Shelley Kaye of REOMAC #125

This week Bruce is joined by Shelley Kaye, the president of REOMAC. She also works with InSource Financial Services, where she handles bulk sale purchases.

Bruce begins the radio show by asking Shelley what REOMAC stands for. REOMAC stands for Real Estate Owned Managers Association. It was founded in 1985 by a group of REO asset managers, who met during the California downturn in order to exchange business ideas. Originally the members were only asset managers, but now the group is composed of anyone who can compliment agents and asset managers. Because the market has significantly changed, the lenders are using other sources to help sell their properties.
REOMAC membership has grown substantially, because networking is very important during these difficult times. Right now, REOMAC has stopped accepting new members because they are trying to reformat the organization so that people who want to join can get into the organization. The organizations bylaws say that the membership must be balanced so there are currently more agents that are wanting to join. There are currently four levels of membership that Shelley explains.

The cost of being a member of REOMAC varies by category. The lenders pay $75 dollars per year, the outsource members pay $150 per year, and their affiliate and broker members pay $375 per year.
REOMAC holds about ten to twelve meetings per year around the country and they also have two conferences. Their most recent conference was in Rancho Mirage, and over 2,500 people attended.

Bruce asks Shelley if REOMAC also has members that deal with commercial lender-owned properties. Shelley just implemented a commercial committee this year because REOMAC knew that as the market turned around that would be another phase of default. In their last conference, REOMAC had a session on commercial real estate, and many people were interested.

Bruce feels that commercial real estate is going to be the next market to get hurt. The agents who are prepared for this market will have a lot of business. Shelley agrees that agents need to be prepared for the commercial market because the down economy is affecting every area of business.

Bruce asks Shelley if REOMAC has its largest number of members in California. Shelley says that California does represent its largest member population which is partially due to the fact that REOMAC started as a California organization. When Shelley joined REOMAC in 2001 there was not much business going on with lender owned properties. Subprime loans were going crazy and people were recognizing that people could go in and buy a home. At that time REOMAC had about 300 REOs in the entire company. Last year, REOMAC had closer to 20,000 REOs.

In 2008, lenders were overwhelmed by the number of defaults in their portfolios. They were unable to sell their inventory faster than it was coming in. Bruce asks Shelley if there are agents who have been thru this cycle before saying that there is a difference in how their properties are being handled this time. Shelley does not think there has ever been such a bombardment of properties.
Bruce says that asset managers once talked to REO agents, and there was some type of communication on a regular basis, but now their communication relies on email, and this is sometimes frustrating for an agent. Shelley agrees and disagrees with that statement. Agents are busy in the field as well. Most of the lenders went to online systems, and since you could do all your business online, there was less need to speak to agents.

Bruce says that in 2008, there was a challenge in pricing properties correctly and the lenders took a lot of losses that they could have avoided if they had just listened to their local agents. Shelley does not think that the lenders necessarily needed to listen to the agents because when agents work for a lender they are appraisal driven. The appraisers and brokers were disagreeing with each other. Nobody could keep up with the speed in which property values were dropping. It took a while for everyone to understand what was occurring in the market place. People had many years of increasing prices, so it was hard to fathom that prices were dropping as quickly as they were.

In the past, when there was a decline, the appraisers would notify the seller that they were deducting three percent per month to accommodate for what was occurring in the market place. In this downturn, people were not doing that because they did not understand what has happening. They did not have the proper statistics. If they were looking at comps, that would not work. If they were looking at stats that were even 90 days old, then the broker would have a poor understanding of what they would get for their property. Appraisers give you information from data, rather than what is going on in the market place. The lenders started to realize that the agents were their best source of information.

Bruce asks Shelley if it has been difficult to keep up with all of the rule changes that have been applied to the foreclosure process. Shelley says that it has been difficult for everybody, because there have been times where people were about to sell a property, and in the middle of the process, some sort of law changes.
Laws have been made on both the national and state level. Bruce asks Shelley if a lot of states are having moratoriums. California did for a while but the lenders are the ones that have really put the moratoriums in place. When Fannie and Freddie started doing this, everyone else followed suit.

Bruce asks Shelley if there is any chance for a national moratorium. Shelley hopes not, and she thinks that nobody truly believes that the moratoriums are doing anything other than delaying the inevitable. When someone creates a moratorium for 9 months it messes with your business model and you have to staff up for that. The moratoriums are affecting the REO agents and the lenders. While the moratoriums may keep people in their homes temporarily, it may also be putting other people out of work, which will lead them to losing their homes.

A new rule has just been created that protects tenants after the foreclosure sale. This rule allows anyone who has a lease agreement to stay inside a property during the entire time of the lease. Shelley says that the wording in this new law is vague and unclear, so attorneys are trying to interpret the meaning. The problem with this rule is that it turns lenders into landlords, and that is not the intent of any mortgage or loan process. This is expensive for any lender that exists and it will put fear into the next lender who takes over the property. Shelley says that some people worry that this law will scare away potential investors who buy properties from foreclosure sales. Bruce confirms this belief saying we will not buy a property with a tenant. Shelley wonders who will be collecting the rents as well. Will the agents collect the rent? But why would they do that if they are not going to be able to sell the property? The system is not set up to handle this.

Investors won’t touch this because typically when buying at trustee sale the investor has not seen the inside of the house, has not met the renters, and have no idea what the lease agreement says.

It is difficult to determine what a valid lease is, and whether or not a property is actually something you want to keep. Bruce fears that people will take advantage of this law by faking people into believing that they are legitimate tenants, and that they have the right to take charge of the lease. It seems difficult for the lenders to do this without taking on a lot of losses. The longer they hold on to their properties the more expensive it is, and the less they will be able to make on them. This law may also turn them into a landlord with many other responsibilities and they are not ready for that.

The cities in California have passed a law that allows the city to fine lenders $1,000 dollars a day for things such as brown lawns and green pools. Bruce knows cities that have hired code enforcement people who are paid just to check up on these things. This is actually occurring in Chicago and other cities as well. This is unfair because there are many occasions where the lender does not have the property vacant so that they can repair the property. The cities are just putting the lenders in a position where they will have to spend more and more money. Cities need to be in partnership with the owner of those properties. Cities are starting to fine properties right after they go into foreclosure but they are not fining the occupant or the owner.

Shelley Kaye recently joined InSource Financial Services, LLC as a Portfolio Acquisitions Specialist, handling bulk sale purchases of REO properties. Prior to joining InSource she was a Servicing Oversight Specialist with ECC Capital and for 11 years a Senior Asset Manager for First Option Asset Management Services, managing a team of associates as well as a multi-state REO portfolio. Before working at FOAMS, she spent seven years at First Central Bank where she was the assistant to the VP of the Servicing Department. She has been a licensed Realtor for over 20 years and sold properties in Southern California prior to entering the mortgage banking field.

Shelley has served on the REOMAC® Board for the past 8 years and participates as a speaker on a variety of panels for many industry events. She has held the offices of Sponsor Chair, Treasurer, Secretary, and Vice President , prior to becoming REOMAC President in 2008.

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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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Leslie Appleton-Young of CAR #122

Bruce Norris is joined once again by Chief Economist for the California Association of Realtors, Leslie Appleton-Young.

Bruce begins by asking Leslie about the CAR payment protection program. Leslie says that C.A.R. has a housing affordability fund, which was developed around 2002. It is a fundraising arm, run by a group of members, which gets proposals from local associations for various projects. Since the downturn, the committee has decided to do something that has potential to impact the market by putting people into homes. The committee has developed a $1 million dollar program, which can be used to pay a premium on an insurance policy for a qualified first time home buyer who uses a California Realtor.

The criteria for this program includes someone who has not owned a home in 3 years and you have to have been employed for a minimum of four months. The policy does not begin to pay on a job loss situation for six months, and then the policy will pay for $1,500 dollars of the mortgage payment for six months. If there are two buyers then the second buyer will get $750 dollar benefit. The application does not take place until the close of escrow. The buss has been tremendous. Leslie is hoping that this program will be able to help 3,000 home buyers.

Bruce asks Leslie if the funds given from this program need to be paid back and she says no. She says that it is an insurance policy that does not need to be paid back. She is hoping that this insurance policy will encourage 3,000 people will make the choice to buy their first home. Hopefully it gets people off the fence.

Bruce asks Leslie what encourages her most about the current California market. She has seen a tremendous amount of resiliency within the last year and a half. The damage that we have withstood since the beginning of the downturn can be compared to a forest fire; things get damaged, but in time you begin to see the green seedlings come up. Seeing 7,000 people attending the first time home buying fair was very gratifying to her. People are starting to look at homes as a place to live and a long term investment which is very important. The motivations and expectations are changing.

Bruce has studied migration for years, and he is sure that California is losing migration right now, but he believes that when California gains more job stability that we will receive more migration from all states, because we are a very desirable place to be, and our monthly payment will be lower in ratio of earnings here than in other places. Leslie says that it is difficult to predict what will happen to California because of all the socioeconomic and demographic changes going on in society. One of the things that will have to happen is making more livable cities. Technology allows you to live and work anywhere. It has been argued that the younger generation will be more mobile because they will have 8 jobs in their career, rather than just 1 or 2 like the boomers. Location isn’t as relevant because society is becoming so mobile.

Bruce believes that the retiring baby boomers will be attracted to California. They will have the choice to pay a $300 dollar gas bill, so that they do not freeze during the winter, or they can move to California where you can survive without a heater. Climate is huge.

The traditional buyer, which is the person that hires the Realtor that they knew or the person that drives by the for sale sign, has been replaced with the online buyer. Leslie says that 78 percent of home buyers use the internet during their selection process, and most of them say that they found their agent on the internet, but different surveys produce different results. The only explanation that she can come up with for the different results is that people are being exposed to more advertising and different types of advertising, which is why she tells her members that they cannot do only one kind of advertising. Only 20 percent of home buyers have claimed that they use print in their home search, and 75 percent of that 20 percent said that they looked at the weekend supplements for open houses.

Bruce believes that Realtors have to understand that customers are always looking for and up to something new. Leslie says that she knows a lot of Realtors who team up with people of different ages, so that they can appeal to a larger number of people.

Bruce says that there are two factors, shadow inventory and a large pile of notices of default that will affect trustee deeds and more REOs. He believes that inventory levels are giving us a false indicator, and that the REOs are going to greatly affect the market before the end of the summer. Leslie believes that we will see a second wave of foreclosures during the 4th quarter of this year. The notices of default are going to affect the market, there are Alt-A and option ARMs that are typically a five year fix, and there will be a continued loss of jobs. Lenders are saying the inventory is out there but clearly there is a bottleneck.

There are now three times as many foreclosed properties in comparison to normal listings compared to last cycle. That is the one ration that Bruce believes must rectify itself before a normal price environment can return. We have to get through the bulk REOs. The Norris Group used Krunching.com to track trust deeds back to the lender when they could not find the inventory reemerge as a grant deed or a listing, and they discovered that there were many cases like this.

Obama claimed that the government would give $75 billion dollars to loan modifications, and that not one dollar of it will go to investors. This worries Bruce because he fears that Obama may have been speaking about all investors, rather than just speculators.

Bruce believes that many of the problems in the 90’s were solved because of the 203K loan that investors could use, but this loan option has not reopened to investors yet. It allowed investors to buy a fixer upper and include their purchase price plus the repair cost in the loan. Bruce hopes that they will reactivate that loan for investors.

Bruce asked Leslie, “How do realtors view investors?” She replies investors are a very important part of the market. They are one of the forces behind the current market strength. One of the issues that she has heard is that first time buyers are having difficulty competing with investors. In defense of the REO agent, Bruce claimed that investors get offers when they protect the owner occupant from a failure. The inventory will not work for a conventional loan at this time.

Bruce asks Leslie how she feels about the cram downs. She says that CAR has been opposed to cram downs because cram downs increase the cost of financing for every one else. Bruce thinks that is a scary thing to start because it gives bonuses to people who declare bankruptcy. Usually that is something you do not want to do because it prevents you from getting a loan, but in this case it can help you.

Bruce asks Leslie what she believes will cause the market to become healthier. She believes that inventory and foreclosures are the most important factors. The future is unknown because it all depends on how quickly the economy reinvents itself.

Bruce asks Leslie if she thinks our current interest rates will remain low for a significant amount of time. Leslie believes that interest rates will increase significantly in a few years. The price and interest rate combination are an amazing bargain right now.

Leslie Appleton-Young is Vice President and Chief Economist for the California Association of REALTORS® (C.A.R.), a statewide trade organization with members dedicated to the advancement of professionalism in real estate.

Mrs. Appleton-Young directs the activities of the Association's Member Information Group. She oversees the analysis of housing market and brokerage industry trends, member communications, and membership development activities. She is also closely involved in the Association's strategic planning efforts and is a well-known speaker in California’s real estate community.

Before joining C.A.R. in 1984, Leslie Appleton-Young was a consultant with Telesis Inc. in Rhode Island. She also spent several years working as a research associate at the Federal Reserve Bank of Philadelphia and as an instructor at the University of Pennsylvania.

Mrs. Appleton-Young earned a Bachelor of Arts degree in economics from the University of California, Berkeley, and her Masters from the University of Pennsylvania.

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Leslie Appleton-Young of CAR #121

Bruce Norris is joined this week by Chief Economist for the California Association of Realtors, Leslie Appleton-Young.

Bruce starts by asking how many members C.A.R. currently has? In 2009, she estimates there are 160,000. Peak membership was in 2007 when there were 211,000 members. The numbers are better then both originally thought they would be.

Things have really changed and people are doing very different things than they were two years ago. More work is out there for REOs, working with investors, and first-time buyers.

Bruce asked if the membership encouraged by what you were able to say for 2009? Leslie says the market, in terms of transactions, has seen the worst. The market bottomed, in terms of sales, in the fall of 2007. We had over a 25 percent increase in sales in 2008. The problem is that there is a lot of uncertainty right now about everything, but particularly about the economy. That is what is hard to gauge right now. There has been a lot of initiative coming out of Washington that has not yet had a chance to impact on the street. It is easy for an economist to say “jobs are a lagging indicator”, which they are, but this restructuring could go on for a while, and it could get a lot worse.

Leslie says she is able to carry a message that the distressed REOs and short sale component of the market is bottoming, and slightly improving, with respect to prices. Sales have gone up sharply in the regions of the state, such as the Inland Empire, where you have a significant amount of the listing inventory falling into the distressed category, so that housing is extremely affordable. There are parts of the state where homes are selling below replacement cost. I think that is very encouraging, but there is a cloud over the country and the world, because it is uncertain how long this recession will be. That will have an impact, and I do not think anybody knows.

Bruce says that the hardest part about this real estate downturn is you have to consider so many factors that you have never had to contemplate before. The local, national, and global economy comes into play. Leslie says we have political issues, we have environmental issues, we have swine flu, and we have the economic issues that are really difficult. Housing is just one part of it. Clearly, subprime started the ball rolling about 3 years ago. There is no doubt that this is a systemic issue related to risk taking, transparency, fee driven events with no accountability, and so on. In order to rebuild confidence there needs to be some major changes in how these industries are regulated. That is happening in Washington now.

Bruce says typically when you start down the path of regulation there’s a danger of over-regulation. Leslie says that is possible, but there needs to be more regulation now so that people know what they are getting when they make an investment. That is what is really crippling the lending market. Investors do not want to have anything to do with mortgage backed securities, because they do not trust the paper. There’s no way around it because you need this intangible item called confidence and trust, which is not going to come back on its own.

Leslie says she never thought she would never see the statewide media and home price drop 38 percent in one year. Bruce says he agrees. Investors are buying properties right now at prices we have not seen since 1987 because of the REOs. The median price is probably not highly accurate because there is a mixed inventory.

Leslie says that is absolutely true. She debates average versus median with people all the time. The issue is the fact that it is the moderate and low end of the market that disappeared in 2006 and 2007, and the high end was maintaining until September of 2007 when you could not get a jumbo loan. In 2006-07, the market contracted, in terms of transactions, by more than 20 percent during each of those two years, and yet the median home price was at a very high point.: The high end was still going strong, but that all changed in September 2007. One of the themes, in remarks to C.A.R. membership is “leverage your local market knowledge”, because a national, statewide, regional, or county statistic is not going to be enough. It will not be accurate for the decisions that your clients are making with respect to a particular neighborhood.

Bruce talks about a recent survey where the customer was asked, “What will the direction of prices be in 1, 3, 5, or 10 years?” The dominant answer was “I do not know”, and yet they still bought and Bruce was surprised. Leslie says there are a lot of things going for the market right now. The federal government is buying rates down to 4.5 percent, there is an 8,000 first time home buyer tax credit, there is a 10,000 dollar state income tax credit for construction, there is the FHA financing, there is conforming loan financing that is fairly readily available, and you are looking at prices that are half what they were 3 years ago. Bruce says that interest rates are also 2/3 and the affordanility number is way high.

Leslie says if you look at PITI in the last two years, you can see that it has been cut in half. Bruce talks about his 24-year old daughter and purchasing her first house. It is a big thing when you have your first chance to own a home. It’s an FHA purchase, in which she will have $4,000 or $5,000 dollars down, will receive an $8,000 dollar check from the federal government. She previously rented a room for $700 in another area, and her payment on a perfect fixed house is $804. Bruce says most families have two incomes so he doesn’t think there has ever been a time where California real estate has been this affordable.

Leslie says she challenged an audience last week to examine what their assumptions are about price appreciation over 3, 5, and 10 years, and to make sure that was not driving their decision. It was important for them to understand that housing prices come down.

Bruce says that is part of this issue. There were a lot of realtors, investors and home owners that were very accustomed to just owning a house that created an extra $50,000 to $100,000 dollars whenever they wanted it. Leslie says homes won’t be seen as a piggy bank any more.

Leslie challenges everybody to look back at the past 3 or 4 years, and study it, and be engaged in the public policy debate that is going on in Washington. Look back at the post World War II period up until 2002, you can see that housing debt was different. People treated the home ownership process very differently. It was hard to get a mortgage. Foreclosure and getting into trouble was not viewed as an option. That did not happen unless there were extraordinary circumstances. The fact of the matter is there were a significant number of people who refied out of reasonable loans into risky loans. Many of the deals that went on during the boom were cash out, so people were put in harm’s way.

Bruce says important is the velocity of this downturn. Leslie uses a slide from the late 70s that shows it took 5 years for the market to shrink about 60 percent. In the last 80s and early 90s it took 5 years for the market to shrink. This time it has taken 3 years for the market to drop 44%. Prices are typically sticky on the way down because if the market is not good then why would discretionary sellers decide to sell. In the last couple years there has been a lot of nondiscretionary sellers.

Bruce says that the job issue doesn’t look like it will be solved immediately. Leslie says the big question, in regards to the housing market, is the economy. The problem resides within job losses and confidence. The problem is not that people cannot get financing, particularly conforming financing and FHA.

Bruce says in Riverside, 45 percent of the buyers are under water. Then other people are out of work, or under employed. When you add up these pieces you realize that you need the new buyer to emerge, or you need to attract migration to California, and jobs play a part in that. We are going to have a challenge in the next 18 months while we find out who is going to buy all this stuff.

Leslie says she’s been floored by the first time buyer response, and the affordability is clearly the trigger, but there were a significant number of people who were on the sidelines waiting for this to happen, and they timed it right.

Bruce says there is a definite shift to the type of buyer. It’s really geared towards a first time buyer.

Leslie says she thinks most buyers are getting fixed-rate loans. She doesn’t know why anyone wouldn’t get a fixed-rate loan.

One of the things said in a recent survey was that 56 percent of people qualifying said that on a scale of 1 to 10 of difficulty in getting through the financing they had a scale of 9 or 10, over half the people found it pretty tough to get that loan closed.

Leslie says it was a survey that was done in the middle of last year, so it will be interesting to see if the scale changes when we do it again this year. Leslie’s hope would be that the Obama initiative helped that. Another issue with difficulty is not that the funds are not available, but you have got to document everything. You have got to have a very strong FICO score, and you have got to have your W2s. The problem is not that the money is not there, it is that they want to make sure that they are going to get their money back, and who can blame them?

Bruce says you have to set up the next set of loans to be safe, so when there is another mortgage backed security in our future that it is actually as advertised. Leslie says transparency is critical for us to get our market back. She said on many occasions that rapid price appreciation trumps underwriting. She does not think we can count on that any more. It is an incredible risk to take.

Bruce said the projected median price for 2009 was around $250,000 and he wonders if that is where we’ll end up. Leslie says $250,000 is a reasonable number. When CAR calculates a statewide median for the entire year it is recalculated from scratch. It is not the average of monthly median. They include everything that is sold during 2009 into the bucket, and then get the median. What I am seeing in the market today is that the price softness is at the high end. It is not a huge factor in the market right now because that is a small part of the overall sales. I thought it was very interesting in our March data that we saw an increase in the median home price from one month to the next. It is likely that we are bouncing around the bottom in terms of prices. There’s a lot of talk about multiple offers at over asking price.

Join Bruce and Leslie next week as they continue the conversation.

Leslie Appleton-Young is Vice President and Chief Economist for the California Association of REALTORS® (C.A.R.), a statewide trade organization with members dedicated to the advancement of professionalism in real estate.

Mrs. Appleton-Young directs the activities of the Association's Member Information Group. She oversees the analysis of housing market and brokerage industry trends, member communications, and membership development activities. She is also closely involved in the Association's strategic planning efforts and is a well-known speaker in California’s real estate community.

Before joining C.A.R. in 1984, Leslie Appleton-Young was a consultant with Telesis Inc. in Rhode Island. She also spent several years working as a research associate at the Federal Reserve Bank of Philadelphia and as an instructor at the University of Pennsylvania.

Mrs. Appleton-Young earned a Bachelor of Arts degree in economics from the University of California, Berkeley, and her Masters from the University of Pennsylvania.

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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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Tommy Williams with the National Auctioneers Association #118

Bruce Norris is joined once again by past President and current Chairman of the Board for the National Auctioneers Association and co-founder of Williams and Williams Auctions, Tommy Williams.

Bruce starts by asking if there is a different process in selling real estate and cattle. Tommy says there is a slight difference but he’s hoping the audience will still understand. He says cattle auction goes a little faster and is a little more entertaining.

Auto auctions generate close to 50% of the proceeds for auctions. The end buyers are typically dealers. There are both dealer and public auctions but some are only available to dealers.

July 13-18th is an auction reunion in Kansas and Bruce asks who attends. Tommy says over 1,000 auctioneers will attend and bring families. It is the best and main time of year to attend education for the auction industry. Over 60 seminars will be available.

Bruce asks about Tommy’s family history in the auctions business. Tommy says there was a little family history but he fell into it on his own. Tommy’s son Dean is an attorney and didn’t plan to be in the auction industry. Tommy moved the business from Illinois to Oklahoma and Dean visited while in school and ended up later partnering. Tommy says he has six grandkids and he thinks a few might be interested in the business.

Bruce talks about the model Williams and Williams has chosen and how it is different from other auction houses. Tommy says online auctions are a very viable way to sell items and Williams and Williams does conduct online auctions. However, Tommy says a property will earn 10% more on the lawn then it will bring online or in a ballroom setting. It’s significant and matters. There is more expense in having these types of auctions.

Tommy describes the difference between absolute and seller reserve auctions. Tommy says the absolute auction is by far the best and motivates the buyer to the ultimate level of bidding. It also attracts the most attendance which is key for the best price. Tommy says many can’t stomach absolute so more are sold with reserve.

Tommy says it not impossible for very experienced auctioneers make mistakes. It’s complicated and not as easy it may look. Advertising has definitely changed over the years. The newspaper has dropped in value each and every day and online advertising has gotten more important. The auction companies track the marketing process very carefully to see where most people are seeing the information.

Tommy says when the word “sold” is uttered, in an absolute auction, it is the most binding contract you can enter into. It is different in a seller reserve. Bruce talks about dealing with deposits in real estate now and how difficult closing can become. Tommy says he thinks 10% down should be at stake to make sure the buyers are truly qualified. Tommy says he doesn’t like the current way real estate is sold because of these issues as buyers can tie up your property will no ramifications if they don’t come through.

Tommy describes how the auction business is commissioned. Williams and Williams gets commissioned directly from the seller. Some lenders require, however, a buyer’s premium. Many more auctions are charging buyers but Tommy actually likes charging the seller. He thinks the buyers see the auction in a more positive light and the premium isn’t seen as a tax on their purchase.

Bruce asks about Tommy dealing with lower priced areas. Tommy says there are minimum fees that must be charged. There does become a point where auctions can’t sell a property because it doesn’t cover the fees.

Bruce talks about lenders not foreclosing on properties because there is more owned on the property then it is worth so lenders don’t do anything with it. Tommy says this issue is really serious and most people aren’t hearing about. Tommy says he’s seen some neighborhoods where 80% of the neighborhood is vacant. There’s almost no choice but to tear them down as they become magnets for vandalism, squatters, and drug labs. Bruce says it doesn’t even have to be an old areas and Tommy sounds surprised. Tommy says that’s why these homes have to be given occupants whether they are investors or owner occupants. Empty properties are not good for neighborhoods.

Bruce talks about Orange County and the FDIC leasing space to set up shop to deal with assets. He asks if Tommy has heard of that and if Williams and Williams were involved in the RTC situation. Tommy says they were slightly involved with the RTC but dealing with government is difficult. Tommy had not heard of the offices being rented in Orange County. Tommy is worried the FDIC will warehouse the properties and it will make the problem worse.

Bruce brings up a new term he saw on the Williams and Williams website called “auction referral cooperative.” Tommy says this is a way to establish a network of like-minded auctioneers that refer one another. There’s no financial obligation and they are simply looking for other auctioneers of the same mind and there’s a referral fee involved.

Thank you Tommy as always for joining us on the show. We look forward to seeing you again this year on September 11th, 2009 for I Survived Real Estate 2009. See more on Williams and Williams at Williamsauction.com.

Tommy served as President of the National Auctioneers Association in 2008 and is current Chairman of the Board. Tommy also graciously took part in I Survived Real Estate 2008 last year.

Thomas L. Williams is a graduate of Penn State University (B.S. Animal Science) and the Certified Auctioneers Institute (CAI). Representing the third generation of Williams family auctioneers dating back to the mid-1800s, Williams is also a graduate of the historic Reppert School of Auctioneering. He has over 40 years experience in real estate auctions, land development and real estate investment. He currently serves as President of the National Auctioneers Association.

A founding partner of Williams & Williams, Williams served as president from 1986-2000, and became board chairman in 2001. He also co-founded and served as managing partner of Lowderman & Williams Auctioneers from 1965-85. He has conducted over 10,000 auctions in all 48 of the contiguous United States and Canada, and is an advisor to auctions conducted throughout Western Europe, South Africa, Australia and New Zealand.

An avid cattleman, Williams also owned and operated Bradmar Angus Farms from 1965-85, after which he continued to serve as a herd and genetics consultant for many of the nation's premier Angus cattle breeders.

Williams is a licensed auctioneer and real estate broker in over 20 states, and an active member of the National Association of Realtors.

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Tommy Williams with the National Auctioneers Association #117

Bruce Norris is joined this week by past President and current Chairman of the Board for the National Auctioneers Association and co-founder of Williams and Williams Auctions, Tommy Williams.

Bruce starts the interview by asking what auction companies miss out on when they aren’t members of the National Auctioneers Association. Tommy says non members miss out of networking, best practices, and education which furthers their professional endeavors. April 18th is national auction day and Tommy would like auctioneers to make communities aware of the benefit that auctions bring to the community. Auctions have the huge benefit of establishing market value on a certain day for numerous products and assets. They also might highlight their charity work in the community through charity auctions. Tommy feels the media picks up too much negative information about auctions and doesn’t highlight all the positives.

Bruce says he read that auctions raise as much money for charities that is sold in real estate and Tommy says that is true. Tommy says auctioneers bring a very important piece of expertise to nonprofit organizations.

Bruce asks if Realtors view auctions as competitors or partners and Tommy thinks too many see auctions as competitors. Tommy says there is fear that auctions establish market value and sometimes people don’t want to really know that actual value. The real estate community wants to not take the hit. Bruce says he’s baulked at final bids before and most times he paid for not selling at that time. Tommy says all of us have been in that situation. Usually, the public will tell the truth and auctions are the best barometer for prices and it will also tell you where price trends are going.

Bruce asks if women are getting more involved in auctions. Tommy says this is a growing trend as it used to be a male dominated field. Tommy says 20-30% of classes for auctions are now women.

Bruce asks about legislative issues that are affecting auctions in general. Tommy says that when legislation postpones the sale of assets it usually means there will be net price deterioration. Real estate is very fragile and unattended and vacant homes tend to lose value.

Bruce says Fannie Mae and Freddie Mac postponed auctions for their properties but in April have started back up. Doing this moratorium cost them money. Tommy says their unwillingness to accept market value has cost them millions. The more they postpone, the worse it will get.

Bruce says he read the auction magazine that in the last few years $270 billion worth of assets were sold. Tommy says this is not a record but getting close. There’s been steady growth in the total dollar sold at auction. 2008 saw prices for assets decline so volume went up but prices were down due to devaluation. So in volume, 2007 and 2008 were record setting years.

Bruce talks about trustee sales and how the lack of advertising doesn’t help the cause. Bruce asks if the National Auctioneers Association has any intent to try and get involved in the trustee sale process. Tommy says that was one of his main goals as President was to do away with the traditional foreclosure process. If the home was sold at the trustee sale to an end user it would save the mortgage holder at least $15,000 in transaction fees. This is not including price declines. This would be of huge benefit to the mortgage industry as a new loan with a new end user would immediately take the property.

Bruce talks about current laws and issues of cities hiring people solely to write fines to homes that are considered blight and that are violating codes. Tommy worries that these types of laws only makes lenders not excited to loan which further exacerbates the lending policies we currently face. No one will want to lend in these areas.

Bruce asks Tommy if he’s nervous about a shift in the American perspective. Tommy says he is concerned that capitalism and private enterprise is something that Americans are now wondering if they should be in favor of. Bruce says he’s concerned as well for some of the things that he’s seen and hopes we can solve some of these issues soon. At “I Survived Real Estate 2008” several solutions were presented but none have been implemented. Bruce things banks could save themselves so much time and money by doing so.

Tommy talks about his pre-foreclosure auction concept. Some Realtors are doing something very similar without approval. Tommy says they’ve implemented something very similar in their company and they’ve tried it out with consumers. As soon as a consumer was falling behind, Williams and Williams worked with the consumer to present the property to the public as well as possible. The final offer was presented to the lender. However, the loan servicer is typically the decision maker and is far removed from the actual decision maker. The goal needs to be lenders getting rid of this stuff as soon as possible to get things moving. This particular solutions gets a new person in the home right away.

For more information visit williamsauction.com or thenorrisgroup.com. Join us next week for part two with Tommy Williams.

Tommy served as President of the National Auctioneers Association in 2008 and is current Chairman of the Board. Tommy also graciously took part in I Survived Real Estate 2008 last year.

Thomas L. Williams is a graduate of Penn State University (B.S. Animal Science) and the Certified Auctioneers Institute (CAI). Representing the third generation of Williams family auctioneers dating back to the mid-1800s, Williams is also a graduate of the historic Reppert School of Auctioneering. He has over 40 years experience in real estate auctions, land development and real estate investment. He currently serves as President of the National Auctioneers Association.

A founding partner of Williams & Williams, Williams served as president from 1986-2000, and became board chairman in 2001. He also co-founded and served as managing partner of Lowderman & Williams Auctioneers from 1965-85. He has conducted over 10,000 auctions in all 48 of the contiguous United States and Canada, and is an advisor to auctions conducted throughout Western Europe, South Africa, Australia and New Zealand.

An avid cattleman, Williams also owned and operated Bradmar Angus Farms from 1965-85, after which he continued to serve as a herd and genetics consultant for many of the nation's premier Angus cattle breeders.

Williams is a licensed auctioneer and real estate broker in over 20 states, and an active member of the National Association of Realtors.

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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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Joseph Magdziarz of the Appraisal Institute #115

Bruce Norris is joined again by upcoming 2011 President of the National Appraisal Institute, Joseph Magdziarz.

Bruce asks Joseph why he’s teaching appraisal courses in foreign countries. Joseph says numerous foreign countries are asking for the education so they can find out how to write an appraisal that could be understood globally. This will allow them to participate in the global mortgage market.

Joseph says the ultimate goal of an appraisal is to assign a value of an asset in the now. An acceptable margin of error for an appraisal is 3% but no more than 5%. The definition of market value is a buyer and seller under no undue stimulus coming to an agreement on a price to be paid for an asset. Joseph talks about REOs and short sales and how they should not be factored in to appraisals as they are liquidation prices.

Bruce beings up this appraisal issue which investors are having to deal with when they purchase these types of homes and then repaire them in California. Joseph says the banks should not consider REOs and short sales market value because of the repairs being done and the risk the investor takes in this market. Bruce asks if the new buyer of a fixed home is setting the new market value. Joseph says in the open market, it should but the appraisal might be different because of all glut of REO comps. Often times, appraisers are not being fair and many properties are being undervalued which is a problem.

Bruce brings up the typical scenario of The Norris Group when dealing with appraisals in the current California real estate market. TNG purchases the distressed, “as is” property from auction or from an REO agent and spends time and money upgrading the property. If TNG gets multiple offers, why isn’t it considered market value?

Joseph says competent appraisers will say that that does create market value. Submitting those back up offers could really help force the appraisers make that market adjustment.

Bruce asks if there is no similar inventory, what should investors do? Joseph says hire someone with specific experience with an MAI or SRA designation. Bruce talks about an area in Moreno Valley and the glut of vacant REO and “as is” inventory. When TNG fixes something, the appraiser is typically not getting cooperation because there is no similar substitutions in the market. We’re the only fixed up property.

Bruce talks about the appraisal business in 2004-2005 and how they were feeling pressure to get to a certain high number for refinances. Bruce asks if there is now the opposite pressure from banks wanting to loan less thinking the value will continue to decline.

Joseph says lenders can make loans in a declining market at today’s value and shouldn’t feel like there’s excessive risk if there are the three C’s: collateral, capacity to pay, and credit rating. Joseph says he heard that appraisers were using foreclosure and short sales and these DO NOT make market value so are inappropriate. Liquidation value is a better term for these types of inventory.

Bruce brings up review appraisals and how the original appraisers are worried about coming in too high for fear of being blacklisted from doing work for a certain account if the numbers are adjusted. Bruce asks about the review appraisal process and what authority they have to adjust prices the way they do. Joseph says these review appraisals have to come up with their own opinion but to arbitrarily adjust a number up or down 10% without just cause would be a violation. Many times these reviewers are not following the same license laws the appraisers are required to follow. Appraisers could ask for the review appraiser to send to them the review but most probably won’t. They are entitled to a copy of the review appraisal.

Bruce asks if the review appraiser goes out into the field. Joseph says they often do the review behind a desk using AVM. This is not the same and is just an estimate. Joseph says many lenders might be looking for quick and cheap. Joseph says the lending institution or review company they pay does the review appraisal which is also causing a problem.

Bruce asks how difficult it is for appraisers to work in a market with such wide swings in price, sometimes monthly. Joseph says he doesn’t know how they work in states like California. He says only the best people should be doing these appraisals. People need to use a professional appraisers and not AVMs or BPOs.

Bruce asks if there are new rules for appraisals coming down the pike. Joseph say the Home Valuation Code of Conduct (HVCC) says any new loans that are purchased has to have an appraisal and any existing can be less than that. A borrower is also required to get a copy of the appraisal. Joseph said the use of management companies is causing a problem because they are keeping part of the fees that should go to the appraisers so they may be spending less time doing a proper job.

Joseph says an appraisal is typically good for six months but in this market, it’s not as relevant. Bruce asks about improvements on homes above and beyond like pools and upgraded hardscaping. In an inactive market, it’s very difficult to assign a value to these extras. An appraisal will have to try and find similar comps. In this type of market, it is possible for these extras to result in little extra value.

Bruce asks about “standard 3.” Joseph says they are 10 sets of rules that govern the appraisal industry. For more information, visit appraisalinstitute.org.

Joseph C. Magdziarz, MAI, SRA is the 2009 vice president of the Appraisal Institute. He will become the president elect in 2010 and president of the Appraisal Institute in 2011.

Magdziarz has been an active member of the Appraisal Institute for 38 years. He has served in a variety of capacities at all levels of the organization.

At the regional level, Magdziarz has served two terms as Regional Vice Chair and two terms as Region III Chair. He has also been a regional representative for many years. On the national level, Magdziarz served two terms on the Appraisal Institute’s National Board of Directors. He has served as Chair of the Education Committee for five years and has also chaired the National Audit Committee, Instructor and Faculty Committees, and Education and Publications Committees. In addition, he has served on a number of project teams. Presently, he is serving on the ADAPT (MAI demonstration report alternative) project team and the International Education and Designation project team.

Magdziarz has been President of Appraisal Research, Inc. in Rockford, Illinois for 38 years. He resides in Rockford, Illinois with his wife Sandra of 41 years and his bulldog Bella.
Magdziarz is an approved Appraisal Institute instructor for 26 courses in the Appraisal Institute’s QE, AE, CE, and USPAP curriculums. He has also had international assignments in Naples, Italy; Istanbul, Turkey; Seoul, South Korea; and Beijing, Tianjin, and Shanghai, China.

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Joseph Magdziarz of the Appraisal Institute #114

Bruce Norris is joined this week upcoming 2011 President of the National Appraisal Institute, Joseph Magdziarz.

Bruce starts by asking what the MAI designation means. MAI used to stand of “Member of the Appraisal Institute” but now means a members holds the highest professional designation for appraisers. The SRA designation is for residential appraisals and once again gives you the highest designation for that profession. These designations are given by mandated educations and experience.

In 1989, the FIRREA Act was passed. The FIRREA Act was put in place to create barriers to entry for those seeking to become professional appraisers and also to standardize the appraisal process. While it didn’t clean up the appraisal institute completely, it did put in place important systems. In 2008, the Appraisal Foundation brought education and review to a new level. This is still a work in process.

Joseph says on-the-job training is probably the most important aspect of a trainee becoming competent in the world of appraisals. Bruce asks what the stimulus was behind the FIRREA Act. Joseph tells him that at the time there was huge losses going on and lenders were able to hire whoever they wanted and they sometimes had no experience. This lack of experience was seen as a huge part of the problem during the S&L crisis.

Bruce talks about the current markets and asks if appraisers are taking some of the heat for the foreclosure problems. Joseph mentions the Appraisal Institute just got back from a Washington D.C. meeting with Congress and other groups in related industries. The Congressional Research Services gave them a copy of a report that was done on all the causes of the current crises. Out of 26 key areas that are listed as the cause of the real estate and mortgage backed securities issues, the appraiser world is not listed. Joseph says it’s good but it doesn’t mean the organization is perfect yet.

Bruce asks if Joseph sees legislative changes coming regardless of who is at fault for the current real estate crisis. Joseph says the Appraisal Institute’s president, Jim Amorin, is testifying before the Congressional Housing and Finance Committee speaking on the Housing Valuation Code of Conduct.

Bruce says in California foreclosures are a huge percentage of the for sale inventory. Often the process starts with a BPO. He asks is appraisers are part of that process. With BPOs, Joseph says there is not accountability and the requirements are different. Joseph says there are different motivations and that appraisers are required to remain unbiased.

Bruce asks how Realtors and appraisers get along and if they typically agree on important issues. Joseph says the two groups differ greatly on the BPO issue and appraisers think Realtors and brokers should be held to the same standards when making real estate evaluations and appraisals. Many states have their own rules and regulations so the National Association of Realtors doesn’t have much control of this issue on a state level. There are 23 states that currently prohibit BPOs for lending purposes. Fannie Mae and Freddie Mac were unaware of this and called their management companies immediately and halted the practice in those states.

Bruce says a few years ago he was at a Five Star Conference and a lender was on the stage when a broker asked why she had never gotten a listing from the numerous BPO submittals she had put forward. The lender admitted to giving the listing to the highest BPO they received. Joseph says that doesn’t surprise him.

Bruce asks how much of a problem coercion is for appraisers. Joseph says it’s been a real problem lately and especially in states like California. There was recently a lawsuit about an appraiser getting blacklisted because he didn’t give a lender a certain price. The Home Valuation Code of Conduct should address this as a new hotline will be created so appraisals can report this when issues like coercion arise. Joseph says there could be a penalty if an appraiser was caught adjusting numbers or was influenced. The other side is not currently help accountable and that should change.

Bruce says he had read that appraisers may soon have to be bonded and asks how that would change the appraiser business. Joseph says it would be devastating to the business. This would raise an appraiser’s overhead $16,000 and that would be passed on to the customers. The lenders should be the one with the bond since they approve the loan.

Bruce talks about the cramdown in which a current appraisal is necessary. Joseph says it’s excellent for appraisers but it hasn’t passed it yet. Too many people did home valuation models and BPOs and not professionals appraisals. It would have helped. There is a downside to cramdowns so he’s waiting to see what happens.

Bruce asks about valuations models. Joseph says sometimes they are very good and sometimes they are really bad. Areas like San Diego where there are a huge amount of dissimilar properties in a neighborhood make these models less effective. AVM is a type of regression analysis reliant on historical data so it’s not always current. Sometimes these models aren’t updated for sometimes months. Bruce asks if this is the issue with review appraisers. Joseph says this is more of an opinion and not a real estimate. AVM stands for automation evaluation model.

Fannie and Freddie say they test and update their systems often but to not give details. Every time new data gets in the model changes. But once a downward trend starts, it will predict lower and lower numbers much like it did when the market was booming. It works best when markets are flatter.

Bruce asks Joseph what changes he would like to say in the business. Joseph would like to see more education and higher standard of competence for all appraisers.

Listen in next week as the interview continues. To read more on the Appraisal Institute, see appraisalinstitute.org.

Joseph C. Magdziarz, MAI, SRA is the 2009 vice president of the Appraisal Institute. He will become the president elect in 2010 and president of the Appraisal Institute in 2011.

Magdziarz has been an active member of the Appraisal Institute for 38 years. He has served in a variety of capacities at all levels of the organization.

At the regional level, Magdziarz has served two terms as Regional Vice Chair and two terms as Region III Chair. He has also been a regional representative for many years. On the national level, Magdziarz served two terms on the Appraisal Institute’s National Board of Directors. He has served as Chair of the Education Committee for five years and has also chaired the National Audit Committee, Instructor and Faculty Committees, and Education and Publications Committees. In addition, he has served on a number of project teams. Presently, he is serving on the ADAPT (MAI demonstration report alternative) project team and the International Education and Designation project team.
Magdziarz has been President of Appraisal Research, Inc. in Rockford, Illinois for 38 years. He resides in Rockford, Illinois with his wife Sandra of 41 years and his bulldog Bella.

Magdziarz is an approved Appraisal Institute instructor for 26 courses in the Appraisal Institute’s QE, AE, CE, and USPAP curriculums. He has also had international assignments in Naples, Italy; Istanbul, Turkey; Seoul, South Korea; and Beijing, Tianjin, and Shanghai, China.

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REO Mentor Tony Alvarez #113

Bruce Norris is joined by expert real estate investor, property manager, and mentor, Tony Alvarez.

Bruce starts by asking if teaching will be a new venture for Tony. Tony talks about The Norris Group giving him his first speaking chance several years back and how doing so forced him to think about what he brought to the table as an individual. Tony had to figure out why he was different in the business. Tony talks about how building relationships is so important and how those relationships can build unbelievable business relationships and wealth.

Bruce asks why a Realtor is better off building a relationship with an investor. Tony says many of these REO houses are going into escrow multiple times. Tony has built his relationships by performing. He has never put in an offer to an REO agent he didn’t close if it was accepted. Agents begin to understand he stands for performance. That strong performance gives the agent ammunition for their asset manager and makes his offer stand above the rest.

Tony discusses coming out of bankruptcy and how he started investing in Palmdale. Tony talks about how he gets in the door with REO agents. These REO agents are busy and they can’t stand newbie investors and the amateur mistakes they make. REO agents eventually end up relying and trusting an investor only after they prove they are an asset.

Tony goes over an example of what he had to deal with when starting to work with REOs in the Antelope Valley in the 90s. Tony talks about approaching an REO agent and how he got the door open. One relationship made him millions and he returned the favor when the market changed.

Tony and Bruce discuss trying to make connections with people. Tony says he’s never met an REO agent that was from Mars. They’re people. There’s always a way.

Bruce talks about Tony and why he is so loved. Some people think Tony is the greatest negotiator but Bruce says why he’s so good is because it isn’t the intent. Bruce talks about love and what Tony brings to the table.

Investors have to not only know what is working to make deals in this California real estate market but they also must understand what they bring to the table as individuals. We as individuals must know what we’re good at and why each of us is different so we can use that in our daily lives to impact people around us. Tony put it best: The one who gives the most gets the most.

Tony Alvarez has been a successful Real Estate Investor and Certified General Appraiser in the Southern California area since 1981. Tony has bought, sold and rented hundreds of properties from vacant land to condos, single family residences, and apartments. More recently he is investing in commercial developments in Arizona, Nevada, and Southern California.

As an appraiser Tony worked as a staff appraiser for Great Western and Glendale Federal Bank and is approved by hundreds of Lenders, Insurances Companies as well as Government Agencies.

He has worked for Fanny Mae, Freddie Mac, FHA and the FDIC.
He has an in depth knowledge of the inner workings of Lenders and their REO (foreclosure) departments. Tony’s knowledge of real estate, appraisal, finance, and investing is vast and varied. He brings a unique perspective to the real estate investment community.

Thanks Tony for joining is on the radio show. Best of luck with you training in Los Angeles this weekend. Next week, a very important interview with Joe Magdzriaz from the Appraiser Institute.

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REO Mentor Tony Alvarez #112

Bruce Norris is joined by expert real estate investor and mentor, Tony Alvarez.

Tony got started in 1980 watching the infomercials on the television. He bought all the courses. It quickly led him to appraising. All the courses he had bought didn’t get him to the numbers he needed. The appraisals license really helped him take off. Tony was born in Cuba and his first exposure to real estate at a young age was very positive.

In the 1980s the interest rate was high. Tony started buying little single family home sin Burbank. He expanded in “The Flats” and kept his job as an appraiser. He started working with two gentlemen from New Zealand. These guys opened his eyes to a new world of investing. Tony learned quickly that his preconceived notion on real estate investing had held him back from what was really possible in the business.

Tony goes into detail about what many new investors say and how they fear getting in the market. Tony discusses the specific questions he asks new investors because he finds they typically make the same mistakes and they just don’t know where to start. They haven’t really thought about the details of where they want to invest and say that they just want a deal.

Bruce talks about how many investors are trying to either make up for lost time and/or trying to make up for losses which is not good. Hearing the desperation makes him nervous as many of these investors get led astray. Tony feels the same way. He himself struggled with this issue early in his career.

Tony talks a little about his “Third Element” concept. He goes into fear and how it really controls people and what they do and don’t do. He talks about fear and how it really gets in the way of real accomplishment. More people need to analyze how they make decisions and stop operating under fear.

Tony talks about people making mistakes because they are unwilling to learn from people already in the business and do not invest in education. He talks about his philosophy on education which is very much like Mike Cantu. Tony went to Mike Cantu’s training although he’s been a land lord for years. All it takes is one simple idea that can revolutionize how you do business. Tony talks about how much money he would have saved if he had been more careful with education in the beginning.

Bruce and Tony discuss how this business has changed his life and how he’s set up his properties to pay for his base lifestyle. It’s afforded him to do some interesting things.

It was a little long of an introduction but more is coming next week.


Tony Alvarez has been a successful Real Estate Investor and Certified General Appraiser in the Southern California area since 1981. Tony has bought, sold and rented hundreds of properties from vacant land to condos, single family residences, and apartments. More recently he is investing in commercial developments in Arizona, Nevada, and Southern California.

As an appraiser Tony worked as a staff appraiser for Great Western and Glendale Federal Bank and is approved by hundreds of Lenders, Insurances Companies as well as Government Agencies.


He has worked for Fanny Mae, Freddie Mac, FHA and the FDIC.
He has an in depth knowledge of the inner workings of Lenders and their REO (foreclosure) departments. Tony’s knowledge of real estate, appraisal, finance, and investing is vast and varied. He brings a unique perspective to the real estate investment community.

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