“Martha Stewart is now under house arrest. So she’ll go to her $40 million 153-acre estate. So she’s going from the big house to an even bigger house.”

T.J. Maxx.  Target.  Burlington Coat Factory.  Walmart.  Kirkland’s.  Goodwill.  Did you notice I didn’t mention Kmart?  That’s not because we don’t buy our staging items at Kmart.  It’s just because we don’t have many Kmarts around here.  If we did, I’m certain some of our stuff would come from the Martha Stewart Living line.

And for what it’s worth, I forgive Martha for the whole insider trader thing.  She’s paid her debt to society.  But I still don’t tune into her show – mostly because listening to her talk is about as exciting as watching a car rust.

So why stage a vacant house?  Here are my top three reasons:

1. A high percentage of buyer’s start their search for a home to buy online – a home that is staged looks more, well, homey.
2. Staging items like furniture, pictures and plants give the buyer an idea of how much space they will have in the house for their own stuff.
3. Lived in homes, or homes that looked lived in because they are staged, usually sell faster.

We like to stage the kitchen, master and hall bathroom and master bedroom.  The family room isn’t a bad idea either.  Our budget is around $500.  I’m sure we’d make Martha proud.

For more tips check out this video:

So imagine my frustration when I found out I couldn’t buy this film after my youngest daughter was born in 2004.  I looked everywhere.  Best Buy.  Walmart.  Amazon.  Barnes and Noble.  Nada.  Zilch.  Nothing.

Fortunately, we had a trip planned to Disneyland.  Problem solved.  I would go directly to the source – Main Street U.S.A., Disneyland, California.  The souvenir shop there had the movie selection prominently displayed behind the cash register.  I could see all of Disney’s big hits:  Aladdin, Cars, The Incredibles, Sleeping Beauty and Cinderella. 

But wait a minute.  Where was Beauty and the Beast?

It’s in the vault she said.  What?  The Disney cast member repeated it again – it’s in the vault.  So I said well go back there and get it!   No sir, you don’t understand.  Disney puts movies in the vault for extended periods of time.  You will have to wait until it’s re-released.  That was 2005.

Disney finally pulled Beauty and the Beast out of the vault – last October.  I gave it to my daughter for her 6^th birthday.  I also paid $24.95, about twice what a normal kid movie would cost.

You see, the folks at Walt Disney are master marketers.  They don’t just make whimsical princess movies and cool adventure attractions like The Pirates of the Caribbean.  They’ve figured out how to create artificial demand.

Disney got a rational guy like me to pay double, and wait five years, for one of their products.  People who don’t even have children or grandchildren yet bought this movie out of fear it would get locked up in the vault for another decade.  Pretty smart.

That’s why I find it a little amusing when I’m in real estate circles and someone asks me about the shadow inventory.  Aren’t you worried about it?  If the banks unleash this shadow inventory on the retail market don’t you think prices will plunge even further?

The answer is no, I’m not worried about it because the banks will not unleash this shadow inventory (if there really is a shadow inventory) on the retail market.

First of all, let me clear up one myth – banks don’t foreclose on a  mass of houses, board them up and then wait to sell them off for months or years on end  (at least not in Arizona).  Many experts define this as shadow inventory.   I’m on the ground here in Phoenix and that does not happen.  Once a bank forecloses they promptly secure it and sell it as an REO. 

The home directly behind mine was foreclosed on last week and it was on the multiple listing service 6 days later.  The banks do this because there is too much liability in home ownership.  If they foreclose on a house and then let it sit they are responsible for property taxes, homeowner association dues, utilities and general maintenance. Even worse, bad things tend to happen in or around abandoned houses.  When bad things happen people sue – not good.

Banks are far more likely to postpone foreclosure proceedings on the current homeowner for months or years at a time.  I bid on house at the auction earlier this week.  Its sale had been postponed 38 times – 1148 days.  This property has been in foreclosure for more than three years.  I bid on two other houses scheduled to go to sale this week – their sales had been postponed 12 and 18 times.  And guess what?  All three of these sales were postponed again.

There is another camp of so-called experts who refer to these homes as our shadow inventory.  But how do we know the owners of these homes won’t eventually bring their loans current, get a loan modification or execute a short sale?  My guess is only a small percentage will actually get foreclosed on and end up on the market as an REO.

Here’s why I’m really not worried about shadow inventory (if there really is such a thing) – artificial demand.  The banks are actually copying the Disney marketing model.  They’re being fairly strategic about what they release and when.  This creates scarcity, which increases demand (albeit artificially).

There is nothing wrong with this.  I’m actually a proponent of it.  It’s good business and probably the smartest thing the banks have done since this crisis began.  It serves us all and makes me want to break out in song – Be Our Guest, Be Our Guest, Be Our Guest…

-          My 6 year-old daughter’s reaction when she found out she has to go back to school after spring break ends.

Out of the mouth of babes.  If only us humans could be like Neo, Keanu Reeves’ character in the Matrix.  Imagine how cool it would be if our brains were like a computer and could download a program for piloting a helicopter.  Or how about transferring a jujitsu file into your cranium?  Certainly with this kind of technology we’d all have a little more time to hang out around the house watching TV.

That would make my little kindergartner very happy.  She could watch a marathon of Sponge Bob and the Wild Kratts.

Alas, we’ll never see that happen in our lifetime.

The good news is if you decide to buy a house at a trustee’s sale (auction) in Arizona, specifically Maricopa County, you can know everything AND stay home all day.  That is, of course, if you use the online bidding service AZ Bidder.

Keep in mind that I don’t get paid by AZ Bidder.  I’m just a client and a big fan of their service.  To see why check out the 7-part video series I did last month.  The only flaw in it was I didn’t win the bid on the property I chose to profile.

So without any further delay please click on the video below to see how well the system works when you win a bid on a property.

*For the best resolution I recommend you view this in full screen mode with the 720p HD option selected at the bottom right corner of the video box.

Winning a Bid

She told us that business was great.  How couldn’t it be?  “I’m finding houses on the multiple listing service for .50 cents on the dollar” she claimed.  “Really,” Mark said.  This unsuspecting Realtor just stepped into his trap.  She shook her head confidently, “Yes, I am.”

Mark told her he would buy every house she could find for .50 cents on the dollar.  This, of course, made the agent very happy.   She was grinning from ear to ear.  “Okay, I found a condo in Phoenix you can buy for $140,000.  It’s worth about $210,000.”  A puzzled look came across Mark’s face.  “I’m no math expert, but that doesn’t sound like .50 cents on the dollar to me” he answered.  The Realtor said, “You’re right, but it’s in turnkey condition, no repairs needed.”

“But you just told me you were finding properties for .50 cents on the dollar” Mark insisted.  He told her if she found any to call him.  Then we wrapped up.

This meeting took place in September.  2008.  Here we are, more than two years later, and poor Mark is still waiting for the Realtor to call.

Mark Saenz taught me a lot about the art of asking questions.  Before I met him I would accept what most people had to say at face value.  I would give them the benefit of the doubt.  Why would they lie to me I thought.  Besides, they said what they said with such authority.  They must be telling the truth.  If there were a few holes in their story I would fill in the blanks myself.  That was the polite thing to do right?

Like me, many people just fill in the blanks – especially when desperate.  Back in 2007, l was a struggling real estate professional.  My net worth went from $8 million to negative $2 million practically overnight.  I would listen to any sales pitch and consider any investing strategy imaginable if it meant I could improve my financial situation.  I wanted to believe these opportunities would work so I didn’t ask too many questions.  It was like I didn’t really want to know the truth.

Fortunately, I learned from Mark that questions are like a shield.  They protect us from the smelly stuff that my daughters always complain about whenever we drive by the dairy farm near our house.

If you’re thinking about paying someone to teach you how to invest in real estate then I advise you ask a lot of questions.  Here are my top three suggestions:

1. How many deals did you do last year?
2. Can you show me HUD settlement statements for those deals?
3. How many properties do you own right now?

If the sales person fidgets, fusses, stutters, stammers, sweats, delays or tries to change the subject then your shield worked.

My business partner Manny Romero likes to say that “if it’s 99% true, then it’s a lie.”  The problem with the real estate business is that many of the investors and educators you hear about or see on TV leave 1% of the story out.  Why?  Because that 1% will make you, and your checkbook, run for the hills.  The truth hurts doesn’t it?

-       Gordon Gekko, Wall Street:  Money Never Sleeps, 2010

A sequel is rarely as good as the original film.  Wall Street:  Money Never Sleeps probably won’t have the shelf life the original movie had.  Shia LaBeouf?  Please.  He’s no Charlie Sheen.

I hope you will find my sequel, Using AZ Bidder to Buy Homes at Trustee’s Sales:  Videos 5-7 as good as the original post, Using AZ Bidder to Buy Homes at Trustee’s Sales:  Videos 1-4 .  I guess my collection of videos are less like a sequel and more like a full season of Sopranos episodes – by themselves they don’t make much sense but when viewed together the message is clear.

One disclaimer before you watch this next set – I’m not paid by AZ Bidder to endorse their company.  I put these videos together on my own as a service to my readers.  Buying homes at trustee’s sales (courthouse steps) is very risky.  But armed with the right information you can minimize this risk, save time and capitalize on some incredible opportunities in the market.

*For the best resolution I recommend you view these videos in full screen mode with the 720p HD option selected at the bottom right corner of the video box.

Video 5 – Placing a Bid

Video 6 – Watching the Bid Cast

Video 7 – Final Results

“The most valuable commodity I know of is information.”

-       Gordon Gekko in Wall Street, 1987

I was 15 years old when the film Wall Street was released.  I had no interest in business back then.  I was too busy popping pimples and chasing girls – on my bike.  By the time I got around to caring about business, about 15 years later, the movie was off my radar.  That is, until Wall Street:  Money Never Sleeps came out in 2010.  I finally watched Wall Street and I wasn’t disappointed.

Last December, I was introduced to AZ Bidder by Tom Ruff of the Information Market.  This powerful web-based program allows me to bid on homes sold at trustee’s sales (auction) here in Maricopa County, Arizona, online.  With this service I can search for homes in foreclosure by city, zip code or file number.  It allows me to build in my own assumptions for holding costs and repairs.  I can order and view title and drive reports.  The market analysis information comes directly from the Arizona Regional Multiple Listing Service.  Once I finish my due diligence I can place my bid and watch the auction unfold live on my computer screen.

That’s a lot of stuff and I’m sure I left a few things out.  Whenever I log into the system I think of Gordon Gekko.  With all of this information at my fingertips I can make better buying decisions.  It makes we want to go around quoting him.  This line is one of my favorites –  “I don’t throw darts at a board. I bet on sure things.  Read Sun-tzu, The Art of War. Every battle is won before it is ever fought.”

I posted 4 videos here today.  On Monday I will post the other three.  Here’s the order:

1. Property search
2. Identification and research
3. Market analysis
4. Marking for bid (title and drive report)
5. Placing the bid
6. Watching the bidcast
7. Final Results

*For the best resolution I recommend you view these videos in full screen mode with the 720p HD option selected at the bottom right corner of the video box.

Video 1 – Property Search

Video 2 – Identification and Research

Video 3 – Market Analysis

Video 4 – Marking for Bid

John and Jim

John Page could make my Dad laugh.  I mean really laugh.  You know the type of laugh that comes from deep inside your belly?  That’s the kind of laughter I’m talking about.  When the two of them got together the beer would flow.  Stories were told and new memories created.

That’s the two of them pictured – John to the left, my Dad to the right – smiles bright and faces flush from a night full of laughter and wine.

They met in the first grade and grew up together in Belvidere, Illinois – friends for almost 60 years.  John served in the Air Force during Vietnam, my Dad in the Army.  Although they were separated at times they never lost touch.  After my Dad moved our family to Arizona in 1977 John would bring his family here from Illinois to visit us.  Likewise, my Dad would take me, my Mom and brother back to Illinois every summer to visit our relatives – and of course, the Page family.

John’s oldest son, Brian and I are the same age.  And like our Dads we have also been lifetime friends.  Growing up not a summer went by that Brian and I didn’t see each other.  I remember one year in particular.  We had been up all night screwing around like teenagers do.  John wondered why we had slept in so late.  Brian and I gave him a less than honest answer and John quickly replied “you can’t snow the snowman!”

John was the life of the party and he had the funniest lines – so many in fact that his daughter, Jennifer, began compiling a list of them a few years ago.  If he was a guest at my home and I didn’t offer him a cocktail promptly I could be sure to hear “it’s dryer than a Baptist picnic around here!”

That’s why it breaks my heart to be writing about John in the past tense. On January 22^nd, 2011 he died after an eight month battle with esophageal cancer.  Not a day has gone by since that I don’t think about, and pray, for him and his family.

John was a loving husband to his wife Mary.  He was a proud father of Brian, Andy, and Jennifer.  He was a doting grandfather to Wyatt.  And he was one of my Dad’s closest friends.  I’m blessed to have known John and his family all these years.

Me, John, Mary, Renee (Brian's wife), Brian, Ally (my daughter), Jim, my Mom (Brenda)

John’s passing has helped me focus on what’s important; creating memories with family and friends.  He’s even helped me out with my real estate business.  These days when someone presents me with a less than honest evaluation of a property I like to say “you can’t snow the snowman!”

At his memorial service a few weeks ago I spoke with one of John’s neighbors.  She told me that she was in the happy hour club with John.  She then paused for a moment and said, “Actually John WAS the happy hour club!”

I can’t help thinking that things must have been getting a little dull in Heaven.  John was needed to get the ultimate happy hour started.  I bet he even used one of his famous lines when he got there, “let’s party like rock stars!”

I hopped in the shower and about 15 minutes later my wife, Linda, strolled by.  She wanted to know when I would be done.  Apparently my bride was anxious to get her day started too.  Our daughters would be awake very soon and she needed to get ready.  She pointed out to me that I take very long showers.  I couldn’t disagree.  I told her I find long hot showers to be very meditating.  I do my best thinking in there.

Linda then brought to my attention that several celebrities, including Jennifer Aniston, take 3 minute showers to conserve water.  As a matter of fact, Jennifer Aniston even brushes her teeth in the shower (that is, of course, if you believe the celebrity gossip magazines).

Now I’m all for conservation.  Our back yard has fake grass and we recycle everything.  But I draw the line at short showers.  Besides, I told my wife, Jennifer Aniston is a hypocrite.  She lives in a huge house in Beverly Hills that overlooks the ocean.  According to People magazine the master bathroom has a spa bath with soaking tub.  Her water and electric bill is higher than my entire neighborhood.

I had to laugh this morning when I came across a piece in the New York Times titled, Do Nothing (Impossible?).  The writer, Matt Richtel, discusses the benefits of doing nothing.  There’s even a website you can go to, do nothing for 2 minutes.  The idea is to clear your mind.  I tried it as soon as I got to my office today and it seems to be working.  How else can you explain my extra creative wittiness in this post?

Bob Proctor, one of my favorite personal development coaches, likes to say that 2% of people think – 3% of people think they think – and 95% of people would rather die than think.   I don’t know if he did a real survey to come up with these numbers but my guess is he’s pretty accurate.

So where do you do your best thinking?  In the shower?  At the gym?  In your car?  Do you ever turn everything off and clear your mind?  If you do so on a regular basis you’ll be in rare company.  According to Napoleon Hill, author of Think and Grow Rich, some of the most successful people in this country, from Thomas Edison to Henry Ford, devoted time everyday to thinking.

I recommend you start out by devoting 5 minutes a day to this exercise.  Over time, see if you can increase it to 30 minutes.  You’ll be amazed at the results you get – in both your personal and business life.  But if you’re like me and do your best thinking in the shower then you may want to set aside some extra money each month to pay the water bill.

-          Norman Cousins

Dateline:  Rocky Point, Mexico – March, 2010.  My business partner Manny Romero and I, along with a couple of buddies, headed four hours south of Phoenix for some sun, sand, golf and cervezas.  This would be our first annual guy-only trip – we called it a Mancation.

No detail was overlooked.  Manny set us up in an awesome resort condo right on the beach.  He booked our tee times.  I checked the weather – perfect conditions – and packed the cooler full of Pacifico beer.  The iPod was loaded up – Zac Brown Band’s Toes the first song on the playlist…

I got my toes in the water, ass in the sand,

Not a worry in the world, a cold beer in my hand,

Life is good today, life is good today.

It was a memorable trip.  We ate shrimp tacos and listened to mariachis.  I lost 17 golf balls in two rounds and nearly broke my 7 iron in half.  On Saturday night we jammed out to a cool Mexican rock band with a lead singer that looked like Jesus and had a voice like Chris Cornell.  All the while we barely noticed the college kids – it was spring break.  When Sunday morning came we wearily packed up the car with our golf clubs and empty cooler for the ride back home.

There was a wait –a very LONG wait – at the border checkpoint to reenter the United States.  It took more than three hours to get out of Mexico.  When I rolled down my window to greet the Customs agent he took one look at me, Manny and our two friends in the backseat and asked “what are you guys celebrating spring break 10 years later?”  I told him I considered that a compliment – we were actually celebrating spring break 20 years later!

Here’s the thing – we knew that our Mancation was the same week as spring break.   We realized it two weeks before we left.  Most middle aged men would have cancelled the trip, paralyzed by this new information.  Not us.  Our purpose was a good time, line at the border or not.

Analysis paralysis is an ugly disease.  It can kill a vacation or keep you from getting started in real estate investing.  Studying stuff like employment figures, vacancy rates, median incomes, economic diversity, contract ratios, median prices and absorption rates in your town is a wise thing to do.  Just don’t forget about your purpose – to make money.

Tom Ruff of Information Market and Mike Orr of Cromford Report know the Phoenix housing market better than anyone.  They have a way of analyzing complex data and drawing simple conclusions, without the doom and gloom.

In his January 2011 Housing Opinion Tom wrote, “We are living in the time after the crash, not the time before; Phoenix is now offering the same opportunities we saw in the early 90s. I haven’t heard anyone say, boy, I wish I’d have bought that home down the street in 2006 when I had the chance, but I’ll bet you, ten years from now when they look back at this unique time in history…”

In his January 16 mid month pricing update and forecast Mike Orr concluded, “So we see a generally gloomy picture for sales pricing and no sign of any improvement in the next four to six weeks. In fact we see continued deterioration. We do not get too concerned about this however, since sales pricing is a TRAILING INDICATOR of the market and is the last thing to show any turnaround. When we look at other measurements things are not so gloomy. This is because lower pricing results in increased demand which is certainly making its presence known at the moment.”

Remember your purpose.  Don’t over analyze.  Keep it simple.  If you can buy a home in this market and rent it for more than it cost to pay the debt service and expenses then you’ve made a smart investment.  If you can buy a home, fix it up and sell it for what you paid, plus another 12-25K in profit, then go for it.  Let the numbers guide you, not paralyze you.

Next week Manny and I will embark on Mancation II to Rocky Point – only this time we’re doing it Super Bowl weekend and are returning on Monday morning.  We’re expecting the line at the border to be much shorter this year.  What can I say?  Analyzing the numbers from last year’s trip I learned that we should go a different weekend.  I also concluded that I need to bring more golf balls and a spare 7 iron.

Nobody likes to come in last.  It goes against everything we are taught.  There is no trophy or medal for last place.

That is unless you’re buying a bank owned property.  It pays to be last.  In this video my partner, Manny Romero and I share three tips for getting the bank to accept a low offer.