David's Macro Blog

Last week I interviewed John Ray, the largest buyer of foreclosed homes at the Maricopa County (Phoenix area) trustee sale auction.  Through his company, Bid AZ Foreclosures, he currently buys around 100 homes a month on behalf of his clients.

Listen as he shares his knowledge and experience on topics such as: getting a good deal on a foreclosure, the amount of research it takes to compete, the old boys’ network (main players) at the auction, and much more.

Note: there are 4 parts/videos of this interview, about 36 min. total.

Original post for your reference: Interview with John Ray: How to Get a Good Deal on a Foreclosed Property at the Trustee Sale Auction and Avoid Common Mistakes

Here’s a video of live bidding at the Phoenix auction:

Purchasing homes at the trustee sale auction has become increasingly popular throughout 2009 as the real estate markets have firmed. 

When there is a big enough discount in the purchase price of a home at the auction vs. its full retail price on MLS, real estate investors will buy the home to either flip (resale) or hold for greater appreciation down the road.

Jim Klinge (aka “Jim the Realtor”) of San Diego interviews Adam Rappoport (aka “SD Realtor”), a realtor and active flipper of trustee sale homes.  This is a very frank and honest discussion about the risks and process of investing in trustee sale homes.

Adam Rappoport Interview – Part 1 of 3

Adam Rappoport Interview – Part 2 of 3

Adam Rappoport Interview – Part 3 of 3

There is a lot of mystery and uncertainty about buying a home at the trustee sale: there’s no inspection period, deep pocketed buyers pay all cash to buy the property “as is” and “where is”.

The interview really gets into some insightful and insider details in parts 2 and 3 so make sure to watch all of the videos.

What surprised me the most was how the margins have shrunk this year. Notice Adam mentioned that his target margin was 20% per deal but now it’s down to 15% and the current deal was at 9%.

Another interesting thing is that every property he’s resold this year has had multiple offers because his group priced the home right.

What do you think about this interview? Please comment below.

During our last visit in Scottsdale, Amber and I toured 3 houses purchased at the Maricopa County trustee sale auction in October 2009.

You can watch all 3 videos below.

Related Posts:

• Tour of Trustee Sale Homes in Scottsdale, AZ
• Real Estate Investors “Making a Killing” at Trustee Sales! about Jim the Realtor’s video and comments about trustee sale homes and industry professional Jonathan Mann in San Diego.

Is it possible that the great equity bubble of 2007 could fool the person best positioned to detect it?

Calculated Risk states in his post “A Comment on Fed Chairman Ben Bernanke” that Ben Bernanke misread the real estate bubble as Fed Governor, then as Chairman of the Presidential Council of Economic Advisers, and later as Federal Reserve Chairman.

How can Fed Chairman Ben Bernanke miss the biggest bubble in history?  Not only did he have the best education at Harvard, MIT, and Yale, but he also had access to all the data, experience, and team members that came with his powerful positions and titles.

In July 2005 Bernanke said:

“We’ve never had a decline in housing prices on a nationwide basis.  What I think is more likely is that house prices will slow, maybe stabilize … I don’t think it’s going to drive the economy too far from its full-employment path, though.”

From this one quote, made at the peak of the boom, we can see two things.  First, Ben did not believe that housing prices would fall much if any and that it was not conceivable that prices would fall across the country in all markets.  Secondly, any decline in housing prices would not slow the economy much to cause a significant increase in unemployment.

Now, just 4 years later we can see that we had the biggest housing boom (and bust) in history AND that the crash caused us to experience the unemployment unparalleled since the Great Depression.

In this case, a big trend (in asset prices and leverage) caused even the most well trained and experienced economic thinker, who has access to the best data, to get swept up and lose track of the fundamentals.

Why did this happen?  Share your opinion by commenting below.

Historically we often think of a recession as a sharp drop in economic output followed by a sharp rise. This is called the “V-shaped” recovery. The current “Great Recession” had a sharp downturn but so far no recovery after 18 months, and most talk is of an “L-shaped” or “U-shaped” rebound.

Why is this?

There’s an excellent post on Calculated Risk blog (one of my favorites) about economic growth engines that typically pull us out of recession with a sharp upward swing in activity.

The top two economic growth engines are residential investment and personal consumption expenditures.

Since we’ve had the largest residential real estate bubble in history and massive over-consumption, both due to very loose credit, these two growth engines are NOT poised to restart economic growth anytime soon.

In fact, just the opposite is true. Any recovery will be held in check by the massively overbuilt inventory of residential real estate and the inability of consumers to tap savings and credit to purchase consumer goods at the level needed to “stimulate the economy”.

Thus, while it looks like we avoided the Great Depression II, we’ll probalby remain in the Great Recession I for some time.

What do you think? Whether you agree or disagree, please add your comment below and show me you’re alive!