170-TNG Radio - Norris & Barlet 4-17-10
This week Bruce Norris is joined by Marketing Director for The Norris Group, Aaron Norris, and Investor Relations Expert, Diana Barlet with The Norris Group.
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Diana sold her Riverside home in November of 2006. That was a pushing slightly past the peak, but she bought the home in 2001, so she still profited from the majority of the price increase. She purchased the home for $145,000 in 2001 and she sold it for $400,000 in 2006. She was very pleased with the results. The original interest rate for her home was around 8 percent. The home was an owner carryback. She did a refi on the home afterwards for upgrades.
At that time, her decision to go from homeowner to renter was a big decision. Diana has been a homeowner since she was 21, so becoming a renter felt like giving up part of her identity. Diana also felt like she was loosing control of her life, because she had the property owner telling her what to do.
Her experience as a renter has been relatively unpleasant, but she has benefited from having someone else pay for repairs. However, some repairs are easier for Diana to take care of herself.
Aaron left California for New York in 1997. He stayed there for seven years, and moved 5 times during those years. Aaron lived in Hells Kitchen for part of that time. He was illegally renting from a renter, and he eventually got kicked out. Fortunately, he never worried about being homeless, because he had many friends as a performer. The smallest living quarters he lived in was 80 square feet. That is about the size of his current walk-in closet.
During his time in New York, Bruce arranged for him to own a house. He sold it a bit early, because he thought prices would stop going up, but he still made a decent sum of money. Aaron took the money he earned from the house and placed it in a trust deed. He considered buying a home in Washington Heights, but the house would have been painful to rehab.
Once Aaron came back to California, he began renting. In 2004, he moved to Los Angeles for 2 years. In 2006, he moved back to Riverside and began working full time for TNG. Unlike Diana, Aaron has enjoyed being a renter. He is accustomed to being in small spaces, so renting does not bother him. He just closed a house yesterday. His house is 2,500 square feet and he does not know what he will do with all the extra space.
Diana has lived in two rental units since she sold her house. Looking back, Diana is glad that she sold her house. If she had kept the home, she would now be in a position of negative equity. Being generous, that home might be able to sell for $160,000. When she refinanced the house, she brought the home’s total up to $225,000. The area has also devalued since she sold her home. Right before she sold the home, her car was stolen and her new fence was graphitized. There were a lot of things about that neighborhood that made her uncomfortable as a single woman.
Diana closed a home yesterday. She had 3 important criteria points for buying: a view, a master bath with a walk-in closet, and a 3 car garage. The home was bought as an REO. She looked for a home like this for 2 years. She had made offers on other homes, but her offers were not accepted. She found the home she just closed on through Foreclosure Radar. Her home eventually fell off of the reports on the website, and it popped up later on the MLS. This home originally sold for $565,000. When she bought this home it was extremely clean, so she has little work to do on it.
She had to compete with 10 other offers to get it, but hers was actually the lowest. This shows that price is not necessarily the determining factor when buying a home. The quality of the offer is most important. She beat the other offers because she was able to give assurance that her offer would close.
As was mentioned previously, Aaron just closed on a foreclosed home. He also had to beat multiple offers; one of them was an all cash offer. He beat the home by paying 5,000 more through a loan. Aaron has been looking for a home for 2 years, but he is very picky. He had other opportunities to buy, but those homes were made in the 60s and 70s, and he did not want to deal with the work that comes with an older home. This home originally sold for around $450,000, and he bought it for about half of that price. Aaron felt very discouraged by the process of buying the home. He received threats from the asset manager that they would not uphold the deal. His escrow was supposed to be 30 days, but he was warned that Fannie Mae REOs can take longer. Long escrows do cause problems, because he had to pay extra money to stay in his previous residence.
Aaron and Diana have great track records and FICO scores. Many people have had trouble getting loans. Fortunately, Diana had a good loan experience. She got a conventional loan with a 20 percent down payment. She was prequalified with her lender in November when she originally made an offer. Diana recommends her processor, Genie Ball from Pacific Sunrise Mortgage, to anyone interested in buying a home. Genie is very proficient and does a good job of keeping you informed. Diana had to have documentation for any deposit that wasn’t from payroll on her bank statement.
There are many things that can go wrong when you are trying to get a loan. You have to deal with both lenders and appraisers. When Diana’s appraisal came in, it was only $1,000 dollars over asking price, which happily surprised her. The view of Diana’s home gave her a $15,000 credit. The original interest rate for her home was 4.8 percent. She was prepared to close in 20 days, but the bank told her that they were not going to rush to close. That happens frequently in the loan business. There are many times in which Bruce is ready to provide money for an investment, but he won’t get all the information he needs to provide the loan. Because Diana’s lender did not close on time, the bank extended the closing date for over a week, which cost her an extra $1,000 dollars. Her final interest rate was 4.87. This low interest rate will probably not come back for many decades, if ever.
Aaron got a conventional loan on his home. His escrow was supposed to be 1 month, but it actually took over 2 months. He began the loan process immediately after his offer was accepted. There were a couple documents he had to refill during the process. The original interest rate he was given was 4.87 percent, and even though he extended the closing process, he still got that same rate.
Aaron’s escrow was chosen by his lender in Redondo Beach. Aaron had an overall good experience with her. There ended up being a lot of fighting and ego involved towards the end of the deal because of the good faith estimate. When people like you on the service side, you will find they will do things for you that they would not consider with other people. Aaron’s escrow manager was rooting for him, because he was helpful to her. Aaron helped solve an asset management problem in which $2,600 of city fines were overlooked, but Aaron got that taken care of over the weekend. Aaron did not have any problems with his appraisal, because the house was overpriced to begin with, and he expected a higher appraisal.
Aaron took 2 months to close because of the lender and the asset manager. The lender did not want to give away certain pieces of information. This caused problems with the asset manager, and Aaron eventually had to speak to the lender’s supervisor. Aaron was concerned at multiple times that the property would not close. He was threatened multiple times with an expected closing date, but it was actually Fannie Mae’s asset manager’s fault.
If Aaron was on the other side of the table, he would have chosen a different lender. This is important because when you are selling property as an investor, there are many times when you are not in control of that choice. Knowing the truth is helpful, because that allows you to be a part of the solution.
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