aaron Norris (The Norris Group) — Mon, 03 Aug 2009 11:36:18 -0500

Thank you Real Wealth Network for your assistance in making I Survived Real Estate 2009 a success from way up in northern California! Special thanks to Kathy Fettke.

About Real Wealth Network

Our mission is to provide you with information, inspiration and support to help you build more wealth and create the lifestyle you really want.

We believe real wealth comes from ownership of income-generating assets such as property, businesses, products, and stocks.

We’re a California based real estate investment club, helping our local and nationwide members build wealth through free education and resources. We turn ordinary folks into investors and ordinary investors into millionaires.

About Kathy Fettke

Kathy Fettke is an active real estate investor, certified personal coach, and host of The Real Wealth radio show on HOT TALK 560 KSFO. Kathy specializes in helping people build multi-million dollar real estate portfolios through creative finance and careful planning. She is the founder of the Real Wealth Network, an organization dedicated to helping members get the most current and cutting edge education and information they need to succeed as real estate investors.

Kathy received her BA in Broadcast Communications from San Francisco State University and worked in the newsrooms of CNN, FOX, CTV and ABC-7. She’s past-president of American Women in Radio & Television.

Kathy became a certified personal coach through the Coaches Training Institute in San Rafael, California. In 2001, she took the coaching process to television and produced a cable show called “DREAM” which followed the process of 6 people going after their dreams over 90 days.

Kathy noticed a theme on her Dream coaching show: dreams often cost money, and most people don’t know how to get it! Her show sponsor was a real estate expert, and the segments they produced changed her life. After interviewing dozens of real estate millionaires, Kathy discovered their secrets. She and her husband have since bought numerous investment properties and tripled their net worth in their first year of investing. Kathy is passionate about learning more and sharing that information with her listeners. She lives in Northern California with her husband,Rich, and her two young daughters

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