All Forum Posts by: Aaron Norris

For those interested in the video from I Survived Real Estate, it's now online. It's free and will also play via our podcast. Some interesting perspectives, not always in agreement, from a group of very smart people.  

They discuss trends, regulation, legislation and what they are fighting for in 2015 for their respective associations. We always appreciate them giving us their time to make this happen. 

• Doug Duncan, Chief Economist of Fannie Mae
• Sean O'Toole, President PropertyRadar
• Christopher Thornberg, Beacon Economics
• Gary Thomas, Immediate Past President for the National Association of Realtors
• David Cogdill, President and CEO of the California Building Industry Association
• Bill Cosgrove, Chairman of the Mortgage Bankers Association
• Bruce Norris, President of the Norris Group

Hope you enjoy. 

http://www.thenorrisgroup.com/isre2014 or www.isurvivedrealestate.com

@Will Barnard hoping this is OK to post but if not let me know so I can take the links out. People can just as easily search for the event on google.

@Account Closed for the big flips. :) I like my boring single family rentals in the IE. 

Price reductions because they were dreaming for a high number or real comps coming in lower. I see the down arrow all over the MLS but the listing price that some people had stuff listed at were almost offensive. I don't think some Realtors are dong a good job telling their buyers what's up. Creating a bidding war is a far better strategy than a reverse auction (in my opinion).

I sure wish they would have gotten creative. I recently emailed the City of Riverside's Community Director about an idea of a nothing down program for graduating university students. In Riverside, we have four colleges but many graduates leave for better jobs along the coast. What if there was a nothing down program for students with a good business idea? In exchange for getting them into an affordable home with nothing down, the graduate would commit five years to working on building the business in the city. Granted the would need to have a solid business plan and idea. If they moved before, they would have to pay back the down payment assistance.

When you plant roots for that long, you're more likely to stay. In this scenario, students would be locking in their payment and would be more likely to take better care of the property. (I live in an area with a lot of student renters)

Imagine if graduating students in the Inland Empire back in 2009 were offered such a program! Not only would the city stopped the brain drain, we would have had almost 30-somethings with a home, fixed living expenses, and equity in their home to invest back in their business. 

We're knee deep in research for our January market update on this very topic. I've been hard pressed to find an economist that's negative on the California economy for 2015. The big difference with the new 97% program, as it's currently being presented, is that the borrowers will have to fully qualify. I'm assuming under the same guidelines that QRM requires. Yeah, we'll see if that lasts. Remember that the best performing loan program, even through the downturn, was the nothing down VA program. It's about qualifying and not lending money to anyone with a pulse. Maybe they could stay out of trouble that way.

Many of the building projects in Riverside just broke ground or won't until 2015.  The building industry has been DEAD since 2008 out here so it's going to be weird to see what that looks like for an economic engine locally.  I don't know enough about how long that would take to show up on a chart. Then again, builders are not building until a home is sold. No more building out a tract hoping for them all to sell. Not sure if they are doing it that way in Irvine and San Diego where I know there's some tracts going in. The fact that building is occurring seems positive.

I am set to attend the California Association of Realtor Economic Summit in November.  Looks super nerdy and the line up is all academia economists for the most part.  I'll report back. 

I was at an event with Bruce Norris, Christopher Thornberg, John Husing, and an economist from Wells Fargo in May I believe.  All thought 2014 was a bit of a dud but didn't see a huge reason why the Inland Empire region would experience a negative 2015.  

I purchased a rental in Riverside early this year and prices have still gone up.  The price point was under $300k and inventory for the area is still tight. My brother, however, said there's a pocket in Corona that he watches where inventory was back up to 5 months and prices had dropped. That area is all over the $400k mark.

I'm curious to see if they revise HUD funding guidelines. Riverside and San Diego County both got 30% slashed with OC and LA only got 10%. I think I heard CAR is fighting for the return to previous levels. No we have quantitative easing that just ended completely. I'm not going to pretend I know what that will look like. I do know there's a lot of money looking for return. I know Dad thinks these hedge funds would put their money to work faster going after the private market. Far more demand. We'll see!

My favorite quote from a Realtor: 

"He won't make any money on this one. This will be practice."  

We turned down that hard money loan.  Realtors can be your best asset or worst enemy. They get paid up front and aren't necessarily tied to the success. While, yes, the eventual goal would be to be less involved an trust a team.  Your margins on this deal are REALLY tight for one of your first deals. 

Do you have a very detailed estimate of what is going to be fixed and very comfortable there will be no surprises? 

You're not backing out of the deal, it's just a delay. If you cancelled the transaction after tying up resources and time, that's understandable. At least that's what I read. Is the money in addition to what you've already paid? Will he subtract that amount from fees once closed?

SB978 in 2013 forced many of the issues mentioned in this thread to be dealt with. 3rd party appraisals are required and must be presented to the trust deed investor. If it's new construction or repairs over $100,000, a third party fund control is required. There is also a cap on the ARV allowed now at 80%. So in the last boom, you may have had a builder go under that borrowed the full amount and spent all up front. With fund control, funds are released as work is being completed according to a set schedule. If the builder went belly up during the project, money should remain to finish the construction. Other mistakes we hear about: 1. People brokering transactions illegally and committing usury (most not understanding what that is). 2. Funding deals without a full appraisal with true comparables to understand true value. Not all appraisers understand ARV and our world. 3. Making loans with zero payments for a long period of time. How on earth would you know there's an issue in this scenario until it's too late? 4. Working through layers if agents and brokers. You often never get the full and true story. As in, originated as non owner occupied but in realty, you were duped. Had an attorney tell me a woman in Orange County, in collusion with a notary, fraudulently created paperwork and changed signing authority of their LLC with the Secretary of State. The originating broker was working through two other agents somehow to close the deal. Loan on land with no payments for a year. She was hours away from getting the loan but the originator got suspicious and looked some of the other people in the entity. Luckily, the transaction was stopped. Here is California, I hear you should expect 2% of the cost of the loan in foreclosure fees. It used to be 1% but the required advertising in print has made it far more expensive.

Hi Robert, I've purchased two rentals this year on top of working full time at The Norris Group. Once was a first day listing on the MLS and I was the first with an offer. I was not the highest price but was willing to flexible in terms. the seller's purchase required extra time in the house because their purchase was contingent on me closing quickly. The second was a wholesale deal. I've been letting people know I was looking in the IE. Hoping to hold on to one more this year.

You can get prequalified with a hard money lender and it's a good idea that you do. Experience is great but not required. As a hard money lender, we look at liquidity. We want our borrowers to be successful so we look at our loans like business loans. We want to see a certain amount of liquid working capital to ensure you've got enough cash for down payment, some repairs, and monthly payments. All hard money lenders are different and some states have different requirements. But, find someone local, give them a call, and find out how to get prequalified. We have simple phone interviews and after looking at you liquid cash situation and understanding what you're trying to accomplish, we give a letter of credit stating how much we're willing to lend. Keep in mind this is not proof of funds but most REO and short sale agents understand hard money. They also know bad hard money so working with a hard money lender who has a reputation for closing is important. It doesn't mean we'll fund a bad deal so also keep that in mind.