The Media's Negative Spin on Flipping Houses and Investors

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Here's a report from CNN Money on flipping houses that continues the trend of media and government negativity on the housing situation:
House Flipping

Pay special attention to the reporter's remarks about flipping playing a role in the bubble (makes it sound in passing like flipping was the cause almost exclusively), and also listen to the remarks from Lawrence Yun from NAR. He claims that house flippers are driving first-time buyers out of the market due to affordability issues.

I'd think that NAR would be on the side of investors who improve neighborhoods and the quality of homes? Perhaps I'm reading into his comments too much?

What are your thoughts?

Is this more of what I and others talked of at the BP Summit -- of an overwhelmingly negative impression of investors by the media and others in the industry?

Maybe this report from CNBC the other day changes your opinion?
http://www.cnbc.com/id/46892030

Thoughts?

Medium fbprofileJoshua Dorkin, BiggerPockets | http://www.biggerpockets.com

I think that investors fail to see the importance of local public relations. REI clubs should be involved in the community, putting something in, not just taking from. Take note of how local RE boards interface with community affairs, at least attempting to put the best foot forward. PR pays off, if it didn't others wouldn't do it! Write an article for your local newspaper or hosuing magazine, get involved with a non-profit housing or shelter. PR pays.

Medium logoscopiccroppedblue2Bill Gulley, General Real Estate Academy | https://generalrealestateacademy.com

That CNN report was appalling. No mention of banks giving bad loans, no mention of questionable approval processes, just a slant that investors were the cause of the housing crisis, and for someone to say investors are forcing out first time home buyers is insane. If anything, we are creating an asset that first time home buyers would be proud of. They cannot afford to pay all cash and rehab a property. We provide a service to home buyers. Its the banks who are squeezing out 1st time home buyers.

@Bill Gulley - That is one (of many) point of contention I've got with the real estate clubs out there. I believe that they should be doing exactly what you talk about. They need to be the eyes and ears of the community to local press, but unfortunately, I believe that too many of these groups are focused on getting guru speakers to sell stuff to care about being advocates for the population they are designed to serve -- but that's a debate for another thread.

@Kevin Kaczmarek - agreed.

Medium fbprofileJoshua Dorkin, BiggerPockets | http://www.biggerpockets.com

The NAR economist first says that investors are pushing out 1st home
The CNN report is consistent with the media's and public's lack of understanding of RE investor activity.

The continued use of the word flipping does not help investor image or PR. Back when I started in the late 90s, a wholesale deal was sometimes called a flip. A rehab deal was a rehab or remodel. Then in the mid-oughts, the government went after illegal "flipping", which had nothing to do with wholesale deals or rehabbing. That type of flipping involved collusion on the part of investors, agents, appraisers and loan brokers (and sometimes straw buyers) to inflate prices and sell to buyers with bad credit. "Anti-Flipping" rulings became something the public heard about. Not that they understood any of it. Flipping still indicates something either illegal or somehow unethical to the general public.

I don't use the word flipping about what I do. I re-sell properties or I rehab properties or I do both. Rehabbers calling what they do flipping might want to consider calling it R&R (rehab and reselling). Think about it. Why continue to call your hard work and investment something that the government told the public was illegal. I think we'd be better off revising the language than trying to explain to the media and public that what we do isn't illegal.

Updated over 4 years ago

Somehow my first sentence got truncated. I meant to say that the NAR economist first points out that entry level home buyers are being pushed out by investors. Then later he says that investors are needed to help out with excess inventory. Talk about p

I'm not sure Josh. Once we get beyond our egos, does media perception really damage our bottom line? I suppose you could argue a slippery slope that media perception will skew public opinion which in turn could skew legislation which in the end could result in policies that affect our ability to do business... but... wow, that's a stretch.

Sure, our egos wish we were all portrayed as Mother Teresa but at the end of the day, does that increase our profit margins? As business people, would you rather have your time spent inflating your ego, or bolstering your bottom line when you attend a meeting or training session?

I will gladly lead by example and establish policies for myself and my business that are not only legal and morally sound, but that also allow me to sleep well knowing I'm contributing positively to more than just myself. But I'm not a Saint, I have no desire to go beyond that nor to be recognized beyond that. My friends, family, colleagues, and business interactions will know the real me. CNN can say whatever they'd like to everyone else.

People have been flipping houses for a very long time, in all real estate markets. The increase in flipping was because of the bubble, not the cause of the bubble. It is almost comical to talk about the cause of the housing bubble and not mention lending practices, swaps, etc. Does it hurt our bottom line? It is hard to say one way or another, but I agree with Bill that positive PR could only help.

@Nathan Emmert - This certainly goes far beyond ego. Every single piece of legislation that affects your business is constructed, at least partially, based on media spin.

Medium fbprofileJoshua Dorkin, BiggerPockets | http://www.biggerpockets.com

I know of case after case of banks accepting cash offers over a higher (significantly higher, mind you) financed offers! So who's hurting the housing market and who's just taking advantage of opportunity? The point of an investment is to buy it at a good price. I don't blame investors for doing what's possible. I do kind of agree that some people are going into it flighty and not fully understanding what a real estate investment will entail.

I think most people have an idea or perception of what rehabbers do, but have no idea of the complexities that are involved in our business models. TV shows make great ratings by showing people one side of the transaction, but do not show accurate numbers or the other side of the deal - helping a struggling home owner walk away debt free, taking "that house" off the neighborhood and making it look better, etc.

When I started rehabbing I was in apartment complexes, and the project manager told me to stop using the word flipping. I would always mention that we were flipping the apartment. I understand now why he was so adamant about not using that word.

Today, when friends, family or others ask about what we do.. I avoid the word flip altogether. We buy, renovate, and sell houses - adding value to the deal, ensuring that the new buyers will enjoy their home for years to come.

I find it ironic that this business model has a negative perception about it.. How many other business models are built around "buy low - sell high"..?

As long as my business is operating within my personal morals and ethics, and I am in the black - I am content. I think the people passing judgment do not understand the full scope of what we do entails, and like many other things, opinions are skewed by lack of knowledge.

Thankfully, sites like BP exist that open and clear the air to show there are legitimate business owners who do operate ethically and morally.

@Nathan Emmert Josh is correct. Our legislature responds to media spin, for better and for worse. It's great when the media does some old-school heavy-duty investigative journalism and the government responds with hearings and it's own investigation (think Watergate). Not so great when CNN and Fox News tell the general public they've been the victims of RE investor activity without any real understanding of RE investment activities and RE law. Unfortunately, our congress people are not immune to reactionary public pressure.

Most flippers are buying homes that either due to poor condition OR a very low price would make it very very very hard for the typical first time home buyer to get a mortgage.

Flippers can and often do make a positive impact on the values of the surrounding homes by taking an eyesore property and making substantial improvements.

Ignore the ignorant...

@Mark Brian - The problem is that by ignoring the ignorant, real estate investors become the voiceless. Investors and the investing community as a whole need to speak out. We have to spread the word - one by one - through channels like BP, Facebook, Twitter, etc, through comments on these articles, and so on. We also need to lobby our elected officials and make sure that the voice of the investor is heard.

Right now, the ignorant is exactly whose message people are listening to, and that needs to stop if things are to change.

Medium fbprofileJoshua Dorkin, BiggerPockets | http://www.biggerpockets.com

I'm not sure how many Investors saw this, but it's clear that we're not popular in some quarters...

CONTACT

Leah Cody
New Vista Asset Management
(858) 432-5200

Brian Hurley
New Vista Asset Management
(858) 432-5200

REO SALES DRIVE DOWN OWNER OCCUPANCY RATES IN KEY US MARKETS

Ongoing declines in the percentage of foreclosed homes acquired by owner occupant buyers confirmed by newly published Index

December 1, 2011 — San Diego, CA — New Vista Asset Management, a San Diego-based provider of real estate services for banks and other sellers of foreclosed residential homes, has published the results of a three-year study examining buyer types in 18 US counties hit hardest by America's mortgage crisis. The study uses data extracted from local recorder, courthouse and tax assessment records to determine whether the purchasers buying foreclosed houses from banks, HUD, Fannie Mae and Freddie Mac, are owner-occupants or absentee owners using single family homes as rental or vacation properties.

New Vista's data indicates that the percentage of REO homes sold to owner occupant buyers has decreased in almost every market analyzed by the company in a study that began tracking real estate sale transactions closed in the first quarter of 2009 and includes consecutive quarterly data through the third quarter of 2011.

"Although, quarter-by-quarter, we have observed some market-specific increases, over the entire period, owner occupancy rates for REO sales have broadly weakened," said Brian Hurley, New Vista's president and chief operating officer. "With eleven consecutive quarters of data, we can look beyond both seasonality and the temporary impact of demand stimuli such as the homebuyer tax credit, and observe a clear pattern of decline."

Hurley added that the pace and scale of decline vary widely across markets. In Los Angeles County, California, for example, the New Vista data shows 79.36% of single-family REO houses were purchased by owner occupants in 2009, compared with only 60.32% in the third quarter of 2011. Most counties covered by the study saw declines of more than five percentage points during the same period, with a few dropping more modestly.

"We are troubled by the significant drop in owner occupant purchases of REO properties in these hard hit markets, which is no doubt compounded by decreased access to credit and a failure to repair foreclosed properties to move-in condition," said Kevin Stein of California Reinvestment Coalition. "The increased investor acquisition of REOs is reversing the years of community development progress that nonprofits have facilitated throughout California. We need to ensure that lenders, nonprofits and government agencies are working together to give qualified homebuyers a fair chance to purchase REO properties and help stabilize residential neighborhoods," Stein added.

According to the New Vista study, only one county included in the Index (Wayne County, Michigan) had an owner occupancy rate for single-family REO sales below 50% in 2009. By the third quarter of 2011, owner occupancy rates for REO sales in an additional four of the studied counties had fallen below 50%, including Maricopa County, Arizona; Osceola County, Florida; Miami-Dade County, Florida; and Clark County, Nevada.

"The decline in owner occupant sales in Maricopa County over the past two years has altered the fabric of our neighborhoods," said Patricia Garcia Duarte, president of Neighborhood Housing Services of Phoenix and Chair of the Arizona Foreclosure Prevention Task Force. "We need to look carefully at this trend and refocus on giving homebuyers a chance to own a piece of the American Dream."

While New Vista has been tracking the study's findings since the first quarter of 2009, company management elected to formally publish the index in response to a growing focus on investor-driven solutions to the nation's residential real estate crisis. "Several initiatives now under consideration promise to channel more houses to investors rather than to owner-occupant purchasers," Hurley observed. "We timed the first release of our study to raise awareness of the community impacts that current REO disposition practices are already having. Bulk sales, drop-bid foreclosure auctions and the proposals under review by FHFA promise to move more REOs out of local real estate markets — out of the hands of owner occupants, out of the reach of local real estate professionals, and out of the capital base of these communities themselves. Before the market adopts new strategies to address an expected surge in foreclosure volumes, we wanted the owner-occupancy impact of current approaches to be well understood."

New Vista's "Index of the Percentage of Single Family REO Properties Sold to Owner-Occupant Buyers" will now be published quarterly. The company plans to increase coverage to include additional markets in 2012. Versions of the study that track owner occupancy sale percentages by individual REO seller are made available privately to the company's clients. The Index can be viewed by clicking here.

True Joshua but I meant to not let it bother you.

In 2009 when I was still just a typical realtor, it seemed to be the case that the only thing people hated more than real estate investors were realtors.

Now that I'm more of an investor, the tables appear to have turned. In that light... I should likely apologize to the investor community for causing such a downturn in the reputation.

In all seriousness though... I think people equate investors with slumlords because the good stories never get told. No one in the media thinks it is sexy to do a writeup about a guy that does a ton of well thought out, precisely calculated flips because let's face it, outside of BP no one would know what the hell they were talking about.

If we are to be heard, understood, and eventually embraced (or more likely, at least disliked less) it will start with our ability to publicize the redevelopment of communities, the increase in property values, and the stimulation of the overall economy that investors and investors alone are able to provide.

The thing is... Josh can't do it alone. We all have to do our part.

@Jake Kucheck you are on to a very good point...

There are no sites on the internet like BiggerPockets that seek to actually HELP investors do what we do BETTER! Whether it is providing help, access, mentorship, encouragement or even the biggest thing...providing a venue to establish standard business practices. If we WANT the story out there we have to make it happen.

3 little buttons in the upper right hand corner are a great place to start. As I am writing this, this discussion has been "tweeted" out twice. No shares on Facebook and no shares on Google+. When I get done, each of those will have 1 additional shares. Get this type of discussion in front of your peer groups. Get it in front of people who are in our industry or know that you are in the industry.

When a site like BiggerPockets is getting 1 Million unique visitors a month, then the media will come to not only Josh, but also the influential members of the site for interviews and commentary. All of the power, at least the power that is home grown and built from the grass roots up, starts with the people that care the most.

SHARE THE STORY OF BIGGERPOCKETS!!! HELP THE MEDIA TO UNDERSTAND WHAT WE AS AN INVESTOR COMMUNITY ARE ALL ABOUT.

Othewise, we simply let me define us as they choose either out of jealousy or ignorance. Either way, its an uninformed perception.

Start spreading the word about BiggerPockets.com and create a fire on Social Media that spreads.

Medium memphis invest logo 2015Chris Clothier, Memphis Invest, GP | 901‑751‑7191 | http://www.memphisinvest.com

I agree that the media negative on investors and "flipping" does in deed cause harm to our bottom lines through new government rules, laws, regulations, hinderences, etc. and it is important that we do have a "voice". That responsiblility also lies with all of us and BP is a perfect place to start that voice (or should I say, make it be heard!)

The media and these interviews always seem to get it wrong, perhaps on purpose, I don't know. They speak to a person who is rehabbing to re-sale for a profit, then an interview from some other idiot comes on and talks about how flippers are buying up the property and homeowners have less to choose from. That could not be further from teh truth, what this person is mixing up is the difference between a house flipper investor and a investor who is a buy and holder (landlord). In the rehab flip side, that very same house goes back onto the market in a condition well improved from before, providing a better quality home for a owner-occupant, providing higher tax revenues for the state through property taxes, providing jobs not only on that specific job site, but at all the stores and service providers who are utilized, provides sales tax revenues for all the materials purchased, and provides higher values and quality of homes in that specific neighborhood. For a rehab flip investor, anything negative stated about them is a complete falsehood as only good comes from the efforts.

For landlords, perhaps you can make the argument that since they do not re-sell the property, that is one less available for owner occupants, but lets face the facts here, all they have to do is look at the entire population and then compare that with the number of households that are in existance. That comparison will show that new housing is not needed in most areas of the country and will not be needed until the population grows there.

Either way, it will be very rewarding to hear a story on a large network that praises RE investors. This crap about how flippers created the bubble is ludicrous! The bubble was created by the greed of wall street and the house flippers were a product of that, not the other way around. In fact, I don't call those people flippers or investors, all they had to do was place a blind fold on, spin around and point. Whichever home their finger landed on, buy it, then 4 months later, re-sell for $100k more as it magically increased in price, not because of the fantastic work they did, and not because there were hundreds or even thousands of them, it was due to the manipulation of our government, banks, and wall street all working to cash in on huge paydays. The many so-called flippers of the bubble got caught in 2007 and have yet to rise back, why? Because they were not investors at all, just riding the wave similar to a stock frenzy on an IPO with $0 earnings, yet the stock would go up 200% in 4 hours.

Medium be logoWill Barnard, Barnard Enterprises, Inc. | http://www.barnardenterprises.com

@Will Barnard It really is a journalism problem. Most newspapers and networks simply don't have RE experts. They are truly winging it. Last year there was an article in the SF Chronicle about a couple that bought a property at trustee sale in CA only to find out it was subject to a huge first. The article was about how the foreclosing lender should give them back their money, how there was no announcement at sale that the foreclosing lender was in 2nd position, how the couple was ripped off. It kept referring to the "2nd lien" that was purchased and that it was a "lousy lien".

I wrote to the RE editor and asked who wrote it because every single piece of information in the article about trustee's sale in CA was wrong. The editor made the journalist write me back. She admitted that she just used whatever language and facts the buyers featured in the story told her and she knew nothing about trustees sales procedures. Her title was RE staff writer! She asked me where she could easily learn about foreclosure sales in CA. I sent her to some message boards and to Bruce Norris' site and recommended CA civil code as bedtime reading. She could have done that before writing the story. This is happening every day.

I could not agree more. Journalists need to complete their due diligence before being allowed to write a story on someting they have no personal knowledge of. Not just them, but TC news media too! They do the same thing.

I can't remember what show it was or what station, but last year, I watched some crap on RE and this lady was saying things that made no sense at all to anyone who is "in the know".

I think these news stations need to check out BP and get some real investors who know what the hell they are talking about.

Medium be logoWill Barnard, Barnard Enterprises, Inc. | http://www.barnardenterprises.com

Originally posted by Joshua Dorkin:
I'd think that NAR would be on the side of investors who improve neighborhoods and the quality of homes?

NAR uses investors to take the negative spotlight off of the crap many Realtors do and get away with. Yun basically threw us under the bus as he knows that 1) many of his agents make a very good living off representing Realtors as both buyers and sellers and 2) It's actually many home buyers who are pricing Investors out of the market (at least here). Everytime you want to submit an offer on a fixer upper that makes sense some home buyer with a 203k loan comes along with a higher offer.

BUT, we could learn a lot from NAR. They are ORGANIZED. They collect millions in dues and have lobbyist and PR companies working hard to put Realtors in the best of light. And I didn't really peep it until I became a Realtor 2 years ago. I realized that there are many guilty folks who don't go to jail. Primarily the ones who don't have to use a public defender and can instead afford a high priced attorney. NAR has organized dollars working for them and influencing the public to trust them over Investors.

@Will Barnard - weren't you organizing something similar to NAR but for investors about a year ago?

Medium webuynjrealestate bbbIbrahim Hughes, We Buy NJ Real Estate LLC | http://www.WeBuyNJRealEstate.com

How Negative Coverage Can Hurt Your Business

Negative coverage can lead to a negative image among:

--Lenders, who could be less willing to approve financing to investors;
--Passive investors, who might be less willing to invest in your next project;
--Neighborhood organizations and local residents, who might view investors as bad neighbors and support local ordinances and zoning restrictions to make it difficult for them to buy;
--National consumer groups concerned about affordable housing and minorithy home owners already see investors as a threat and may push for cnanges in banking regulations and housing policies that will limit residential real estate investment; and
--Politiclains and policymakers can enact policies like the recent anti-flipping rule and other regulations at the federal and state levels.

Need more evidence? Ask your local mortgage broker or banker about how recent laws and regulations have changed their lives...

I was starting an organization to organize investors much like the NRA, but yes, I put it on my back burner due to the lack of interest. Maybe it was me, but there is no way I or Josh could do something like that without a large back-room organization for support.

You'll note too in the article posted above that each source is pushing their own agenda. But the public is usually unaware of such topics and most do not consider who is saying what and why.

Journalists have their go-to people to advise on various topics. They don't spend alot of time considering their real expertise and often assume expertise by education or success in the community. If there is a news story about the economy they run to our local state university and have the professor of economics give his opinion....story done!

Journalists will also pick up other stories for ideas or follow ups. There is an impression made, positive or negative, that flavors their mission to write or report, even if they don't admit it. I have been interviewed many times and saw that when my statements were not in line with the overall agenda posed that my statements were not used. I have also pressed some issues and they provided a counter point. But they journalist takes the path of least resistance every time as they are under a time constraint.

RE stories will usually be followed up by one of the RE brokers who own the larger brokerages in town, or a successful agent. Their opinion will always be slanted toward their agenda, not really an unbiased opinion. I mean really, asking an agent that specializes in 300+K listings is not really one to ask about REOs and investors, but the journalist doesn't see that disconnect.

So with all said, you need to be that go-to person in your community, if not you, who? Someone needs to approach your local media and tell the story, speak up!

Medium logoscopiccroppedblue2Bill Gulley, General Real Estate Academy | https://generalrealestateacademy.com

While any action is better than no action - the easiest action to take is sharing this forum. This discussion is a great place to start telling those around us what we do and how different reality is from the story being told.

856 views of this forum discussion - can we get 1,000 shares between the social media buttons??? I put a tweet on my twitter account and it has already been picked up multiple times by other followers. BP gets new users everyday from sharing these types of forums all over the internet.

It is so easy to start spreading the story of this site and the people that use it. The REAL real estate investors that are driving the economy right now.

Share.....

Medium memphis invest logo 2015Chris Clothier, Memphis Invest, GP | 901‑751‑7191 | http://www.memphisinvest.com

Originally posted by Ibrahim S:
Will Barnard - weren't you organizing something similar to NAR but for investors about a year ago?
I wanted to and had a post about it, but with limited responses from other BP members, it never started. Rather than onje person trying this, I think it would be better as a whole if together BP Nation did it utilizing this very forum as "our group" and SHARING this website and threads with others through all available media outlets.

So, if everyone is on board, we can accomplish great things.

Medium be logoWill Barnard, Barnard Enterprises, Inc. | http://www.barnardenterprises.com