All We Have To Fear Is Wishful Thinking

Home builders and real estate investors seem to have a bad case of premature enthusiasm, sparked by the hope that everything is better now that we’ve avoided a global financial melt down.  Many economists and Wall Street analysts now believe we’re likely to see a significant downturn again later this year, and that the economy, real estate and banking all have a long, hard slog ahead. Why?  Well read on….

Housing Prices, BB’s and the Bottom of a Bucket

How long will it take before housing prices go up again? In reply to that question, I typically respond, “It will probably take a while longer than most people think and will look a lot like the bottom of a bucket.” When I’m asked why, I’ll usually ask them a question in return: “How long would it take to pick up two million BBs off the beach?” Whomever I’m speaking with usually gives me a puzzled and slightly annoyed look and says, “What’s that got to do with the bottom of a bucket, or, more importantly, when the real estate market will hit bottom or what the bottom will look like? And, for that matter, what’s the bottom of a bucket got to do with anything, anyway?”  Its been the best way I can think of to explain my view of the housing market.

Receivers Can Sell Real Estate Free and Clear of Mechanics Liens

Yes, receivers can sell real estate free and clear of mechanics liens.

This is not well known though – not even by title companies, highly experienced bank attorneys or many of the most experienced receivers.  Not because these folks aren’t knowledgeable and sophisticated, but rather simply because there hasn’t been much call for selling real estate by receivers, so the area is full of myth and legend and misinformation.

Receivers May Reduce a Lenders Tax Liability on the Sale of Subdivisions

Marc Brooks called me the other day and announced, ”You know, a lender who forecloses on a new subdivision development that was collateral for a non-performing loan may have to pay ordinary income taxes on all of the sales proceeds as a real estate ‘dealer’. On the other hand, when a borrower or a court appointed receiver sells out the subdivision and pays down the loan, the lender gets to remain a lender.”

CFD Infrastructure Bonds: Investors Are Buying and Foreclosing CFD Bonds to Acquire New Housing Subdivisions

So I’m sitting at lunch with some of the other speakers at a recent commercial loan workout conference (I was speaking on the use of receivers to complete and sell new housing projects), and someone mentions that vulture investors are buying, and in some cases foreclosing on, CFD and Mello Roos bonds to acquire distressed tract housing developments.

Where’s the Bottom? March of the Zombies

Several months ago I earnestly asked a friend of mine who is a land economist, “Where’s the bottom of this housing market?” and he promptly answered, “I don’t know.”  However, being persistent, I asked again. This time he answered, “Well if you could tell me how much zombie housing is out there, I could make an intelligent guess.”

SB 800 Construction Defects Liability: Why Should Construction Lenders Care?

As a receiver completing new condominium and tract housing projects, the subject of California SB 800 long term construction defects liability comes up a lot.  So I asked noted subdivision and DRE lawyer Robert Smylie of Robert Smylie & Associates to recap the issues for me.  His explanation follows (with some paraphrasing on my part with his permission). Of course, I’m not a lawyer, so those of you with further questions should contact him directly at rsmylie@smylieandassociates.com, or read his article at  http://www.waldrealtyadvisors.com/downloads/download.html:

Hey Buddy, Wanna Buy A Note?

Hey buddy, wanna buy a watch?   It’s the refrain that immediately conjures up the image of a shadowy figure in a back alley opening his trench coat to reveal a selection of watches hanging from the inside of his coat.  Not exactly the most progressive way to sell watches (or anything else for that matter), but it’s not that far off from the way that most lenders have been marketing their non-performing commercial real estate loans this year (commonly referred to as notes, as in note and first trust deed).  To be more accurate, lenders have been quietly offering their non-performing loans primarily to a small circle of good customers and business relationships.

Bid/Ask Pricing Gap Widened By Scarcity of Debt and High Cost of Capital

My friend and veteran land broker, Larry Lynch of Korek Land, emailed me recently to remind me that the scarcity of debt (the Wall Street folks call it deleveraging) and very high investor return expectations are also helping to drive prices of commercial real estate and land lower.

Long Term Construction Defects Liability Awaits Lenders Who Foreclose New Condominium and Tract Housing Projects

California Senate Bill 800 is complex legislation that requires those who develop and construct for-sale housing to be responsible for construction defects in those housing projects for ten years from the completion of any construction preceding the retail sale of that housing. In the case of condominium projects, it is actually ten years from the date that the developer turns over control of the homeowners association to homeowners. There is no special post-foreclosure protection for lenders who take title to new housing projects.