Jun. 15, 2007 Edition

New York Franchise Makes History

Largest home buyer in HVA history signs franchise agreement
By Monica Feid

Mark Wolf, John Hayes, and Mitch Cohen.

Mitch Cohen, a native of Brooklyn, NY, was hoping to earn $200 a week to pay for school and make a car payment when he took a job 20 years ago at a real estate agency. He was a gopher. He did everything from picking up lunch to answering the phone.

It was a phone call one day that changed his whole future. A homeowner rang, wanting to talk to someone about selling his house. Cohen answered. But instead of asking for an agent to list the house, the owner explained that he was going through a messy divorce and he just wanted to get rid of the property for cash as quickly as possible. Cohen offered to meet with him.

"I only had $500 dollars to my name," Cohen says. But he visited the homeowner, toured the house and made what he called a ridiculous offer. "The only problem was, he accepted it!"

Thanks to a generous uncle in Dallas who loaned him the cash, he was able to follow through on the offer. Cohen turned around and sold the house and collected a nice profit. It was official. He was hooked. Cohen took that one experience and began repeating it.

"It was relatively simple," Cohen explains. "I didn't have much money, but I took the profit from the first deal along with the principle investment, and I ended up doing one deal every three months. Then it became one a month."

As business picked up, so did Cohen's knack for selling rehabbed properties to happy customers.

That's when Cohen crossed paths with Mark Wolf some 10 years ago. Wolf, also from Brooklyn, runs the oldest mortgage banking business in the state of New York, which turned out to be the perfect career when a string of Cohen's homebuyers came looking for a loan.

Before long, Cohen and Wolf were making deals together -- good deals, and lots of them. When Cohen invited Wolf to become his partner, business only got better. Today, their staff includes four buyers, five sales agents, and two sales managers. They purchase a dozen houses a month in an economy that is correcting itself. And business is still great.

As the largest home buyer in the state, they buy homes in all of the New York boroughs except Manhattan, as well as parts of Long Island and Westchester. The average purchase price of a fixer-upper is about $275,000, according to Cohen. That might be a two-bedroom attached house, or a three-bedroom home that needs anywhere from $25,000 to $50,000 worth of work.

"But the market is still strong," says Cohen. "And the demand to purchase is still strong." The secret to success, he says, is understanding the market.

"We buy what the market allows us to buy," explains Cohen. "We had reached as high as 40-50 [homes] a month when the market allowed. But anybody whoever talks to me about this market and how to beat it is going to have problems. Hoping for a miracle is not a good business plan."

However, a miracle might be exactly what customers experience when dealing with Cohen and Wolf, because the best part of the whole process is turning those homes into dream homes for buyers. The exit strategy is built into the marketing.

"We have 400 to 500 people a month walking through our door because we're a large advertiser in local newspapers," Cohen says. Known as Buy A Home in the ads, specializing in the low- to middle-income bracket has allowed the business to turn many of their prospective buyers into homeowners.

With 75-80% of buyers coming from advertising and the other 15-20% coming from referrals, Cohen says that Buy A Home sells everything they buy. "We're never concerned about the sale," he says. "We're more concerned about the buy and the rehab, because that's where you make your money."

Cohen and Wolf buy houses at a deep enough discount that they're able to rehab and retail it for fair market value. And selling about three houses a week is a clear indication that buyers love the price! For one to three percent total cash at closing, buyers are able to get into a beautiful home for a song.

"We're really selling a monthly payment [that is] not vastly different from paying rent," Cohen explains. For about the same cost as one month's rent, a month's security deposit, and a broker's fee, Cohen and Wolf make home ownership dreams come true. And the satisfaction is sweet.

"We went to a closing last week, and the husband and wife had these tears of joy. Obviously, it was a big moment for them, the American Dream. Seeing that total joy and then hopefully getting referrals is the greatest thing."

Now these real estate veterans are taking another big step and rolling their whole business into an HVA franchise.

The seed was planted when Wolf read a six-page feature in Mortgage Banking magazine about a national franchise that did, well, what he and Cohen were doing. Only with a lot more cash.

The article said HVA was in the business of lending money so investors could buy houses, and the company was planning to expand to the East Coast. Enough said. A trip to Dallas was in order.

Access to more affordable financing was a huge draw for Cohen and Wolf. And as they inspected the franchise system up close, they saw that it fit in nicely with their current business model. They weren't going to have to change a lot of their organization, because what they had perfected on the local level mirrored what HVA was doing nationally.

Cohen admits that he didn't phone other franchisees when researching HVA either. "I just spoke to John Hayes and Jason Killough," Cohen says. "And I clearly understood that these guys knew what they were doing."

"It seemed to me to be a smart move for [HVA] to be involved with us, and us to be involved with [HVA]," says Cohen. And he also enjoyed the thought of bringing the brand to a whole new audience in New York. "I didn't see any downside to being [one of] the first in the door," he says.

HVA President and CEO Dr. John P. Hayes agrees, and he can't help smiling when he talks about Cohen and Wolf. "First, these are genuinely good people with a sense of humor. Second, they're experts. We're hoping we can teach them a few things, but we all know they didn't buy our franchise because they need to learn how to buy and sell. They recognize the value of our brand and our financing. Awarding them a franchise is one of HomeVestors' finest moments. It strengthens our positioning as we open the New York City market. When the largest independent home buyer in the market becomes our franchisee, that sends a message to all of our competitors.

Hayes is also excited about the effect Buy A Home will have on the HVA network. "Existing franchisees in the New York and New Jersey markets will appreciate having Mark and Mitch in their presence because they've been through a couple of different real estate cycles, and they have all the contacts they need in the marketplace," he explains. "They also raise the bar for our entire franchise network. These guys buy a house every other day! That sets a new level of performance for our top franchisees, who will enjoy the challenge."

Cohen remembers a time when franchises like Century 21, McDonald's, and Burger King were just breaking into the New York market. "I heard all the naysayers say, 'This won't work here,'" he says. But history proved them all wrong. And Wolf and Cohen plan to have the same success with HVA.

"If a franchise is set up correctly," Cohen says, "it will work in Dallas, it will work in Kansas, and it will work in New York."

. . . Monica Feid of BizCom Associates handles public relations services for HomeVestors and its franchisees. You can contact her at 972.490.8053.

An End To Overvaluation?

Global Insight report signals a return to equilibrium
By Buck Maxey

Buck Maxey

Global Insight, a real estate forecasting firm, has pointed out what might be considered the silver lining to the softening, or, in some cases, the considerable decline, of home prices. Global Insight tracks various economic and financial indicators and generates a report which attempts to quantify, among other things, whether a particular area is overvalued or undervalued. The report examines 317 U.S. real estate markets, which constitute about 90% of the single-family housing market, to determine what home prices should be, accounting for differences in population density, relative income levels, interest rates, and historically observed market premiums or discounts. Global Insight considers markets with valuation premiums above 35% to be at risk for price corrections. This figure is based on historical analysis of 63 market price corrections since 1985.

Global Insight's most recent analysis, which covers the fourth quarter of 2006, helps to quantify the implications of lower home prices on overvalued markets. The result of these price drops is that the overall number of single-family housing units identified as overvalued dropped from 17% to 16%. Relative to single-family asset value, the percent identified as overvalued dropped from 31% to 28%.

The firm notes that single-family home prices in the fourth quarter of 2006 went up 1.8% compared to the previous quarter, which was also a 4.1% jump from the same quarter the year before. Still, on a market-by-market level, 72 metro areas (22%) showed price declines. Not surprisingly, these declines were concentrated in California, Florida, and the New York metro area -- all areas of extremely high appreciation. In fact, for the period from the third through fourth quarter of 2006, California had 21 out of 26 metro areas with negative price appreciation, and Florida was home to 10 of 18 metro areas that had declined in value. Conversely, 21 of 50 states had no price declines.

Not surprisingly, areas that had not experienced extreme price appreciation tended to be the best performers at this late stage. Examples include northern Arizona and interior and northern parts of the West, including Utah, Idaho, Washington, and Oregon (with the obvious exception of Seattle).

From the third to the fourth quarters of 2007, the number of metro areas designated as overvalued dropped from 60 to 57.

The greatest incidences of overvaluation tended to be localized in the Atlantic and Pacific Coasts, although New England appears to be as overvalued as it has in the past.

And, although still overvalued, Orange County, Tucson, Reno, and Carson City are no longer defined as "extremely" overvalued. At the other end of the spectrum, Texas, specifically Dallas and College Station, come in at the bottom, effectively the most undervalued areas in the nation; this in spite of solid gains in value.

Topping the list, Naples, FL, maintains its dubious distinction as the most overvalued market in the country, although its level of overvaluation has declined to 79.9% for the fourth quarter 2006 from 83.6% in the previous quarter.

Jeannine Cataldi, Senior Economist with Global Insight, pointed out, Nearly all markets posted a decline in the level of overvaluation, which signals that the overall housing market is beginning to trend back to more normal price growth."

To request a copy of the full report by Global Insight, visit http://www.globalinsight.com/Highlight/HighlightDetail2350.htm.

From Alabama To Afghanistan

Franchisee Roland Beason joins U.S. troops serving in Kabul
By Lawri Murray

Roland Beason

Roland Beason has been a HomeVestors franchisee for nearly four years. Now, he's on temporary leave from his duties as managing owner of Oak Partners, Birmingham, AL, to spend a year in a city that's nearly 7,500 miles from his home.

Roland, a member of the Army National Guard, has been deployed to Kabul, Afghanistan, where he is serving as an Embedded Tactical Trainer with an Afghan Infantry Battalion in Paktika Province.

"I mentor the Afghan officers/soldiers on how to have a functional, logistical, and operational army," Roland explained from Afghanistan. "Fighting is no problem. These mugs know how to fight. They have been doing so for three decades. [But] supply chain is a little foreign to them."

Oak Partners co-owner Spencer Sutton is understandably concerned for the safety of his friend, who isn't scheduled to come home until May 2008. "I actually watched a National Geographic documentary on a task force of Green Berets in southern Afghanistan, and they are experiencing increasingly hostile and difficult situations with imbedded Taliban who are using IEDs from Iraq much more frequently," said Sutton. "Please remember Roland in your prayers as he serves our country and theirs."

"The thoughts and prayers of our HVA Leadership Team and other members of our corporate office will be with Roland, and his wife, Kelly," said HVA President & CEO Dr. John Hayes. "In addition to being one of our experienced and talented franchisees, Roland is one of our favored sons. We want him back safely. Meanwhile, we appreciate him all the more for defending our country."

If you'd like to show Roland your support, you can write to him at:  

Roland H. Beason
TF 1-503, EAGLE
ANA ETT
ORGUN-E
APO AE 09354

. . . Lawri Murray is HVA's marketing creative manager. She can be reached at 972.761.0046, ext. 217.

Mid-Year Summit Wows Franchisees

If you missed the MYS, you really missed out

". . . I felt the MYS was the best HVA meeting I have attended.
I really got more out of this meeting than any other."
--  Jim Lutz, Metro Investment Properties 

"It's always helpful to get a cross section of the country in one place
to realize what's happening on a national level, and share experiences."
-- Cal Wilkins, The Real Advantage 

"The networking by far was the greatest teacher."
-- Diane Maldonado, PeyMax Properties 

"This was the best convention or summit I've ever been to."
-- Bob Pilz, Take Too Enterprises

The MYS provided plenty of networking opportunities.

For those of you who couldn't be present at the MYS, the highlights of what we shared with franchisees:

New Finance Programs -- Attract more investors and first-time home buyers with the new Investor Loan Program and the revamped Owner Note Program!

New Web site -- A new Home Page that's user-friendly, easy to navigate, and evenly focused on selling, buying, attracting investors, and recruiting new franchisees!

New properties listing feature -- You can now list assignment properties on the HVA Web site! (Be careful. This may be temporary, and you need to follow the guidelines).  

New advertising intiatives -- UG moves! New testimonial spots feature an animated UG. The new UG -- and his new "We Sell Luvly Houses^SM" tagline -- will also appear on new outdoor boards and print ads.

The Roundtable luncheon offered discussions on a variety of relevant topics.

The Selling in a Buyer's Market seminar, featuring a panel of franchisees -- Chas Carrier, C&C Residential; Greg Justice, MJS Holdings; James Roche, Stieferman Investments; and Mike Maldonado, PeyMax -- along with FSS staff Larry Louwagie and Mike Blatney, brought everyone up to speed on what these franchisees have done to become our Top Sellers for the year to date, despite the challenges present in the market. They explained their strategies for building an investor base, developing a rent-to-own program, and effectively targeting first-time home buyers. They also discussed the benefits (and necessity) of having a dedicated Seller on staff. And all panelists agreed that taking a loss on inventory over six months old will enable you to buy properties that can more than make up the difference.

The Profit Makers Panel.

• All employ Coordinators.
• All employ Buyers who focus solely on buying properties.
• All employ Sellers who focus solely on selling properties.

This year's summit also featured top-notch keynote speakers, who were all very well received. Blanche Evans, editor of Realty Times, told the group in no uncertain terms that the time to buy is now, while the other investors are "sitting on the sidelines." Philip Campbell grabbed the audience's full attention when he said, "Money may not buy happiness. But it buys a lot of cool stuff." In his presentation, Never Run Out Of Cash, Campbell explained that getting a handle on where your business stands financially can help you avoid problems down the road. He said the goal of every franchisee should be to know the answer to the following questions:

1. What are my cash balances right now?  
2. What do I expect my cash balances to be six months from now?  

By far, the most energetic presentation was delivered by Bryan Dodge. One of Dodge's core philosophies is the idea that every single person has the responsibility to set goals. He explained that setting goals helps you achieve success, because in setting them, you:

1. Become better organized,
2. Focus your creativity and energy, and
3. Improve communication with the important people in your life. 

Bryan Dodge

So if you're one of those feeling the Pain of Regret for not having attended the MYS, pull out your written list of goals (you do have one, right?), and add the following:

• I will attend the Annual Convention in December
• I will attend the 2008 Mid-Year Summit
• I will make the most of every opportunity to network, to learn, and to make my business a success!

. . . Questions on any of the new finance programs? Contact John Bachmann at 972.761.0046, ext. 130. For details on any of the new marketing initiatives, contact your Regional Marketing Manager (RMM). For information on any of the other topics covered at the MYS, call your Franchise Systems Manager (FSM).