Craig Hill Joins Bruce Norris on the Real Estate Radio Show #340

Bruce Norris is joined again this week by Craig Hill. Craig is the underwriter for the Norris Group’s loan programs. He has been with the Norris Group since they opened, and he has been in the hard money loan business for over twenty years. Bruce and Craig discuss the hard money points and fees and the changes made to the programs, loan-to-value, buy and sell, entities in which investors buy properties, credit worthiness, borrower protection, short sales and REOs, the new potential construction lending program for the Norris Group, and much more on this week's real estate radio show and podcast.

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Craig Hill Joins Bruce Norris on the Real Estate Radio Show #339

Bruce Norris is joined this week by Craig Hill. Craig is the underwriter for the Norris Group’s loan business. He has been in the hard money loan business for over twenty years. Bruce himself has been a customer of his since 1993. Bruce and Craig discuss trust deed investing and their hard money loan program, owner-occupants, the Norris Group's borrower track record, costs involved with the lenders and borrowers, properties they loan on and their condition range, and much more on this week's real estate radio show and podcast.

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The Norris Group Team #208

This week on The Norris Group Real Estate Radio Show, Bruce Norris interviews Greg Norris, the property manager and buyer for The Norris Group, and Craig Hill, hard money loan and trust deed investment lead for The Norris Group. Craig, Bruce and Greg discuss some of the inner working of the company, working with a hard money lender, appraisals in the current market, and much more on tis weeks radio show.

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The Norris Group team #207

This week on The Norris Group Real Estate Radio Show, Bruce Norris interviews Greg Norris, the property manager and buyer for The Norris Group, and Craig Hill, hard money loan and trust deed investment lead for The Norris Group. Transcription will be available next week.

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Tom Anderson Joins Bruce Norris on the Real Estate Radio Show #204

This week Bruce is joined by Tom Anderson. Tom is the chairman and founder of PENSCO Trust Company. He is considered by many to be the national expert on the topic of self directed IRAs. Bruce and Tom discuss prohibited transactions, the IRS and the Department of Justice, real estate investors using their IRA for investing, disqualified persons and Internal Revenue Code 4975, how lenders can be fined for being involved in prohibited transactions, prohibited linked transactions, and much more.

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Tom Anderson Joins Bruce Norris on the Real Estate Radio Show #203

This week Bruce is joined by Tom Anderson. Tom is the chairman and founder of PENSCO Trust Company. He is considered by many to be the national expert on the topic of self directed IRAs. Bruce and Tom discuss Roth IRA, how and why IRAs were started, the 2010 Roth conversion, why investing in alternative assets make sense, leveraging an IRA, tax deferred investing, and much more.

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Ivan Choi Joins Bruce Norris on the Real Estate Radio Show #192

This week Bruce is joined by current president of REOMac, Ivan Choi. Ivan discusses the difference between a mortgage banker and a mortgage broker, the ease of obtaining funds in the current market, the current state of foreclosure inventory, shadow inventory, fear in the servicing market, and much more.

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Philip Tirone of the Mortgage Equity Group #159

Bruce Norris is joined by Philip Tirone. Philip Tirone is the President of the Mortgage Equity Group and author of The 7 Steps to a 720 Credit Score. Bruce and Philip discuss the state of the jumbo lending market, difficulties with appraisals, over disclosure in the market, regulation x, and new lending guidelines.

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Craig Hill with The Norris Group #150

Bruce speaks with Craig Hill again regarding hard money loans and trust deed investments at the Norris Group. This week Craig discusses preferred characteristics for a hard money borrower. With over 20 years in the hard money business, Craig has important discernment skills that protects our money sources. The Norris Group only loans in California so The Norris Group offers local insights and prides itself on an excellent track record. Bruce and Craig discuss why The Norris Group does not offer pooled (also known as fractionalized) trust deed investment and why they prefer their one-on-one method and the risk-saving features it offers. Bruce Norris and Craig Hill also discuss the new long term hard money program currently available.

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Craig Hill with The Norris Group #149

This week Bruce Norris is joined by Craig Hill. Craig Hill is The Norris Group's hard money loan officer and California trust deed investments manager. Bruce and Craig talk about things going on in the current market, how they started working together, and the mind set of current investors in the market place. They also discuss real estate investors with an "all-in" attitude and how dangerous it can be in the current market.

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Randy and Mike Griff of Elite Auctions #124

This week, Bruce is joined again by Randy and Mike Grigg who head Elite Auctions. Randy Grigg is President of Elite Auctions and Mike Grigg is the Chief Auctioneer.

Last week, Bruce, Randy, and Mike discussed a Riverside auction in which a man bought a home out of the MLS. Because of the price deterioration in the market, Bruce said that the man should flip the property via auction. In the end, the buyer earned a large profit after the property sold. Bruce asks about the costs to market.

Randy and Mike Grigg discuss marketing and advertising and what the auction company does to attract attention. They are also able to show all their results to their clients, so that they know where their money is being spent. Bruce asks Mike and Randy how many people showed up to a particular open house they had. They had approximately 60 to 80 people come in to view their property. They typically have a successful auction when there are that many people attending their open house.

Whenever someone attends one of their auctions, they always ask the attendees how they heard about their auction. Only about 30 percent of their attendees go to the open house. In this case, the winning bidder did not go to the open house. The winning bidder owned rental properties in that same area, and he was attracted to the property from a post card advertisement. Altogether, 38 bidders showed up at the auction, and they all had $5,000 dollar cashiers checks. The home being sold needed paint, carpet, and the kitchen was in bad shape. Just down the street from their auction, REDC was selling similar inventory for $98,000. The final sale price for this house was $147,400. The investor bought the home for $75,000. What a fantastic deal. They closed the property in 12 days.

Bruce goes on to discuss what people consider to be a “deal”. Bruce believes that if that buyer owned homes in that same neighborhood then he might have paid more for every house that he owns than that particular one. People are used to thinking that real estate is so cheap, that they have forgotten that real estate used to be 2 or 3 times the current price. Sarah, Bruce’s daughter, bought a house very recently. From Bruce’s perspective, her deal was the interest rate she received. The market was at 5%. The man who bought this property knew the area he was buying in, so the purchase worked well for him.

Auctioning properties is challenging right now, because buyers are very cautious. In a market where prices are escalating quickly, the auctioneer will be ahead of the prices in the MLS. The consumers prove how much the auctioned property is worth when there is competition. Bruce believes that his properties in Rosamond would have sold better if they had been auctioned. Bruce is surprised builders don’t use this method instead.

Bruce asks what Mike’s duties are as the president of the California Auction Association. Mike’s main duty is following California government legislation in regards to real estate auctions. He also assists other auctioneers by showing them what they need to do to be a legitimate auctioneer. Mike arranges conferences where speakers come and talk about their specialties. The main goal is to better California’s auctioneers, so that they can offer better service to their clients.
Bruce asks Mike if there are California rules that trump national rules and vice versa. Mike says that auctioning rules vary greatly state to state, and that California is actually very lenient. Mike would like to see more legislation to stop people from holding deposits for lengthy amounts of time after the bid is rejected from the lender. Bidding on behalf of auctioneers is also something that needs to be addressed by legislation. Instead of an auctioneer having to be licensed like a realtor, there should be a separate real estate auction test. It’s very different.

Bruce asks Mike what C.A.R. thinks of real estate auctioning. Mike does not think that C.A.R. views auctions as a bad thing. There are some Realtors that view auctions as a threat to their business, but it is not. Mike and Randy pay Realtors if they bring in buyers and sellers.

Approximately 10 percent of the time a Realtor represents a client for his auctions. Occasionally, Realtors get confused by the process because they are not used to that method, but Mike does not feel that this has affected his ability to close a deal.
In the United States people have viewed auctioning as a necessary evil. Bruce asks Mike if he thinks that auctioning will have a strong foot hold in the real estate business in the future. Mike thinks that auctioning will become more important for real estate sales in the future. California seems to be far behind the rest of the United States in regards to understanding the value in auction sales.

Bruce believes that the key going forward is to have repetitive clients. If investors get the idea that they can efficiently sell houses in auctions then it would be constantly viewed by retail people as a respectable selling method. Mike believes that as the real estate market returns many of the big auction houses will go back to land auctions, but Mike and Randy’s business will stay as a local California business.

Bruce asks Randy what kind of perception change has taken place in the auction industry. Randy thinks that much of the public still view auctions as a fire sale, but many investors believe that it is an effective way to sale inventory. It depends on who you talk to.

Bruce discusses how variable the results can be when selling properties through auctions. The right person for the sale may or may not be attending. Often the problem with auction sales lies within the seller’s expectations. When people own properties, which they have assigned a feeling of value to, it can distort one’s perception of whether or not a property is being sold at the right price. Randy believes that houses sold through auctions are priced properly about 80 to 90 percent of the time.

Bruce asks Mike how different it is to auction real estate in comparison to other auctions. In real estate you do not get paid immediately. You have to go through escrow, and you have to understand how to deal with Realtors. An antique seller is not going to understand real estate, just as a real estate auctioneer will not understand antiques. In the rest of the auctioneer industry, you usually get paid immediately after the sale. Online auctions are also much different than the on site real estate auctions that Mike and Randy handle.

The number for Elite Auction is 661-325-6500, and their website is www.sellwithauction.com

Randy Grigg
President

Being involved with real estate transactions since 1977, Randy discovered the benefits of using the auction method of marketing real estate after completing a single-family house rehab project that had three failed escrows. Selling time went from 2 months to 7 months due to the buyers backing out because of financing and appraisal contingencies. These extra 5 months of holding costs dramatically reduced the net profit.

As a "control freak" (and knowing other people are too) we designed our company to cater to the desire of our clients to sell their properties quickly in "as-is" condition with no loan, appraisal or property contingencies... at the highest price the market will bear. By selling my own properties "absolute" (no reserve), we learned first hand how to get the right bidders to our auctions. After we continued tweaking our marketing program we finally felt comfortable selling for others. We also have developed a strategy for selling real estate for others where our clients have full control over the final selling price, again understanding many of our clients desire for complete control.


Mike Grigg
AARE - Auctioneer / Agent

Mike graduated from the prestigious "World Champion College of Auctioneers." He has participated in charity and real estate auctions and handles agent/broker relations. Mike serves as President for the California State Auctioneers Association (CSAA). He has been designated AARE, which means he is an Accredited Auctioneer of Real Estate appointed by the National Auctioneers Association.

Mike has called a variety of real estate auctions in California and knows what it takes to get the buyers to competitively bid and drive the prices up. He is one of the 2004 California State Auctioneers Association Bid Calling Champions. Mike began his career in the real estate auction business in 2002 and believes that real estate auctions are the purest form of price realization. Learning real estate exclusively through the auction method is an advantage to potential clients and makes Mike one of the leading auction experts in California . Contact Mike at (661) 325-6500.

Professional Memberships

* On the Board of Directors for the California State Auctioneers Association (CSAA)
* Member of the National Auctioneers Association (NAA)
* Accredited Auctioneer of Real Estate (AARE) designated by the National Auctioneers Assocation
* Member of the Bakersfield Association of Realtors, Arcadia Association of Realtors, and the * MRMLS (A Multiple Listing Service for Southern California )
* Member of the National Association of Realtors (NAR)
* Member of the California Association of Realtors (CAR)

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Randy and Mike Griff of Elite Auctions #123

This week Bruce interviews Randy and Mike Grigg from Elite Auctions. Randy is the President of Elite Auctions for which Mike serves as Chief Auctioneer. Mike is also current president for the California Auctioneer Association.

Bruce begins by asking Randy how he got involved in real estate. In 1977, Randy had heard in seminars that real estate was the way to go, so he eased into it. He brought his first rental house in 1977, and after that he bought about 2 or 3 houses every year, for 20 years, and then stopped. Randy’s plan for real estate was to buy houses so that he could pay them off and enjoy the cash flow. This has worked well for Randy, and he currently has a few dozen houses that he is collecting cash from.

Bruce asks Randy when he started auctioning houses. Randy says that he started doing auctioning after he decided to stop doing real estate for a while. After getting involved, he decided that he did not like the selling process, because he had a few escrows that fell out. He drove past a house in his neighborhood one day, and he discovered that it was being auctioned. He decided to attend the auction in hopes that he might buy the property. He thought that he might be the only person at the auction, but he discovered that many people were interested in bidding at auctions. The house he wanted to buy went up to full market value, so he thought, “this might be a good way to sell.” This occurred in 2002.

Bruce asks Mike when he got involved in the auction business with his dad, and who the typical selling client was from 2002-06. He says that he got involved in 2002, and that he dealt with a lot of homeowners who were expecting to receive a high offer. In 2004-06 most sellers were astonished by the selling price of their homes. When Mike and Randy got involved in the business, they did it to help investors help sell 5 houses per day, but when other home owners discovered what Mike and Randy were doing many decided they wanted to auction their houses too.

Bruce asks Mike if he gets a lot of exposure from just holding an auction that is successful. Mike claims to receive a lot of attention from his auctions, because many times Mike will have 100 people show up for one house, and some of the participants have houses to sell as well.

Between 2004-06 the typical buyer was an own occupant. The typical buyer showing up now is often a long term investor, and first time home buyers are getting into the market now too. One of the recent changes that have been made to the $8,000 tax credit program is that first time buyers can use their 8,000 $dollar credit as a down payment up front.

The typical selling client that Randy works with right now is a rehabber, or a wholesaler, who understands that if they do not get their houses sold within two months then they will lose their opportunity to gain a profit. Prices went down a great deal.

Mike and Randy have an auction coming up on June 4, which will include houses that they have bought at REDC and Hudson Marshall. They have done minor fixes to them, and they are hoping to gain a profit. They have done 25 auctions within the last 8 months, and most of them are profitable.

Bruce asks Mike and Randy if they have ever had their competitors try to buy their houses, and then resell them for profit. They do not know if that has ever occurred, but they doubt that this has ever occurred, because they fix their houses more than other auction companies do.

Some auction companies host their events in a ballroom setting with a large amount of inventory, but Mike and Randy have taken a different route. Mike and Randy typically sell 3 or 4 houses per day, because they do their auctions at the property they are selling.

Mike and Randy’s advertising has done very well, but it has changed dramatically in the past seven years. They are doing much more internet advertising now. It is more expensive to send letters than to advertise on the internet. Mike believes that their may be a time when they no longer need print media. The newspaper does not work as well in bigger metropolitan areas.

Bruce asks Mike what source he receives his most qualified buyers from. Mike claims that the sign on the front of the property often attracts the most qualified buyers, because those buyers often own property on that same street. When you put the word auction on a sign, people pay much more attention.

Mike usually has two open houses during the week before the auction. Each open house is about 2 hours. The main reason why they have a limited time for viewing each house is to create sense of urgency. They are prepping their mind for the auction, because the house is going to be sold at a specific time and date. Bruce asks Mike if it is important that there are other people present when someone attends the open house. Mike thinks this is very important, because it gives them the idea that they are doing the right thing.

Bruce asks Mike what his main objective is when people call about an auction ad. Mike’s main objective for the initial conversation is to get them excited about the auction, and to get them to come to the open house, so that they can fall in love with the property. He also wants to assure potential buyers that buying from an auction is simpler than buying the normal way. The first call that Mike gets from a potential buyer is the most critical call, because it is easy to lose buyers when they first call for information. A first time participant may be looking for a reason not to attend the auction. Mike has hired a professional to handle most of his buyer calls.

Most people assume that an auction would be held on the weekend, but Mike and Randy are having their auction during the week. They hold auctions on everyday except for Sunday and Monday. They prefer not to hold auctions on Sundays because they do not want to get in the way of anyone’s religious traditions, and on Mondays people are busy preparing for the rest of the week. However, he has attended an auction on a Monday that was very successful. The time that they choose to hold their auctions does not seem to matter too much. There are times when more people will show up for a Wednesday auction than a Saturday auction.

Bruce asks Randy how many bidders are typically needed for a successful auction. Randy has had successful auctions with as little as 3 bidders. He often feels better when there are only about 5 to 10 people attending. There’s been up to 70. Bruce asks if there’s been any issues with appraisals. At one auction, the bank lowered the $10k. They stuck to their guns and the buyer ended making up the difference.

Bruce talks about The Norris Group’s current appraisal situation and how the verdict is still out.

Back to auctions, when Mike starts an auction he often begins by auctioning something small for charity. He does this because it helps new bidders to relax, and it encourages them to bid. It’s an ice breaker.

Bruce asks if people ever forget about the buyer’s premium. About half of the time, people forget about the buyer’s premium. This still occurs even though they disclose it in all the written terms, and it is disclosed before all the auctions they do. Even Mike has forgotten the buyer’s premium, because there are many times where people come to an auction not thinking about the buyer’s premium; they are thinking about winning the property they want to bid on.

Bruce asks if Mike can tell when buyers feel remorseful over their decision to buy. Mike can tell when people feel bad about their decision because they do not look excited. This is why Mike does his best to make people feel comfortable when they buy his properties. He does his best to answer his buyer’s questions.

Mike believes that receiving a healthy deposit for the closing of a property is of key importance. In this market, you cannot come out and tell people that they need $15,000 dollars for them to bid, because you will knock out all the first time home buyers. On a single family house in Bakersfield, Mike and Randy will often ask for a $5,000 dollar deposit, because it is enough to encourage people to close the deal. Mike and Randy close about 95 percent of their escrows during the first try.

Bruce asks Randy to describe the perfect seller to have as an auction client. Randy thinks that the perfect seller is someone who works with wholesale properties. Those kinds of people have reasonable price expectations, because they often buy at the right price to flip it, and they are willing to pay for the marketing cost with the expectation that Mike and Randy will make them a profit.

The number for Elite Auction is 661-325-6500, and their website is www.sellwithauction.com

Randy Grigg
President

Being involved with real estate transactions since 1977, Randy discovered the benefits of using the auction method of marketing real estate after completing a single-family house rehab project that had three failed escrows. Selling time went from 2 months to 7 months due to the buyers backing out because of financing and appraisal contingencies. These extra 5 months of holding costs dramatically reduced the net profit.

As a "control freak" (and knowing other people are too) we designed our company to cater to the desire of our clients to sell their properties quickly in "as-is" condition with no loan, appraisal or property contingencies... at the highest price the market will bear. By selling my own properties "absolute" (no reserve), we learned first hand how to get the right bidders to our auctions. After we continued tweaking our marketing program we finally felt comfortable selling for others. We also have developed a strategy for selling real estate for others where our clients have full control over the final selling price, again understanding many of our clients desire for complete control.


Mike Grigg
AARE - Auctioneer / Agent

Mike graduated from the prestigious "World Champion College of Auctioneers." He has participated in charity and real estate auctions and handles agent/broker relations. Mike serves as President for the California State Auctioneers Association (CSAA). He has been designated AARE, which means he is an Accredited Auctioneer of Real Estate appointed by the National Auctioneers Association.

Mike has called a variety of real estate auctions in California and knows what it takes to get the buyers to competitively bid and drive the prices up. He is one of the 2004 California State Auctioneers Association Bid Calling Champions. Mike began his career in the real estate auction business in 2002 and believes that real estate auctions are the purest form of price realization. Learning real estate exclusively through the auction method is an advantage to potential clients and makes Mike one of the leading auction experts in California . Contact Mike at (661) 325-6500.

Professional Memberships

* On the Board of Directors for the California State Auctioneers Association (CSAA)
* Member of the National Auctioneers Association (NAA)
* Accredited Auctioneer of Real Estate (AARE) designated by the National Auctioneers Assocation
* Member of the Bakersfield Association of Realtors, Arcadia Association of Realtors, and the * MRMLS (A Multiple Listing Service for Southern California )
* Member of the National Association of Realtors (NAR)
* Member of the California Association of Realtors (CAR)

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Susie Leivas-Sturner of Leivas Associates #120

Bruce Norris is joined once again by Chief Financial Officer with Leivas and Associates, Susie Leivas-Sturner.

Bruce starts by asking about 1031 exchanges. Many California real estate investors took money out of California to dodge the price declines and are now bringing it back into California. Bruce asks Susie to expand on the 1031 exchange concept. They start by talking on what like-for-like means.

Susie says like-for-like means you can buy any real estate. However, it can’t be personal property. You can switch from investment single family residence for land, as an example, as long as it is an investment property. Boot can happen if money is not spent in an exchange. So when a replacement property is not of higher value and there’s extra left over in the exchange, if it doesn’t get reinvested in like-kind, that left over portion can be taxable. When you close escrow on the property you sold, you only have 45 days to find a replacement property and 180 days to close. If an agent suggests backdating the paper work, DON’T DO IT. Backdating can cause you tax penalties and jail time. The IRS takes this fraud seriously.

Out-of-state ownership of property could require investors to file for that state tax. Depending on the filing status and age of applicant, the Federal Government has an amount cap and after that is hit, the gross amount must be filed. Many states are the same. Check with your tax professional. In California, investors must report their world-wide income which goes on the Federal and California State return. If there is an additional state, they can give you a credit for filing in an additional state which is dollar for dollar.

Worldwide income is required and Bruce asks if investors can deduct world wide losses. Susie says she’s never had a client do that so she’s not sure.

Bruce and Susie talk about precious metal sales and if they are on the honor system. The process doesn’t have an escrow and it’s hard to track. Susie does not know if the IRS has a way of tracking. If the IRS was tracking, they would be looking for deposits that seem odd.

Bruce asks about refinancing properties and 1031 exchanges. Susie says there will be deductible interest issues and there could be a tracing problem.

Bruce talks about credit lines and investors. Many investors in California don’t realize rules about limits on deductible interest. Only $100,000 is allowed. Beyond that, if it can’t be proven that the dollars aren’t spent on home improvements, it’s not deductible. There’s a one million dollar cap on mortgages.

For rentals, it’s a different category. The money just has to be traced and used for that property. You can take out money of one and invest in another but it has to be traceable.

To be declared a real estate professional, there are several categories. 50% or more of everything you do must be real estate related and 750 hours are required. Susie gives an example of a teacher couple who has a rental and how the IRS might look at their situation.

Bruce asks about the forgiveness of debt for an investor versus a regular consumer. A 1099C will be given for the amount of forgiveness. As an investor, the only way out of debt completely is to declare bankruptcy or file for insolvency. The test for insolvency is when you put together all the assets and liabilities. If liabilities exceed the assets, you can claim insolvency. At that moment, the debt is permanently wiped out.

In the past, if a consumer submitted a fraudulent return to a lender and the IRS got a hold of it, the IRS will use that for taxes. For stated income loans, she is unsure of how that is being handled by the IRS.

Bruce asks about an investment rental property that receives repairs and how that is handled in taxes. Susie says the repairs would be capitalized and made part of the purchase of the property. Residential real estate is a 27.5-year asset and it would be deducted over time. Points and financing costs have to be amortized as well.

Dealer status means you are in the business of buying and selling real estate. Intent is key here. Did you mean to buy a property as an investment or was it to buy, fix and sell? This matters for self employment taxes.

Bruce talks about entities. There are S and C Corporations. In C Corps, there are no capital gains. As a dealer in C Corp, it might be a good entity. Before year end, the investor needs to make sure all profit is out of the business by way of bonus and payroll. Social security and Medicare will be paid on that. Things might change soon because of this administration’s intent of foxing social security. Check with your professional tax advisor.

Bruce asks if people can write off home price declines and Susie says no.

Bruce says many investors went into many states that had different recourse rules. People need to understand the difference between recourse and non recourse states.

Bruce and Susie talk about the difference between tax credits and write offs.

Thanks so much Susie for the interview. You can find Susie and her team at leivasassoc.com. Next week join Bruce and Chief Economist of the California Association of Realtors, Leslie Appleton-Young.

In 1990 Susie became enrolled to practice before the Internal Revenue Service and in 2003 became a financial advisor for HD Vest.

Susie’s greatest strength is helping clients understand and feel comfortable with one of life’s ongoing large bills...TAXES. Many people say before meeting Susie going to have their taxes prepared was worse than going to the dentist. Susie helps make the best of one of life’s tough chores.

Susie’s father Richard Leivas started her in the business at the age of thirteen. After completing her education, she and her father became business partners in Leivas Tax & Bookkeeping Service with two locations in Riverside and San Bernardino. In 1992 Leivas Tax and Norton’s Business Service merged, with Leivas acquiring Norton in 1997. Over her career she has demonstrated to clients the tax benefit of retirement planning. After many years of working closely with Jim Kanouse, it made sense to join forces and form Leivas, Kanouse & Associates. Susie was married for the first time in 1999 and spends much of her free time with her husband Bob and her dog Buster in Lake Havasu City. They enjoy the outdoors, boating, and reading, listening to music and spending time with friends.

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Susie Leivas-Sturner of Leivas Associates #119

Bruce Norris is joined this week by Chief Financial Officer with Leivas and Associates, Susie Leivas-Sturner.

Susie started working in the tax field at 13 years of age. Susie goes into a little detail of the family business and how she got started in the industry. Leivas and Associates does tax returns for individuals, corporations and trusts. Susie sees more audits comings as the State is more cash tight. Susie as an enrolled agent can represent clients during audits.

An Enrolled Agent (EA) is a federally-authorized tax practitioner who has technical expertise in the field of taxation and who is empowered by the U.S. Department of the Treasury to represent taxpayers before all administrative levels of the Internal Revenue Service for audits, collections, and appeals.

The IRS is getting tough as to who they will work with. If you’re not an attorney, enrolled agent, or CPA they won’t want to speak with you. There are different types of audits. Susie describes how the IRS is tracking how many returns the business and she personally accomplishes in a season. Every year the IRS could be looking for different things as red flags.

Bruce asks if a tax preparer pushes the envelope if the IRS could audit their entire clientele. Susie says she does know of cases where that has occurred so it’s important you have a person who knows what they are doing. Susie describes red flags for the IRS including negative taxable income, extremely high business expenses, and anything really out of ratio. The IRS uses computers and then people to check for inconsistencies. A CPT 2000 does not mean a person is being audited.

Bruce asks if there was any significant change this year to policy. Susie says no big stuff but the stimulus bill has changed some things including college credits and automobile purchases. Some got passed during tax season.

Bruce asks how this year has affected her clients. Susie says it’s been a depressing year. People are getting laid off, furloughs, pay cuts, and overtime has been cut. She thinks most Americans are a paycheck away from bankruptcy and we’ve learned to spend too much. She says this year was a very different year than last year.

Bruce asks how this cycle feels compares to the 90s and Susie says this year feels worse. In the 90s, Susie heard issues from mainly businesses. Individuals are really concerned and don’t see an end in sight.

Susie says people 60 and over know how to save money. People who are younger really don’t understand savings and it’s a real issue. Bruce says people confuse home equity with a savings account. Susie says real estate was seen as a check book and that she’s very surprised at how much people had started to pull out of houses.

Susie says people don’t look at the full picture when making purchase decisions. They seem to mostly care about the payment, not about terms. Susie saw many people become second homeowners and almost 100% were financed. Very few people own anything free and clear. Many people are retiring now with major debt. The old way of thinking was to get rid of all debt and then retire. Social Security was meant to be a supplement and around 70% rely on Social Security as their only form of retirement.

Susie says she was expecting the foreclosures to hit sooner and so far her clients haven’t gotten hit so hard. Part of her job is to pick people up so she’s been preparing herself for those conversations. She was ready last season. She got a little this year but not as much as she expected.

Susie says if people have yet to pay their taxes, they need to as soon as possible. Once you file, the IRS is willing to do payment arrangements and it’s really easy. If it’s really bad, she thinks the IRS will probably compromise and negotiate considering the current climate. The ability to pay will probably be more of an issue.

Susie and Bruce talk about people who don’t file for years and the process of going about getting into the system. Susie says the state is more aggressive in going after late payments. Bankruptcies can wipe out debt but it depends. Not all debt is forgivable. Bruce asks about insolvency and how that plays into the IRS.

Susie says Congress made some changes to help homeowners with acquisition debt. The state didn’t do the same. Susie says the every year the amount a senior can make before being taxed changes.

Susie and her team can be reached from their website at leivasandassociates.com. She will join us next week for part two.

In 1990 Susie became enrolled to practice before the Internal Revenue Service and in 2003 became a financial advisor for HD Vest.

Susie’s greatest strength is helping clients understand and feel comfortable with one of life’s ongoing large bills...TAXES. Many people say before meeting Susie going to have their taxes prepared was worse than going to the dentist. Susie helps make the best of one of life’s tough chores.

Susie’s father Richard Leivas started her in the business at the age of thirteen. After completing her education, she and her father became business partners in Leivas Tax & Bookkeeping Service with two locations in Riverside and San Bernardino. In 1992 Leivas Tax and Norton’s Business Service merged, with Leivas acquiring Norton in 1997. Over her career she has demonstrated to clients the tax benefit of retirement planning. After many years of working closely with Jim Kanouse, it made sense to join forces and form Leivas, Kanouse & Associates. Susie was married for the first time in 1999 and spends much of her free time with her husband Bob and her dog Buster in Lake Havasu City. They enjoy the outdoors, boating, and reading, listening to music and spending time with friends.

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David Rosnick #116

Bruce Norris is joined this week by David Rosnick, Economist at the Center for Economic and Policy Research.

Bruce talks about reading several years back that the Baby Boom generation was worth trillions and in great position to retire. David says the Baby Boomers have a fair amount of wealth and every generation typical has grown in wealth over the years. Baby Boomers, however, have been recently hit by the stock market and housing bubble that has caused some great losses.

In a recent report written by David and his team on this very issue, it says the Baby Boom situation looks much bleaker than 8 months ago. Bruce asks how they are coping with this fact. David says the Baby Boom generation has been witnessing the trend for two years. Last summer the savings rate started to increase and consumption has really slowed. The full effects of this contraction in spending and consumption has yet to fully hit the market. David says he’d like to see the government continue the money stimulus and look into subsidizing shorter work weeks, vacation, and sick leave.

Bruce asks if the wealth members of the Baby Boom generation would be harder hit by stock prices and the poorer be more affected by the real estate declines. David says the wealthiest are indeed more likely to own stock but are also more likely to be home owners. The bottom 1/5 of households could get completely wiped out with foreclosure.

Bruce asks David how he feels about recent solutions presented by the government such as the cramdown. David says he’s not so concerned but would like to see the homes go back to the bank and perhaps the individuals getting to stay in their homes and pay market rent. David says the bank doesn’t want to try to take it over and sell the property in this market. By keeping the homeowner in the home, it’s a win-win situation. Bruce brings up that the prices are very skewed in California. David says the bank just needs to decide how they want to take the loss. By not making this mandatory the banks would not participate as they are being a stubborn. Bruce asks how the lenders would react if this was made mandatory. How much would then be available for lending? David says there will always be solid prospects and that it wouldn’t really matter.

Bruce asks David about people stating their income and if they should be held responsible for that. David says that lenders were more responsible for that as he understands it. When real estate was headed up, it didn’t matter and no one cared. This is an example of an unsustainable home bubble that people refused to acknowledge.

David created a housing cost calculator which compares owning vs. renting the same home. Bruce asks if the price to own is much more than renting. David says historically it hasn’t been that different. David says when it went way out of whack that it was almost guaranteed that there would be loss.

Bruce asks if bubbles ultimately benefit people. David says bubbles that are uncontrolled is a problem. Bruce says many were refinancing and spending the money. There must have been a short-term streak of wealth. David says people thought they were very wealthy and savings rates went way down.

Bruce asks if there should be some acceptance of risk when any investment is made. David says experts gave people a lot of bad advice and since there was a lack of an alternative voice, it wasn’t very fair. People were told that real estate was the way to wealth. Bruce asks if people should absorb that risk or if there is a backstop to save them. David says Social Security and defined benefit plans act as that backstop. Personal savings is only one alternative. David explains the difference between defined benefit plans versus defined contribution plan. Bruce says that guarantees of payout were as good as investments made. David says the bubble market really hurt these potential retirement funds. When things get so out of line, people make bad planning decision.

Bruce asks if defined benefit plans for cities like Vallejo that just declared bankruptcy will ever see that money. David says in California he’s not sure who is getting what. Bruce says that defined benefit programs typically have a projected return rate and almost all have seen losses. David says that those promises will most likely not be able to be upheld because of the economy.

Bruce asks David is he is afraid for seniors as they retire. The Baby Boomers encompasses the 45-64 age range. The older baby boomers are about to retire so there’s a little more concern there. The younger Baby Boomers have a little more time to get back on track. Overall, they aren’t looking good so far. He says the lower 1/5 could be completely wiped out because of foreclosure.

Bruce asks if we should be worried about the Social Security Program since the baby Boomers will have less population paying for benefits as they retire. He says it’s nothing urgent but today the health care costs are getting worse and are more of an issue as Medicare and Medicaid need to be helped. David says socialized medicine might be a possibility since it’s worked in other countries. We have the best medicine but the worst delivery system.

In David’s report entitled “The Wealth of the Baby Boom Cohorts After the Collapse of the Housing Bubble,” David says the net worth of Baby Boomers that owned a home was less than those that were renters in 2009 which is surprising. David says wealth isn’t just in equity and the housing and stock bubble real caused a problem.

More on this report at the Center for Economic and Policy Research at cepr.net. Next week join us as we welcome back Tommy Williams, co-founder of Williams and Williams auction company.

David Rosnick is an Economist at the Center for Economic and Policy Research in Washington, DC. He has a Ph.D. in Computer Science from North Carolina State University and an M.A. in Economics from George Washington University. He has written numerous policy papers including "The Burden of Social Security Taxes and the Burden of Excessive Health Care Costs" with Dean Baker, March 2005; "Poor Numbers: The Impact of Trade Liberalization on World Poverty", with Mark Weisbrot and Dean Baker, November 2004; “NAFTA at Ten: The Recount,� with Mark Weisbrot and Dean Baker, March 2004; and "Black Swans, Conspiracy Theories, and the Quixotic Search for Fraud: A Look at Hausmann and Rigobon's Analysis of Venezuela's Referendum Vote" with Mark Weisbrot and Todd Tucker, September 2004; and "The Forty-Four Trillion Dollar Deficit Scare," with Dean Baker, September 2003.

He is the architect of a growing number of calculators including CEPR's Accurate Benefits Calculator which compares current-law Social Security benefits to the Bush Plan based on "Progressive Indexing." He also created the Housing Cost Calculator, which compares the cost of owning a home relative to renting for a potential new homeowner. It gives homebuyers a sense of how the current bubble in the housing market might affect them. Prior to joining CEPR, he worked as a Research Associate (postdoc) at the North Carolina State University at Raleigh Department of Computer Science.

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