On this Flashback Friday episode, Jason Hartman interviews RealtyTrac Senior Vice President Rick Sharga. Rick explains what happens during the foreclosure process and advises investors on when to purchase a foreclosed property. They also talk about the increasing numbers of foreclosure notices, bank repossessions, and the states with a high inventory level of foreclosure properties.
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Jason Hartman 0:10
Hey, this is Jason Hartman, thank you so much for joining me. Do you know what day it is? Yes, it is flashback Friday, or you hear the best of the creating wealth show and you hear some good prior episodes, some good review. Remember, we’ve got almost 500 episodes out. And you know what? iTunes doesn’t even hold them all if you’re an iTunes listener, if you are listening on Stitcher thank you for joining us. So we want to bring you some good review stuff now. What’s interesting about flashback Friday it’s a little scary for me I gotta I gotta be very very candid with you on that. Because you the listener, you get the chance to hold my feet to the fire. Did I make any predictions? Was I right? Was I wrong? I’ve been I’ve been right about a lot of things, but I’ve been wrong about a few. But it’s flashback Friday and we will give you the uncensored Best of the creating wealth show with a prior episode. So let’s dive in. Here we go. Remember, this is not current, it’s flashback Friday.
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Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial industry. In day, you really can do it on Now, here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 2:10
Welcome to the creating wealth show. This is your host, Jason Hartman and hope you’ve enjoyed the last few shows and we’ve got a lot more great shows coming up for you as well. Today we’re going to talk with the senior vice president and the spokesperson for realty Trac. You’ve probably heard of realty Trac. They’re the largest website for foreclosure information nationwide. So I think you’ll find this show to be very enlightening. Before we get to the interview with Rick on realty Trac. First of all, I want to say that a lot of you have been sending me articles lately and I really appreciate them Doug Cory, other people as well. Other listeners appreciate it when you send us articles or give us feedback at Jason hartman.com slash feedback. And one of the things I’ve really been noticing is what a bright future landlords have now for the uninformed investor It would seem that investors don’t have a good view But I actually read that the opposite way. There have been some articles recently that have run saying that homeownership rates will be down for years to come and owning your own home is not so much the American dream as it used to be, and all of this kind of stuff and folks read between the lines when you read that stuff, that means that landlords have a bright future. In fact, I was talking with Doug yesterday and he was saying and I think rightly so, he was saying that one of the biggest assets for employment opportunities and business opportunities in the future will be mobility. And who has mobility renters have mobility homeowners do not have that kind of mobility and I’ll tell you firsthand, from my own experience, I’m trying to sell my house in Orange County right now, and it has not been easy. It’s not sold yet. I would like to move and I don’t have the mobility I wish I had renting a place.
So that is a good thing for investors because we love a transient population. Now when I see transit, I don’t mean people moving in and out every week, I mean a population where they might come to our town where we own investment property. Maybe they come to Dallas, Houston, Austin, Atlanta, Indianapolis for a year or two years, and they’ve got a career opportunity with Fitz in Indianapolis, it might be Eli Lilly, if it’s in Houston, it’s with one of the oil companies or the hospitals and this kind of mobility we can offer to our renters as a good service. And in return, they’re going to give us phenomenal returns on our investments. So when you hear that homeownership rates are down, be happy. That is wonderful news for investors, the thing that you shouldn’t be scared of, if you ever hear this headline, if you ever read this headline in any of the media or you hear this on TV, that the population is declining, then you should be concerned. But if the population of homeowners is declining, while the general population is still increasing as it is be happy, that’s just more customers for your business. properties. So that’s really good news. I think landlords have an excellent, excellent future ahead of them. And I’m purchasing three properties right now for that very reason. I mean, interest rates are the lowest they’ve been in recorded history prices are down in many of these markets. The opportunities are nothing short of phenomenal. So anyway, keep that in mind. Call us remember, we have properties in 43 markets nationwide. And there’s a lot of great opportunities out there right now.
Hey, we just did a special promotion for our text club members. And it was for 50% off any of our products at Jason Hartman calm so I’ve urged you to join the text club. I know a lot of you have and we appreciate you joining and if you have not done so yet from your cell phone, just text the keyword Jason My name Jason and space, your first name, space, your email address to 411 24 741 124 seven texts that information to that number from your cell phone you’ll be entered In the tax club and you’ll have some phenomenal special promotions. The Masters weekend preview call is coming up on September 23. That’s totally free registered Jason hartman.com. And we have got a phenomenal masters weekend and creating wealth bootcamp coming up for you in October. Be sure you join us for that that will be well worth a trip out to Orange County, California. If you’re local Of course, do not mess it. So some phenomenal opportunities there. All right, let’s go to the interview. Let’s talk about foreclosures. Let’s hear from realty Trac and kind of get a handle on the foreclosure market nationwide. And remember, we have fantastic foreclosure properties in 43 markets nationwide. So contact our investment counselors at 714820 4200 or better yet, go to the website Jason Hartman comm you can click on Properties, you can look at full performance that are all standardized and benchmarked in many markets nationwide. So we will be right back and we’ll talk to realty Trac here in less than 60 seconds.
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Jason Hartman 7:28
Remember, you’re listening to flashback Friday. Our new episodes are published every Monday and Wednesday. It’s my pleasure to welcome Rick sharga to the show. He is the Senior Vice President with realty Trac and we’ve been wanting to get a realty Trac spokesperson on for a long time. So I’m sure this interview will be a big treat and realty Trac is really the go to source for foreclosure property information in the United States of America. Rick, it’s great to have you on the show. Welcome.
Rick Sharga 7:56
Nice to be here. Thanks for having me.
Jason Hartman 7:58
So what is going on in the world of forex closers I would assume you guys are busy nowadays.
Rick Sharga 8:04
busy busy is something of an understatement. We tend to be right in the middle of everything going on in the foreclosure market and and foreclosures continue to increase. We just released our July numbers recently and in July there were over 325,000 homeowners who received a foreclosure notice just during the month that was up about 4%. From June. We’re also on a on a pace to set a new record for the number of bank repossessions in a given year. We had about 93,000 of those in the month of July and will end this year with probably between 1,000,001.2 million homes having been repossessed
Jason Hartman 8:38
in the entire country,
Rick Sharga 8:39
Right the entire country. That’s correct.
Jason Hartman 8:41
How many housing units are there in the country just to get sort of a per capita or a comparison or relationship basis there. You said for the year you think we’ll end it 1.3 million is that was that the number you said?
Rick Sharga 8:53
We’ll probably wind up at about 1.1 to 1.2 million homes being repossessed by the banks. So We’ll go through the entire process
Jason Hartman 9:02
and I think we’ll own it and sell it
Rick Sharga 9:04
and there will be another I mean, all told there will be somewhere north of 3 million homes that will receive at least one foreclosure notice over the course of the year
Jason Hartman 9:13
and does a foreclosure notice just so people understand the process? Is that considered a notice of default?
Rick Sharga 9:19
Yeah, in in California, where we’re located, the first notice of foreclosure proceeding is called a notice of default. In some states that practice judicial foreclosures. The same sort of announcement is called a list pendens filing. Some other states have different iterations of that initial demand notices things like that. But basically, this means you are formally in default on your mortgage contract. And the clock has started ticking on a process whereby the bank intends to take your property back if you don’t hear the default.
Jason Hartman 9:48
So what do you see in terms of maybe the regional aspect? I don’t know how granular you want to get on this, but state by state I mean, what are the worst states that have the most foreclosures or maybe from an investor’s perspective, those are the best states because they represent the most opportunity for inventory.
Rick Sharga 10:05
Well, let’s take a look at that in a couple different ways. And the fact of the matter is that the states with with the highest inventory levels of foreclosure properties aren’t always necessarily the best places from an investment perspective. And it also depends on your style of investment. If you’re a flipper, your investment style is going to be a little bit different than if you’re if you’re a buy and hold investor who’s looking for an apartment or a rental unit to do as a cash flow property. That’s a great point, Rick, because
Jason Hartman 10:31
Michigan has a very high foreclosure rate. But I don’t know if Michigan has a very bright future.
Rick Sharga 10:36
So well, you know, we were talking about that at an investor group meeting that I spoke at a couple weeks ago and you know, you could buy Detroit probably right now, if you really wanted to,
Jason Hartman 10:46
you could buy the whole city, right.
Rick Sharga 10:48
And the question is, what are you gonna do with the property once you bought it right? The states had a net loss, not just of jobs, but a population over the last 10 years. And if nobody’s left to buy the houses, nobody Left to rent the houses, what are you going to do with those great bargains that you just purchased Las Vegas. Another interesting just sort of data point for you buying a foreclosure in Las Vegas actually represents less of a discount than many other major markets, even though Las Vegas has the highest per capita rate of foreclosure activity. And it turns out that such a high percentage of homes that are sold in Las Vegas are distressed properties that all the other properties have had to reduce their prices in order to be competitive. So you only save about 10% on average, buying a distressed property in Las Vegas compared to what you would pay for a property not in foreclosure. So it’s there are some really sort of countervailing trends that go on here. But to get back to your initial question in terms of where most of the activity is, if you look at it in terms of the rates of foreclosure on a sort of per capita basis, or you know, based on the number of households in an area, Nevada has been the number one state in the Union for probably over two years running now. And it’s followed in in close order by by arrows. Florida, California and Michigan. So those five states have the highest rates of foreclosure activity. So just in the month of July, for example, in Nevada, one out of every 82 households was in foreclosure, which is which is amazing for a given month, in terms of states that have the highest run numbers of homes in foreclosure California by itself has about 21% of the national total almost 67,000 properties in California received a foreclosure notice in the month of July. And then for other states plus California gets you to about 50% of all the activity. So if California, Florida, Illinois, Michigan, and Arizona that by themselves account for about 50% of all the foreclosure filings that are issued in a given month.
Jason Hartman 12:45
So Rick, what’s interesting here is that I’m looking on your website and in California there are 66,910 foreclosure properties. One in every 200 housing unit has received a foreclosure notice is that what that means?
Rick Sharga 13:00
Have some sort during that month? That’s correct
Jason Hartman 13:02
during that month. Okay, so that doesn’t represent how many will happen in the year? How many will happen in the month? It’s just they received a notice in that month. Yes, sir. And so what happens here? And what might be confusing to investors looking at this data is that they could go into foreclosure receive the notice, and then to hear it come out of foreclosure and then drop in again three months later, potentially, right?
Rick Sharga 13:23
Yeah, theoretically, they could come in and out of foreclosure multiple times they could get into a loan modification program, they could cure it a fault, the bank could develop a forbearance program of some sort, all sorts of ways they could temporarily come out of foreclosure and then go back in but your other point was valid to that and that that people can get that initial notice of default and and in some cases, simply cure the default and and not be in foreclosure anymore. So that does happen too. Although it’s happening with less frequency in today’s economy than it does in a more normal market.
Jason Hartman 13:55
Just want to make sure I know what you said there. You’re saying they’re curing it less often today than a year. more stable market, right? That’s correct. Yeah. Okay. All right, good. So there’s a lot of data here, Rick, few sort of want to put it all together for the market. Are there certain states or cities that you guys have an opinion on as to where the best opportunities to buy and hold properties are?
Rick Sharga 14:16
Well, if you were to take a look at cities across the country that represent what we think might be some of the best opportunities, what we would take a look at is where there’s enough inventory of foreclosure properties to make make a difference, where the discount on those properties might be significant, where the jobless rates are not off the charts and where there might be opportunities to do something with the properties once once you purchase them. And and a lot of these areas are places that are a little bit off the beaten path, at least for a lot of investors who tend to focus on the coastal areas, but there are places like Memphis, Tennessee, which actually we believe has some of the best opportunities to find a foreclosure property that’s a bargain but also where represents an opportunity for a good ROI.
Jason Hartman 15:01
Just a reminder, you’re listening to flashback Friday, our new episodes are published every Monday and every Wednesday. Now, we’ve looked at the Memphis market, and it’s pretty spotty. in Memphis terms of the areas, they really vary a lot. So is that more a empirical look? Or do you guys do any sort of anecdotal type stuff where you’ve got people going to markets or you’re getting feedback from people in markets? Or is it all sort of statistical
Rick Sharga 15:32
This is statistical we actually do publish a monthly newsletter that’s called the foreclosure news report. And in that we will do we’re doing a series of stories right now that basically our feet on the street and we’re talking to investors in local markets about what they’re doing in those local markets, and we’ll do a state highlight feature every month as well, where we talk to people that are actively buying in those states. So yeah, the the numbers that I’m talking about right now are fairly cut and dried. And certainly in any real estate market, you know that the reason for the cliche still being around that, you know, real estate is really a local market is because it really is a local market. It varies so much. I mean, you’ve got
Jason Hartman 16:11
on your foreclosure heatmap here a market like Las Vegas with a really high foreclosure rate one in 82 homes and then a market with really low foreclosure rate is one in 10,300 housing units. Yep, all real estate is definitely local, right.
Rick Sharga 16:27
And even within those markets, the point you made about Memphis is is absolutely true. We’re here in Orange County, we’re again we’re relocated, you can look at Orange County numbers, but there’s a huge difference between foreclosure activity rates in a place like Newport Beach compared to the county seat in Santa Ana. And you know, part of its demographic part of it part of it is is just the way buying activity takes place a lot more people want to live by the beach. So it is something that a local market investor really needs to pay attention to what what are the trends not just in the region, but in the part of the region where you’re looking to invest your money.
Jason Hartman 17:00
So your your site gives potential investors the opportunity to find properties where the seller may be in desperate straits where they’ve had a notice of default filed all the way up until the bank owns the property has taken it back and has or is reselling it right?
Rick Sharga 17:17
That’s correct.
Jason Hartman 17:18
So one of the things that we were kind of talking about just chatting real briefly before we went on the air is there’s so many people, and it’s just an amazing never ceases to amaze me. I’ve been in this business a long time now. And all the people that have watched the late night TV when they can’t sleep those infomercials and they go to the seminars, and they think that they can just run out to these foreclosure auctions and the world’s their oyster and there’s deals galore and it’s easy to buy them and so forth. And maybe they went to the guy seminar that teaches them how to do that. But one of the things I don’t think they really realize is how professionalized our industry has become where the people going to these auctions are running real businesses, real companies with resources With boots on the street, going to look at properties before they go up to sale. They’ve got software programs, they’re using your site. They’re comping properties out there. They know the neighborhood’s. They’ve done their homework. They’ve got cash. They’ve got tremendous resources. What do you find in terms of that? I mean, any feedback there?
Rick Sharga 18:18
Well, as a general rule, if you’re a beginning investor, we encourage people to stay away from the from the courthouse auctions, or share sales, if that’s how your state operates for for a number of reasons. One is that generally speaking, people to go in there for their first pass really don’t understand what they’re getting into the risk reward quota is just not very good in today’s markets. And that’s partly because the bank simply aren’t discounting the properties at these auctions as much as they used to because in many cases, the properties are already underwater in terms of valuation before they get to the auction. And another is the risk of making a bad purchase decision at these auctions is enormous for for a first timer. You mentioned the fact that the auctions tend to be populated by people who do this for a living. These are folks who smell blood in the water when somebody new comes in, and they really don’t want any more competition. So they’ll I mean, they’ll actually work toward encouraging a newcomer to over bid on a property and basically get them out of the market.
Jason Hartman 19:17
What you said is so true, because the rehabbers that we work with in different parts of the country, friends of mine that do it locally here that are pretty professional and set up for it, and they go to the auctions and they buy and they said when they started, people would make them in the auction environment, the heat of the moment there, make them overpay for a property, they’d either outbid them or they would bring the price up and then let them have it at the end knowing that they really have forced them to overpay so they won’t be a competitor again, so that their margin is so thin on that property. Economics just don’t work right. I mean, they’re really sharks. Let’s say it land sharks.
Rick Sharga 19:55
The two biggest mistakes we typically see investors make when they’re purchasing a foreclosure property. are one that they over overvalue or overpay for the property. And the other is that they underestimate the the amount of money it’s going to take to repair the property, whether to rent it out or to resell it. And when you’re buying a property at one of these auctions, you’re doing it largely sight unseen, you may be able to do a drive by but for the most part, you’re never going to get a chance to analyze the inside of that property. So if you’re already coming into it into this part of your your investing career without having that kind of information at your fingertips on your first investment, you’re really sort of stacking the deck against yourself who I was just talking to a reporter about a story about a real estate investor in San Francisco who thought they they’d made a great great purchase on a second home only to find out much to their dismay that what they’d actually want at the auction was a second lien. And and so now what they were the proud owners of was a second mortgage on a property that the first lien holder was about to foreclose on. So you really lose To know what you’re doing before you get into these auctions at the very least, you know, it makes sense to attend a few of these and watch what’s going on. So you get an idea of who’s doing what to whom but but it is really not what we believe is the optimal place for a beginning investor to get involved and there are so many other foreclosure opportunities right now that represent somewhat safer and equally lucrative buying opportunities that it really doesn’t make any sense to deliver on that kind of risk.
Jason Hartman 21:28
I would agree with you there. The only problem is though when you work the the other side of the market to pre foreclosure market where you’ve got someone who had an N od filed against them or whatever that state’s version of that is, then you’ve got a person with with no equity, who’s behind on payments, and then you’ve got to go work with a lender on a short sale and anybody who’s experienced short sales knows how you can just pull your hair out, pull your teeth out, this can be pretty difficult, right?
Rick Sharga 21:54
It’s it’s a numbers game and and short sales are not easy. It’s something of an oxymoron. It’s right up there. With no jumbo shrimp and government efficiency, right? So short sales really aren’t. And one of the things that we encourage people to do when they’re using a site like ours, or whatever resources they’re using is to do their do their homework on these properties before they before they even get started. Look, there are 2.1 million properties on our website right now, about 900,000 rows and about 1.2 million properties in various stages of foreclosure. If the first one you look at doesn’t pan out, go to the next one. You can do one property at a time and you can spend the next probably 30 years of your life just working through the current database. So just because you missed out on one property or one doesn’t meet your criteria, doesn’t mean there’s not multiple opportunities there for you. So you know, when you’re looking at a short sale, make sure you in this case, stack the deck in your favor, you know, look for properties that aren’t significantly underwater. Look for properties that don’t have multiple loans outstanding on them do what you can do to find those kinds of properties find properties that are in neighborhoods where home prices have have not declined. Appreciate it as much as some other areas. So, again, the more of these aspects that you take a look at, the more of these things that you do your homework on in advance. And again, we built all these features into the site so people can do it at home in their pajamas, it increases the likelihood of you’re succeeding. I’ve talked to somebody a seminar not too long ago who was going crazy and so I just can’t get the bank to approve a short sale because the second and third lien holders won’t negotiate and I said why are you trying to do a short sale on a property with three outstanding loans? Well, I like the house well, that’s that’s the wrong way to look at it as an investor what what’s your investment opportunity? Not do I like that house?
Jason Hartman 23:38
Very good point. It should be just an analytical numbers game. When you’re an investor. We’ll be back in just a minute.
Rick Sharga 23:46
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Jason Hartman 24:16
Just sort of a general question, Rick. I mean, and this is maybe the $64,000 question. It’s a very generic question, but is now a good time to be investing in real estate.
Rick Sharga 24:29
If you have the financial wherewithal right now to be a cash buyer or can get financing there probably has never been a better better time. I say that with with one asterisk, which is again, you probably need to make sure you know, where you’re buying and what you’re going to do with the property once you purchased it, and have a plan to do that. But in terms of value, homes have probably never been more affordable between the combination of home price appreciation and historically low Interest rates, there’s a growing rental market. So if you’re a cash flow investor who’s looking to do a buy and hold strategy, or if you’re if you’re somebody with a fairly decent time horizon on a property and not looking to buy it, immediately resell it, you’re not going to be as sensitive to home price value fluctuations. If you’re renting a property and you’ve the home depreciates another 5% over the next year, it’s not the end of the world because you’re making your money on the on the rental income anyway. So yeah, it for somebody who knows what they’re doing as a good plan of attack. Probably never been a better time to be a buyer than than it is today.
Jason Hartman 25:35
I want to add one more thing to that. And you sort of alluded to it, but I think that investors and homebuyers for that matter should really right now be looking at what I call the effective cost. And what I mean there is that if they’re able to get financing and even in a market, where the price depreciates another five even 10% even 15, maybe 20% They say that generally speaking, 1% in interest rate equals about 10% in price. And so when you take that incredible mortgage if you get a fixed rate loan for the next three decades, and I don’t know what you think, Rick, but I think inflation is coming. It’s not here yet, but when it hits, I think it’s going to be reasonably severe. And if someone’s got three decade long, fixed rate mortgages, and every other investor or every potential homebuyer that comes after them needs to pay a higher rate to obtain financing. Thank you for listening to the creating wealth show. This is Jason Hartman, your host and we appreciate you following the show. We have many, many episodes, hundreds of episodes, and some of the older episodes have been archived and placed in our members section and that applies to this one. So we include a sample that’s about 25 minutes long, and then for the rest of the show, you can go to our members section at Jason hartman.com many of the other shows are still in their full length complete version. However, some of the shows like this one are in our member section where you can hear the show in its entirety. And again, you just need to go to Jason Hartman calm and you can get the full show there in the member section plus a whole bunch of other great members benefits and resources, whether it be documents, forms, contracts, articles, other video and audio content, just a great resource, so be sure to join as a member at Jason hartman.com and thanks again for listening to the creating wealth show.
Announcer 27:48
This show is produced by the Hartman media company All rights reserved for distribution or publication rights and media interviews, please visit www dot Hartmann media.com or email media at Hartman media.com. Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax legal real estate or business professional for individualized advice. opinions of guests are their own and the host is acting on behalf of Platinum