S. Clay Sparkman
Grover W. Sparkman is the President of Fairfield Financial Services, a company that he founded with his wife, Louise Sparkman, and a business partner in 1964. He has been involved in just about every imaginable aspect of private money lending and paper brokering for nearly half a century. He also works as a licensed Realtor in Oregon and Washington, and previously worked for many years as a licensed appraiser (back when you still had to type appraisals). As my mentor, he taught me how to be a private money professional. And as my father, he taught me simply how to be.
Clay: You started out as a Realtor and in fact you are still a Realtor. When and how did you first get involved in trust deed investing?
Grover: I had been working as a Real Estate salesman for Mayfair Realty, but since getting my Real Estate Broker’s License, I had always wanted to open an office of my own. When an old time Real Estate broker named Henry English died in 1964, a partner and I, Milt Dalby, purchased the Real Estate business in Southeast Portland from the Henry English Estate. In those days there were not many banks loaning money on real estate …
Clay: That sounds like today. Have we gone full circle do you suppose?
Grover: Good point. Perhaps we have. At that time, the solution for sellers was to sell property on private land sales contracts …
Clay: So maybe that is part of the answer. Maybe we’ll see more of that once again.
Grover: Indeed, we might. The attitude then was one of, “why wait for the banks, let’s get going.” Henry English had set up a collection department to collect the monthly payments on the contracts. One day I received a call from an attorney saying one of the owners of a contract had died and he wondered if we could sell the contract to raise money to close the estate and pay the expenses. He also explained that the 4 children that were heirs did not want to split the $400.00 per month coming in on the Contract; they all wanted the money immediately.
I started asking questions and discovered a new business–selling real estate contracts. Back then we were called paper brokers. Those were the days before computers and printing calculators, and I had to learn how to calculate interest yields on the unpaid balance on the contracts. There were a set factor tables called the Elwood Tables that would give us the time value of the money and rate of yield so we could figure out what an investor could pay for a contract to get the interest he or she was looking for. Interest rates being paid by the banks and savings and loans were very low and there were few safe places for investors to put their money to get a good monthly return.
Clay: How has the private money business changed since you your early days in the business?
Grover: The government began to get more involved with the residential mortgage business through programs like the Veteran’s loan program, HUD’s FHA programs, and private insurance programs protecting the banks against foreclosures. This coupled with a growing economy caused more banks and Savings and Loan Companies to make more real estate secured loans, and in turn this caused private land sales contracts to dry up.
We still had the investors looking for a good return on relatively safe loans, so I started looking for ways I could meet their need and discovered Trust Deed financing of Real Estate loans. Working with builders, people wanting to buy rental properties and business buildings, and developers creating subdivisions–I found people wanting to borrow, that could use their real estate as collateral for the loan, giving the lender a reason to support the borrower’s business plan and in turn receive a good return on their money. If things didn’t work out, the property could be foreclosed and sold to recover the investment.
Clay: Share with us, if you would, an experience as a private money broker/investor that you particularly enjoyed.
Grover: Over the years many of my clients became personal friends and referred me to their family and friends. I watched many of them become Snow Birds going to Arizona or California for the winter and coming back to Oregon in the spring. There were a couple of investors that got involved in the Peace Corps and people to people programs and traveled around the world.
Clay: And on the flip side, share with us an experience that you didn’t so much enjoy.
Grover: On the flip side I found a lot of fraud creeping into the business. People vastly overstating their ability to repay the loan and I found Appraisers that would give grossly inflated value to a property if they were being paid by a borrower or broker. I found investors that were making loans to launder money from illegal activities. There were also the investors that were only looking for loans they felt they would be able to foreclose and get property to resell at a profit.
Clay: What is one of the funniest/strangest things that ever happened to you in the business?
Grover: We received a proposal from another loan broker with an appraisal and pictures; they wanted a loan on two houses on one large lot. When I went to inspect the property I couldn’t find the houses. There had been a fire about three months before and the houses had been completely demolished and hauled away. Another time a restaurant submitted a proposal for a remodeling loan, when I went to inspect the property they didn’t want me to go into the basement where the dining room had been. There had been a flood that had filled the basement with muddy water.
Clay: Would you dare to conjecture as to where the industry is going during the next few years?
Grover: I was born just after the crash of 1929 and have seen several booms and busts in the real estate market. I feel that there will always be a market where borrowers need money for their business plans and investors are looking to get a better than average return on their money on a relatively safe loan. Real estate will always be good security for the loan, so long as both the borrower and the investor use good judgment and ensure that there is a proper plan for paying the loan off and that the values for the security are as accurate as possible.
Clay: These are hard times for hard money lenders and hard money brokers. Do you have any advice for those who are currently involved in private money investing?
Grover: You have to like the business. I like the real estate business because I like helping people solve their problems. On the residential side I was helping people buy a house with the idea that they were going to make it a home and a place to raise a family. On the commercial side of the business I always got a thrill out of watching a building grow into a business that became a part of the community. As a loan broker, I was also helping people solve their problems of getting money to buy, develop and build while at the same time I was able to help investors get a good return on their money.
Being a broker is very much a people business; we sell one loan at a time, for a borrower with specific needs, to an investor with a desire to earn a better than average yield on the investment. We don’t have anything to sell but our service. I feel that it is our obligation to be as transparent and open with our clients–lenders, brokers, and borrowers–as possible.
Clay: Would you agree with the supposition that (a) banks just aren’t lending and (b) our industry niche is being hurt by that since we are essentially a bridge and there must be a way to get on and off that bridge or people and businesses cannot cross it?
Grover: Right now we are going through a cycle where the bigger banks are hurting the economy because they are loaning very little money on real estate. Most of the loans we broker are for specific purposes that are generally short term, such as completing a remodel or putting up a building or developing a subdivision. The exit strategy is to get a long term bank loan after the project is completed or sold. If there is no money coming back into the pipeline, nothing happens and the economy suffers.
Clay: I’ve noticed that through your many years in the business—in both good times and bad—you never seem to become bitter or discouraged. What is your secret?
Grover: Over the years I have seen a lot of changes: computers and calculators and the internet, new rules and regulations, roller-coaster markets, and more frightened or suspicious people–but I remind myself that I love the business and its challenges. I have found that most people are honest and well meaning. My goal is to try to treat other people the way that I want to be treated in a business transaction. Over 40 years ago I came up with our slogan: “The Right Investment is Equal to a Lifetime of Toil.” I believe that it is still true today.
— Clay (clay@privatemoneysource.com)
Tags: hard money investing, hard money lending, hard money loans, investing, Oregon, private money investing, private money lending, private money loans, real estate, real estate investing, trust deed investing, trust deed lending, trust deed loans, Washington
Clay:
Nice touch here, I enjoyed reading it.
Alan