Category Archives: Real Estate

Hard Money Lender Tom Hastert Demands Jury Trial

June 26, 2009 jd

It’s hard for me to imagine a man like Thomas Hastert a man who worked so hard to get ahead in this world becoming a felon. Hastert worked for the Nevada County Sheriff’s office, studied to become an attorney, then got his real estate broker’s license.

Once he got his broker’s license he proceed to engage in hard money lending in direct conflict with the law, making construction loans without fully funding them, a felony.

In addition, Hastert pleaded no contest to 62 counts of embezzlement, offering and selling unregistered and unqualified securities by false and incomplete communications. According to the Attorney General of California amounting to $20 million lost by his clients. That’s a lot of money to handle and lose. A standard fee for the mortgage broker Hastert is to charge is about 3 percent of the loan amount which means Hastert would have pocketed about $600,000.

Hastert’s attorneys and the California Deputy Attorney General Keith Lyon had reached a plea bargain that would have given Hastert five years in state prison. Normally that type of sentence means two and one-half years and he’s out of prison.

However, at the sentencing Judge Sean Dowling rejected the plea agreement and came back with his own sentencing of eight years and four months. Hastert’s attorney refused the new sentencing and demanded a jury trial.

I met Thomas Hastert some time ago, while he was an attorney. I did some investigations (as a civil engineer) for Hastert regarding building code violations for some of the real estate cases that he had. My impression of him at that time was that he was a nice person and I had no idea that he would resort to what he did. What does a person like that think? We have the Bernard Madoff, the Sir Walter Stanford’s who look you in the eye with a smile and steal your pocket book at the same time.

What do you think?

Vultures are Coming to the Real Estate Market

June 24, 2009 jd 2 Comments

vultures

I have said many times on this site, now is the time to buy real estate if you have the money and can wait for the market to change. Now REITs (real estate investment trusts) with stronger balance sheets are building billion-dollar war chests to fund acquisitions of troubled properties on the cheap. They’re raising the money to fund acquisitions of distressed commercial properties.

REITs are more then ready, having raised over $12 billion by issuing stock in recent months. There’s an estimated $90 billion in the U.S. that is “distressed” according to New York based real estate research firm Real Capital Analytics.

These are properties that have been foreclosed on, or whose owners are in default on their loans or in bankruptcy. “On top of those properties, there is hundreds of billions more in debt coming due in the next few years,” says Peter Slatin, editorial director at Real Capital. “Some REITs are getting prepared for that.”
The four blue-chip REITs cited above represent a fairly conservative way for individual investors to profit from the (hoped-for) real estate rebound. The fact that they have the resources to exploit today’s weak market may set them up for years of healthy cash flows. “These are the commercial real estate companies that are going to survive,” says Jim Sullivan, senior REIT analyst with Green Street Advisors. “They all have balance sheets that are stronger than average and management teams that have proven their ability to take advantage of downturns.”

Anyone who goes bargain hunting in real estate today has to be patient. REITs fell earlier and harder than the broader real estate market. In the two years from March 2007 to March 2009, REIT stocks fell a stunning 75% on average. Lately, however, REITs have been on a roll, with the MSCI U.S. REIT index gaining more than 45% since the March low. Does this spurt mean that REITs are foreshadowing a sharp rise in real estate values? Some experts caution that there is more pain to come. “Prices have gotten ahead of the fundamentals in real estate,” says Kenneth Rosen, chairman of the Fisher Center for Real Estate and a professor emeritus at the University of California at Berkeley. “It has gone too far, too fast.” Rosen expects a correction in the coming months.

But many analysts like the longer-term outlook. “The underpinnings of the commercial real estate market are really in pretty good shape,” says Philip Martin, a senior vice president of Golub & Co., a Chicago-based real estate investment and development firm. He notes that there isn’t the kind of massive oversupply of commercial properties that existed during the slump of the late 1980s and early 1990s. “So when we do recover, you are likely to see a pretty healthy snap-back in real estate prices,” he says. “This is an excellent environment for those REITs with the right combination of knowledge and capital. They are going to have an opportunity to make some great deals, and the risk-adjusted returns at this point in the real estate cycle are going to be pretty darn good.”

Source: CNN Fortune

Real Estate

Federal Home Buyer Tax Credit Update

June 23, 2009 jd

tax-credit-update
Lawmakers and businesses are calling for an expansion of the existing tax credit now capped at $8,000 to be raised to $15,000. The existing federal tax credit of $8,000 has been a success in spurring first-time home buyers to get back into the housing market.

A further proposed change would be that the tax credit would be applied to anyone who buys a home.

First-time buyers make up a hefty 40% of home purchases, according to the National Association of Realtors (NAR), which is about 5 percentage points higher than the historical average.

Some economists say a tax benefit is vital to spur home buying and help stabilize prices.

According to USA Today the current proposals are:

“•A Senate bill to expand the tax credit to $15,000 for any home buyer regardless of income was introduced this month by Sen. Johnny Isakson, R-Ga. It is co-sponsored by Senate Banking Committee Chairman Chris Dodd, D-Conn.

“It would go a long way toward inducing trade-up buyers into the market,” says Lawrence Yun, chief economist at the NAR.

•A House bill to keep the $8,000 credit in place until June 2010 and expand it to all home buyers was introduced last month by Rep. Kenny Marchant, R-Texas. It also would provide a $3,000 credit to homeowners who refinance.

•Another bill in the House, introduced by Rep. Eddie Bernice Johnson, D-Texas, would extend the credit to all home buyers through 2010.”

The present tax credit does not apply to singles earning more than $95,000 a year and couples who earn more than $170,000.

Buyers do not have to repay the tax credit if they occupy the home for three years or more.

Real Estate

Ex NFL Quarterback Bernie Kosar Files Bancruptcy, Ex-wife Sells House

June 21, 2009 jd

Former gridiron great Bernie Kosar, dogged by financial and legal problems, filed for bankruptcy Friday. In the meantime his former wife Babette sold their home for a cool $2,400,000 according to Zillow.com. Kosar’s wife, Babette, divorced him in 2007. Last year, his Bernie Kosar’s Steakhouse went out of business.

Kosar, 45, the former Miami Hurricane and NFL quarterback, filed for Chapter 11, which is generally used by companies to reorganize.

The bankruptcy petition didn’t provide much detail. Boxes were checked off on the petition indicating Kosar has assets estimated between $1 million and $10 million and liabilities of between $10 million and $50 million.

The filing listed Kosar’s largest unsecured creditors, owed a combined $19.5 million. Among them and the amount of their claims: the Cleveland Browns, a team he quarterbacked from 1985 to 1993, nearly $1.5 million; his ex-wife Babette, $3 million; and Jim Ferraro, the owner of the Cleveland Gladiators, an Arena Football League team, $725,000. Kosar is the team’s president.

Other major unsecured creditors include Tampa’s Florida Bank, owed about $9.7 million over some sour real estate investments and Key Bank of Cleveland is owed about $3.1 million.

The filing marks a hard fall for Kosar, the star Hurricanes quarterback in the 1980s who went on to excel in the NFL with the Cleveland Browns before ending his career with the Miami Dolphins in 1996.

Lenders also obtained foreclosure judgments on apartment properties Kosar had an interest in in Tampa, Clearwater and Pinellas Park.

A recent story by Yahoo points out that Kosar needs to mount a comeback. Read Yahoo’s Story about Kosar.

Real Estate

Foreign Investors Optimistic About U.S. Real Estate

June 20, 2009 jd

Foreign real estate investors expect the U.S. real estate market to recover by the end of the second quarter of 2010, according to a survey released Wednesday by the Association of Foreign Investors in Real Estate (AFIRE).

Survey respondents were optimistic about the prospects for good returns, with more than two-thirds planning to invest in U.S. real estate before the end of the year.

About 31 percent said they were more hopeful now about the health of the U.S. real estate market than they were in January, 16 percent said they were more pessimistic, and 53 percent said their opinion had stayed the same.

The 200 members surveyed predicted that Washington, D.C., New York City, and San Francisco would be the first cities to recover, followed by Boston and Los Angeles.

Source: Association of Foreign Investors in Real Estate (06/17/2009

Real Estate

Sued for Fraud – Stewart Title and Heritage Oaks Bank

June 18, 2009 jd

scammed
Investors have filed a lawsuit against Stewart Title Company and Heritage Oaks Bank (HOB) alleging they aided and abetted or conspired with Hurst Financial Inc. (HFI) in defrauding hundreds of seniors through illegal investment schemes.

According to Cal Coast News

“The suit filed by more than 300 investors against Stewart Title, HOB, and HFI lists eight complaints including conspiracy, fraud, financial elder abuse, and negligence. Investors are seeking punitive as well as compensatory damages.

Late last month, the FBI seized assets of (HFI) President Jay Miller’s home because of allegations of racketeering, money laundering, and wire fraud, according to a seizure warrant. The suit alleges HFI could not have engaged in a “Ponzi scheme” without the “joint effort, cooperation, and planning” of Stewart Title.

San Diego based attorneys Steven Sanchez and David Noonan, of the law firm of Kirby Noonan Lance and Hodge, claim that Stewart Title, working alongside HFI, siphoned money from investor loans to place in the pockets of HFI principles Miller and his daughter Courtney Brard. Sanchez cites examples of the title company creating false escrows, falsely closing active escrows, and illegally filing clean title reports before placing additional loans on already encumbered properties.

In addition, Stewart Title failed to notify investors when they discovered the fraudulent dealings following an internal audit and interviews that were spurred by numerous lawsuits and allegations of illegal activity “

According to the article, more than 1,000 people invested in this scheme, most of them seniors, resulting in over $100 million unaccounted for.

It’s amazing how investors get involved in schemes which promise a high return. The higher the interest rate that you are promised, the more risk that you are taking. When times are good and everyone seems to be getting rich, people want to get into the action.

The lesson here is as before, check very carefully before you invest your money. Remember, If it’s too good to be true, it probably is.

Real Estate

Frank Sinatra’s Resort in Foreclosure

June 16, 2009 jd

Having gone a few times to the Cal-Neva Resort, owned by Frank Sinatra for three years in the 1960’s, it’s sad to see the historic resort in foreclosure. Unique in that part of the resort is in Nevada and part in California, you could jump in their swimming pool which has the state line bisecting the pool in two. You could swim from California to Nevada in just a few strokes!

The resort was up for auction and the result—zero bids. The recession is taking a big bite out of tourism around Lake Tahoe. Indian gaming in California is keeping day trippers closer to home. And Ezri Namvar, the hotel’s most recent ex-owner, was forced into bankruptcy amid several dozen lawsuits, many from the tight-knit Iranian Jewish community in Los Angeles, which alleges that he ran a $500 million real estate fraud.

Marcil’s company, National Hospitality Holdings, specializes in turning around hotels in trouble. It was hired by Canyon Capital Realty Advisors, the Los Angeles company that foreclosed on the Cal Neva.

Canyon officials said their April 8 auction flopped because of the resort’s unique location: The border between California and Nevada splits the property. “It’s the only place,” Sinatra joked, “where you walk across the lobby — and get locked up for violating the Mann Act” (which bans interstate transportation of women for immoral purposes).

The odd division required simultaneous auctions in Reno, Nev., and in Roseville. The complicated process “masked” the resort’s real value, a Canyon spokesman said.

The resort was once a watering hole for elite seekers of quickie Nevada divorces.

Over the years, it was raided by Prohibition agents and shuttered by the IRS. Today, the property once known as the “Lady of the Lake” is showing her age.

In 1983, Ron Cloud, a Fresno, Calif., plumbing contractor who had acquired the Cal Neva, lost his license for allegedly rigging the slot machines and strong-arming debtors

Source Steve Chawkins Los Angeles Times

Real Estate

California Imposes Statewide 90 Day Foreclosure Moratorium

June 14, 2009 jd 2 Comments

really-you-got-to-stop-sign

California is imposing a 90-day moratorium on housing foreclosures under a new law that takes effect Monday, June 15, 2009.

The law is expected to make lenders try harder to keep borrowers in their homes. Loan companies must prove they tried to modify the delinquent loans before they can begin foreclosing.

But supporters acknowledge the California Foreclosure Prevention Act won’t stop thousands of foreclosures from eventually happening. There have been more than 365,000 foreclosures in California since early 2007, with many more already scheduled.

The law will largely press lenders to follow the Obama administration’s Making Home Affordable Program that began in March. That encourages lenders to cut interest rates or rewrite loans to 40-year terms to get payments below 38 percent of a borrower’s monthly income. Other options include reducing principal and tacking missed payments to the back of the loan. Under the law, California officials also can encourage short sales or deeds in lieu – options in which banks accept less than owed – for borrowers who want to leave or don’t qualify for modifications.

In summary, here’s what will happen starting Monday:

• Lenders will submit applications to the state outlining their loan modification programs. That gives them a 30-day exemption from a moratorium.

• If the state OKs a lender’s program, the firm is permanently exempt from the 90-day delay on foreclosures.

• If the state rejects the program as inadequate, a lender has 30 days to upgrade it and be reconsidered.

Leyes said consumers will be able to see a list of lenders that comply with the state’s requirements by mid-July.

Source: The Sacramento Bee

Real Estate

Can’t Sell Your Home, Offer a $1 Million Coupon

June 11, 2009 jd

coupon
Can’t sell your home? Offer a coupon as one homeowner did in Florida in order to sell his home. Realtor Rusty Gulden came up with the idea rather than lower the price of the home $1 million, just make up a $1 million coupon.

In an effort to cut through the gloom in the luxury real estate market, Gulden has been running an ad in the Palm Beach Daily News. “FREE $1,000,000 with this coupon,” the ad reads. “Offer expires May 31, 2009.”

Gulden is trying to sell a 2,000-square-foot unit at the Sun & Surf condo at 100 Sunrise Blvd. in Palm Beach. The asking price was $3.7 million, but it’s a mere $2.7 million with the coupon.

Gulden says tough times call for attention-grabbing marketing gimmicks.
“The volume is significantly off — you don’t need a Ph.D. in finance to know that,” Gulden says.

Since the ad started running earlier this month, she says, “I’ve been busier than a one-armed paper hanger showing it.”

Seller John K. Kearney paid $1.65 million for the unit in 2004, according to property records.

The property Gulden advertised had been on the market for two years, she said. The owner, a Massachusetts resident who was selling because he “just wasn’t using the property,” agreed to shave a $1 million off the asking price if the house could sell in May.
Gulden created a black and white ad offering a “free $1 million” to anyone buying the property. An ad designer at the Palm Beach Post bordered the ad with dashes and a small scissor.

Gulden said she saw more calls on the property and even received an offer from a New York buyer within the month.

“It wasn’t just another ad,” Gulden said.

Million dollar coupons are yet another side effect of a high-end market that is over-saturated with homes and burdened by higher loan interest rates, said Walter Molony, a spokesman for the National Association of Realtors

Real Estate

Too Early to Call Housing Bottom

June 10, 2009 jd

highway-sign-going-both-way

Housing research organization IHS Global Insight estimates that the average U.S. home is undervalued by 12.2 percent, and many previously pricey communities are undervalued by considerably more.

A recent study released by IHS used home prices, interest rates, area incomes, population density, and historic premiums and discounts to analyze housing values. It examined 330 markets and found homes are underpriced in 248 of them.

Despite the high percentage of undervalued areas, IHS says “it is too early to call a bottoming,” as “job losses continue, housing inventories remain elevated, and consumers remain wary in light of economic uncertainty.”

Here are the 10 most undervalued areas:

1. Vero Beach, Fla., -42.5 percent
2. Houma, La., -41.4 percent
3. Las Vegas, -40.9 percent
4. Merced, Calif., -40.1 percent
5. Cape Coral, Fla., -39.1 percent
6. Houston, -36.9 percent
7. Midland, Tex., -34.8 percent
8. Lafayette, La., -34.4 percent
9. Vallejo, Calif., -34.3 percent
10. Stockton, Calif., -34.3 percent

Source: CNNMoney.com, Les Christie (06/04/2009)