People ask all the time, where are the buyers coming from, and what is motivating them?
Yesterday in a couple of comments mentioned that people are tired of waiting, and want to settle down with their families.
But there will always be the get-rich-quick crowd.
Robert Allen is coming to San Diego May 31 through June 3rd, appearing at four different hotels. He has been a well-known real estate speaker for years, and controverial.
His pitch from his full-page ad in the U-T:
“IT’S PULL THE TRIGGER TIME for real estate investors and first-time homebuyers. The tides are turning in today’s real estate market. Killer deals around every corner. The time to act is now. Discover how to profit safely with my exclusive moneymaking real estate strategies engineered for today’s market.”
But there are many complaints about the guy. His main objective is to sell books and tapes, and enroll you into the next program.
This from Ripoff Reports, a quote from someone who signed up for the 3-day course:
Each day they would bait the hook and drop the line about the importance of purchasing the Executive Package Program (regular 12,680.00, class special 6,995.00) and if you want to protect yourself in the U.S., then the J.J. Childers Wealth Library (regular 2,835.00, class special 1,835.00), as well as furthering you knowledge with classes. The pressure was intense, these people are very good at what they do, and would make a telemarketer blush with their tactics. Succumbing to the pressure, I signed up for both products and gave over my Visa number. The class was done, everyone bid their good byes and we went off to seek our fame and fortune.
The person went on to cancel the program, and eventually received his money back. But then he was hounded for weeks by different pitchmen to buy other programs, one costing $22,000 for one-on-one tutoring!
Here’s a link to the full report:
http://www.ripoffreport.com/reports/0/287/RipOff0287225.htm
Are some of today’s buyers coming juiced up from real estate seminars like this?
It’s those get rich quick folks and flippers that scare me in this market the most. They snatch up the low end fixers at auction with hard money loans and slap on the cheapest cosmetic fixes to make a quick buck before the market drops on them. I much prefer to buy a home that needs to be fixed than one that has been flipped and over priced-for-profit with the cheapest materials possible.
So why doesn’t Robert Allen buy these killer deals. Oh that’s right, there’s more money to be made off of you and your wallet with no risk to him. “Profit safely” is very apt.
On ebay you’ll see “get a free TV” or “get a free PS3”, etc.. for some sum like $20 that tells you how. If you do, it gives you a document that tells you to sell this document on Ebay for $20 to as many people as you can. And guess what, you’re living proof that it worked.
These scams are rich in irony.
I just did a similar 3 day seminar for The Millionaire Mind. Same exact format, 3 days of free pep talk to get you signed up for the big $20k package.
The fallacy of all these hype-fests is that there is no way to get rich quick unless you inherit it. Rich requires work and lots of it. It usually isn’t quick, either.
That being said, there is certainly some valuable insight and worth to what goes on. I walked away from my 3 days full of ideas and with some new doors opened. These things are what is called Large Group Awareness Training
http://en.wikipedia.org/wiki/Large_Group_Awareness_Training
And there are a lot of subtle (and some not so subtle) techniques used to
take control of behavior. They will tell you that the behavior modification is for your own good, but the real deal is to control your behavior right over to their credit card machines.
I am always blow away by these seminars. Do people really think that running with the herd is how you make money? You might short term, but you’ll also lose long term along with the rest of the herd. It’s lottery thinking and it’s hard to feel sorry for someone who takes the bait.
Like sdbri said, if it’s such a hot deal why doesn’t he keep it to himself and make all that money for himself?
A future entrepreneur that needs to pay for a ‘course’ or ‘seminar’ is NO entrepreneur. Either you have it or you don’t.
“I much prefer to buy a home that needs to be fixed than one that has been flipped and over priced-for-profit with the cheapest materials possible”
I could not agree more with this – I was so bummed to see a nice-sized home in the area my husband and I are hoping to buy list for $150,000 more than we could afford – one month after a flipper bought it from the bank for exactly the maximum price I’d have been willing to spend. I don’t know how trashed it was originally – maybe it was something awful we wouldn’t have wanted to deal with after all – but the upgrades were so new you could still see the lines where they’d laid the lawn squares, and it looked like every other “upgraded” home with the granite and the travertine all over the place.
The Real Estate Seminar business has been around for a long time, Robert Allen in particular. There will always be people who will sign up for these courses and a big part of the mentality for the average person who takes these courses is the need for motivational training.
The business model for the Real Estate Seminar business has gotten very tough the past few years. Media buys have increased in price dramatically, and hotel/convention room costs have increased as well. The cost to get a lead into a free seminar has driven many of the seminar companies out of business or into different business models.
I don’t think these courses do very much to juice up buyers in California. Most of them teach creative financing with no money down, subject to purchases, lease options, contract assignments, etc., techniques which don’t work very well in the current market. For owner occupied purchases, there is not much these courses can do to compete with the FHA financing which is generally already known to the juiced up buyer.
I think it would be interesting to know who some of the buyers are. Locals? Out of town investors? New corporate relo? Retirees? Who are these brave souls spending millions after the Dow got cut in half in a few months time. Gonna be legendary investments, just unclear which way!
“Like sdbri said, if it’s such a hot deal why doesn’t he keep it to himself and make all that money for himself?”
It reminds me of those sports gambling guru commercials. If they’re SO good at picking winners, why do they need your credit card number? Thing is, this guy is pretty smart – he knows the herd is dying to throw its money away, so he makes his pocket an easy target.
Wait a minute; that’s the guy from the PC/Apple commercials isn’t it?
How to get rich quick: Start seminars for people hoping to get rich quick and sell them stuff that will help you get rich quick by promising to teach them how to get rich quick.
These guys are everywhere, but real estate definately has more than its fair share. Sort of like the guys selling you a six figure income by working at home, by selling people information on how to work at home.
As much as I am amused by these guys, they make it hard for the serious investor. People thinking they are going to buy foreclosurs for no money down and flip them for millions of dollars in a week have made it harder for serious long term investors to add to the portfolio.
Jim, you are getting famous. You should setup one to compete with him. At what price do you think you will make a decent living? 🙂
There are a million real estate gurus out there that stole Tom Vu’s schtick, this makes one million and one.
then cam epitbill mortgage school.What happened to noeve riche school?
get rich quick schemes always seem to attract a new generation of suckers.You live and learn.
Scoot Adams’ Dilbert comic strip. Catbert the evil HR director. Catbert calls an employee and says, “I have a job paying $200k that requires no skills whatsoever”. The employee says, “I might be interested in that,” and Catbert retorts, “You? I’m not calling you to offer you a job. I’m calling to brag about my own job!”
“Who are these brave souls spending millions after the Dow got cut in half in a few months time.”
On my drive to work this morning was one of those orange signs stuck in the ground. Today’s said “Double your 401K, call …”
It was a nice change from the usual “CEO Pay from Home”, “We buy homes for Cash”, or “RE Investor Partner Wanted”.
So the answer to your question, obviously, are the people who have doubled their 401K while making CEO pay at home while. 🙂
I dont beleive that Robert Allen is coming to town as I beleive he already lives here. Olivenhain I think.
OT, I’d love to hear a discussion about mortgage rates after yesterday’s bond market meltdown.
I know one guy who was about to close a short sale, his lazy mortgage broker had not gotten the lock he was supposed to, and now rates are 0.5% higher and he may walk.
If rates stay around 5.5%, I think this crushes sales. I’ll bet a lot of pendings fall out.
I once had a friend, like all of us, who said “Hey, I know you have a great mind for new businesses, would you come to evaluate this new opportunity with me?”
So, I went, young and foolish, to the meeting which was, as we all know, Amway.
All these people were feverishly taking notes, which I thought, wow, all these people brought pens and notepads. Then I realized that they were all current Amway members who were trying to psychologically get new recruits into thinking the information was soooo important, and that you should be taking notes too. (If ound this out by going around and asking them, because I thought it was really strange).
Everytime a friend comes and says, “Hey, I’ve got this great busineess opportunity…, etc., I run for cover.
It’s amazing the psychology involved in these types of meetings / scams.
W. C. – if .5% throws the deal then it wasn’t a good buy in the first place and was stretching the borrower too tight.
“What happened to noeve riche school?”
They’re still around.
You can now attend Nouveau Riche Real Estate Investment College (non-accredited). If you hurry, you can enroll just in time for summer session located at the (*&(^%$ Glendale Conference Center. They are expecting such a crowd, an “Annex Campus” is being located at the football stadium is being set up to accommodate the overflowing masses (shuttle service will of course be provided).
*But, this is the best part – “Nouveau Riche is taking a huge step in educating our children.” With a special Teen Financial Literacy Program. So while you attend, your teen can attend too, for free even.
*I shudder to think what teen financial literacy outreach means to those at Nouveau Riche.
This saddens me Jim that you would even mention this guy. Come on Jim, show your true colors. This is so bs.
No, these are just your typical folks who are mostly cluesless about what’s going on.
Babes in the woods. Babes in the woods. Waiting to be separated from their money.
Those who can,do. Those who can’t teach.
“W. C. – if .5% throws the deal then it wasn’t a good buy in the first place and was stretching the borrower too tight.”
Exactly. That’s what people think buying a house is: stretching themselves as far as they possibly can. The market won’t change because people will suddenly become responsible, people will have to be forced to be responsible. The 0.5% makes a difference.
For those people who aren’t aware, John T. Reed maintains a real estate guru rating system.
Check it out, pretty funny stuff in there.
Here is the listing for Robert Allen.
http://www.johntreed.com/Reedgururating.html#anchor496881
Well sdnerd, I really feel for people who are seriously out of work. 3 people I know were just let go of today in fact, though the writing was on the wall. One was a top performer too.
I’ve never been more worried about the future of the economy as lately. If they can’t kickstart(re-kickstart) the machine, home prices in del mar SD or Lubbock TX simply won’t matter.
But this is America and we tend to always get back up.
0.5% means at least a couple hundred bucks a month. That’s enough to make a rational person rethink the value proposition.
And I’m not even talking about the typical marginal buyer — the typical marginal buyer is stretching to the max on affordability, so 0.5% may even make the difference on whether they qualify for a loan.
Forgive the slight exaggeration:
0.5% means
at leastalmost a couple hundred bucks a monthGreat read, sunsetbeach!
Yeah 1/2 a percent is pretty significant for someone planning to pay less. But it just goes to show that people’s margin of comfort these days is thin. What it means is either this person doesn’t want to buy *any* house at 5% interest or higher, or it more likely means they demand a price discount in exchange for this market change. I.e. by waiting for the market to sink lower.
The latter on a macro scale is pretty damning for real estate. In Japan, it took over 15 years for the market to bottom, and prices are *still* over 60% below peak two decades later. Bubble markets are formed by psychological mania, and since that mania does not recover bubbles tend to have L-shaped recoveries.
Remember, regardless of your interest rate if you ever plan to sell your house the price matters a lot. In fact if you think you may have to sell in 5 or 10 years, a 5% price difference is more important than 1% difference interest rate. To the extent low interest helps you buy more and support house prices, a subsequent upward recovery of interest rates will make your house worth less. The worst cases are people who are literally trapped in their own home, and have to choose between staying indefinitely or walking away.
“Buy now or be priced out forever” has turned into “Sell now or be priced in forever”.
Doofensmirtz wrote:
It’s those get rich quick folks and flippers that scare me in this market the most. They snatch up the low end fixers at auction with hard money loans and slap on the cheapest cosmetic fixes to make a quick buck before the market drops on them. I much prefer to buy a home that needs to be fixed than one that has been flipped and over priced-for-profit with the cheapest materials possible.
Could not agree more.
Whenever we see a “flipper special,” we discount what it would take to undo everything they’ve done, and discount more for what we will probably find underneath all their cheap “fixes.”
I like to see things as they really are, and care far more about the important stuff: quality of the framing, foundation, roof, plumbing, electric, heat/AC, etc. than the stupid paint colors, countertops, appliances, or flooring.
What’s sad is that so many buyers get sucked in by the staging, that they lose all sense of value and continue to overpay for these abominations.
oh man, John beat me to Tom Vu! I loved watching those commercials. That dude had a boat! and sexy ladies on a boat (sadly, no T. Pain on his boat.)
Does Robert G. Allen have sexy babes on his boat?
W.C. – I ran the scenario, on a $400k house the monthly payment difference between 5.25 and 5.75 is ….a hundred bucks.
If a buyer does not have $100 room to play then they have no business buying a house. Houses involve maintenance. Someone stretched that tight is not going to be able to afford the upkeep.
“If a buyer does not have $100 room to play then they have no business buying a house. Houses involve maintenance. Someone stretched that tight is not going to be able to afford the upkeep.”
That doesn’t really make sense. Paying $130 more per month isn’t going to reduce the maintenance costs in any way.
Wikipedia does say he lives in the San Diego area:
http://en.wikipedia.org/w/index.php?title=Robert_G._Allen_(author)&oldid=290206084
Looks like he bought 7,000sf on 3 acres in Wildflower in Olivenhain back in 2003.
Anecdotally speaking, most recent home buyers I spoke with greatly underestimated maintenance costs and special fees and are pushed to the limit because of them. This just goes to show they were operating on slim margins to begin with, amounting to a hundred or two dollars. The point is, this is their living on the edge mentality whether it pertains to maintenance, property tax, or in this case an increase in mortgage interest payment. That’s what makes it all the more ironic when someone drops out because of a hundred dollars in interest payments, when that’s often the same person who fails to account for maintenance or the buffer needed to pay property taxes.
In fact, I don’t know a single recent buyer who doesn’t have cash flow issues on at least two out of three of these issues. That’s probably because recent buyers correlate with certain financial tendencies.
SDBri
I will go one step further. Why are all these “investors” convinced in a neighborhood of empty homes they will even be able to rent the place? Any government statistic illustrates that there were at least 500K homes built per year greater than population growth during the 5 year bubble. Most of these homes were built in the bubble areas. I just do not see the rental demand.
“Why are all these “investors” convinced in a neighborhood of empty homes they will even be able to rent the place?” That is the rub isn’t. There are five homes for rent in my little subdivision of Pulte and Beazer homes. All of these home where purchased in the last 100 days by investor. Now non of these idiot drove around the neighborhood before they close. If these investor would have, they would have saw 20+ plus homes for sale and another 10/15 for rent, these people are so clueless. They are creating the same bubble from before there are not enough renters out there. I guess they have such a low mortgage maybe they can hang on to them longer sitting empty.
Inland Empire may I ask which city you are in?
Victorville near where the homes where torn down by the bank. That why it is so weird to me how all these people are buying homes up here. I don’t see valuation growing at all in the next 5 years. If it is a young couple, yes it is a great time to buy. These are all new home built since 2004 and most are going for 100k and lower. But investor are nuts if they think they going to make a killing, maybe they will cover there overhead..
I don’t even think they are going to cover their overhead. We’re seeing the same types of investor/owner occupied ratios that we saw during the bubble, with massive speculation going on in the lower-end neighborhoods.
Rents were driven up near the peak of the bubble, as the herd collectively realized the game was over, and people tried to exit at the same time and rent to wait out the bubble collapse. This is when we saw record “for sale” inventory, and very low rental inventory.
Now, things have shifted, and that “for sale” inventory has been purchased by new specuvestors who think rents are going to stay high — and some of the more clueless are anticipating rising rents going forward. These new speculators are going to flood the rental market and ultimately, we will see the next leg down because they will not be getting the anticipated rents and will not be able to cover their costs, IMHO.
The bubble continues…