HousingWatch

Homeowners Association Foreclosure Reversed for Texas Military Family

Candy Evans — 2010-07-29T12:47:00 00:00

Filed under: News

Finally, a homeowners association foreclosure story with a happy outcome.

HousingWatch told you about Captain Michael Clauer and his family of Frisco, Tex., a community about 20 miles north of Dallas, who lost their home to foreclosure for failure to pay $977.55 in HOA dues. Well, on Monday, the Clauers settled with the Heritage Lakes Home Owner's Association, whose management company, Select Management, foreclosed on their home and sold it to a bidder for $3,500.

The good news: The Clauers get back title to their home. Other details of the settlement, however, are not available as the court has imposed a gag order on the case. Also, ABC's Nightline is in Dallas shooting a segment on the Clauer's ordeal that is scheduled to run Friday. The Clauer's attorney, Barbara Hale, was not permitting interviews for her client during the settlement process.
In Texas and about 30 other states, HOAs have the power to foreclose on your home if you fail to pay your home association dues, even if you own it free and clear, as the Clauers did. (Capt. Clauer's name was not on the title originally.) May Clauer says that she got into a funk over her husband's deployment to Iraq and failed to pay bills. She let the mail pile up, even the certified letters. May and her parents owned the $300,000 Frisco home free and clear -- May's parents apparently helped her buy the home.

Crucial to the case was Clauer's military status, and whether he was active when the home was foreclosed on. A federal law, the Service members Civil Relief Act, protects those on active duty from certain legal and financial obligations, including foreclosure, without going to court. Captain Clauer was on active duty from Feb 15, 2008 to October 9, 2009.

But a representative for Heritage Lakes said the HOA checked with the military and were told he was not on active duty.

There may be a second happy outcome for this story: the case has brought the power of HOA's into the limelight in Texas, where many are calling for legislation to rein in their power.

HOA's say they need some bite to protect homeowners who do pay their HOAs from the scofflaws who don't pay up. If they become short of funds, property maintenance and services are delayed and new home buyers may not be able to secure financing. But the secretary-treasurer-elect of the Texas Association of Realtors, a Houston-based real estate agent, believes foreclosure should only be the last step after all other collection options are exhausted.

"There is no next step. If the homeowners association isn't responding, there ought to be a neutral mediator for people to go to with complaints," Realtor Shad Bogany told the Dallas Morning News. State senator Royce West of Dallas says he hopes to use the Clauer's story in the upcoming legislative session to make such foreclosures are illegal.

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Texas Gov. Rick Perry's Real Estate Windfall Attracts Public Scrutiny

Candy Evans — 2010-07-27T18:21:00 00:00

Filed under: News

Horseshoe Bay, a vacation playland about 50 miles west of Austin on gleaming Lake Lyndon B. Johnson, has yachts, three championship golf courses, the biggest private plane FBO in the state, and the Hill Country of Texas as the backdrop. No wonder it is often referred to as the Pebble Beach of Texas. This is also where Texas Gov. Rick Perry has come under fire for a real estate deal that some say smacks of political favors and cronyism.

Some of the richest Texans vacation at Horseshoe Bay in mega-million-dollar homes: West Texas ranchers, oilmen, Roger Staubach, Jim Lovell, even the late Red Adair. Horseshoe Bay, once a goat ranch, is so attractive to Lone Star wealth that it is one of the reasons why Ilano County has been crowned as one of the top five places in the U.S. by Forbes magazine where, based on IRS data, the rich are moving.

Perry, a Republican, faces Democratic challenger Bill White of Houston (who Perry is grilling for not releasing tax returns) after defeating Texas Sen. Kay Bailey Hutchison in the Republican primary. But a recent story in The Dallas Morning News diagrams just how Perry may have had a little help from his friends, pocketing more than $500,000 from a Horseshoe Bay real estate deal.

According to an independent appraisal by the News, Perry's land appraisals were also a bit fuzzy. Critics charge that as governor of Texas, Perry should not use the influence of the governor's office to pad his pockets.

Did he? Or did he make a really great real estate deal, buying and selling at the perfect time?
Horseshoe Bay was developed by a San Antonio man named Doug Jaffe, who bought it in 1996. Ironically, Jaffee has decades-old Democratic Party ties in what used to be considered a "yellow dog" Democratic state -- if a yellow dog was on the Democratic ballot in most parts of Texas, he'd be voted in. That's how loyal constituents were.

Jaffe was known as a wheeler-dealer. Though he started making buckets of money in the vending machine business, it was the airline industry where he had real success, selling aircraft "hush kits" that enabled older commercial jets to meet new, tighter, federal aircraft-noise standards at about the time those laws came out. He had some infamous clients: the government of Nicolae Ceausescu, communist dictator of Romania, and Samuel Doe, a notoriously repressive president of Liberia.

After Jaffe poured millions into Horseshoe Bay, it quickly became known as one of the hottest playgrounds for the rich. It caught the eye of Republican State Sen. Troy Fraser, a wealthy investor, who liked two lots of a unique10-acre estate on the water called The Peninsula, which had been subdivided into 11 home sites. There was only one home on the estate, and the original owner had installed sensors along the road leading to his house, with speakers elaborately mounted in the woods, emitting rain-forest sounds. The lone home even had walls lined with fur.

In September 2000, the senator offered Jaffe $700,000 for one waterfront lot and, a few days later, $300,000 for a smaller lot with less water frontage, near the entrance. Jaffe accepted. Fraser had apparently encouraged his childhood friend, Rick Perry, to buy up the smaller lot so that they could retire together at The Peninsula. He negotiated a great deal: $300,000 for the "cheapest" lot, a piece of property that The Dallas Morning News now claims was worth $450,000 at the time.

The governor's office provided The News with a real estate closing statement that shows Perry paid Fraser $310,762 for the Horseshoe Bay lot on Feb. 28, 2001. A spokeswoman for the governor says Perry used cash from the proceeds of his Austin home sale.

Perry held his $310,000 lot until 2007, when he sold it for 1.5 million. And that's where Perry's scruples really come into question: Did he find a willing buyer fair and square, or did he take advantage of the contacts he made while governor of Texas?

Perry sold the lot to a man named Alan Moffatt, a British national and, since he owns an aviation firm, also a business partner and sometimes associate of the original owner, Jaffe. Moffatt was questioned but never prosecuted for his company's international arms shipments to Africa in the 1990s. He paid Perry $1.15 million for the lot, then turned around and tried to flip it for $2.65 million.

An appraiser hired by The News thinks Moffat paid $350,000 over market value, but Moffatt denies anything improper. Perry's asking price was $1.2 million. Moffat currently has the lot he bought from Perry on the market for $1.65 million.

Did Perry use his influence as governor of Texas to buy the lot at a discount price and sell it for a hefty profit? The story of how he sold the land to Moffat is also a little murky.

Although Horseshoe Bay procured a buyer, Perry paid no real estate commission. But in Texas, real estate commissions are negotiable. And when he sold the land, it was appraised for tax purposes at $600,000. Of course, since Texas is a no-income-tax state, property taxes are among the highest in the nation and most everyone fights to whittle down their appraised values with the taxman. Even, apparently, the governor.

And did Perry use his weight as governor to keep that county tax appraisal low while he owned the lot, saving $14,000 in property taxes? Perry used a Corpus Christi attorney to help him fight his tax appraisal -- again, fighting tax appraisals is very common in Texas -- whom he had appointed as chairman of the Texas Public Safety Commission. That was Colleen McHugh, a corporate labor lawyer. McHugh was not paid for her work but appealed the county tax appraisal because Perry had already paid her $2,850 for legal work on the property purchase. That appeal, says The News, kept Perry's value at purchase-price level while he owned the property.

The question is, could any real estate investor get real estate deals this juicy, or just Rick Perry, because he is the governor of Texas? "The man on the street on this would think that this is a series of deals that smell of special favors being created for elected officials to curry their favor," said Ellen Miller, executive director of the Sunlight Foundation in Washington, D.C.

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NYC Parking Reaches New Heights With Sky Garage

Candy Evans — 2010-07-21T16:06:00 00:00

When you live in New York City, you can barely find a place to park an auto much less a place to house one. All it takes, of course, is a wad of money. Better hurry: $5.95 million is the asking price for the last available unit at the Sky Garage.

The lavish, 19-story building at 200 Eleventh Avenue is nicknamed Sky Garage for the auto elevator that allows residents to drive in, hop the lift and park their cars on their own floors, right next to their town home -- the units are two stories each. If you don't have a car, you can use the garage space as storage or a studio.

"The building really draws A-list celebrities," says agent Torsten Krines of Sotheby's International Realty, who's client recently bought a $6.5 million unit as an investment property and has it available for lease for $22,000. "They can drive right in without being seen by the public."

The unique structure was designed by "starchitect" Annabelle Selldorf, developed by Young Woo & Associates, and sales were launched in 2007. Despite the hefty price tags, only one is left. Two penthouses were purchased by designer Domenico Dolce of Dolce & Gabbana for a reported $29 million last year. Other owners include celebrity designer Jamie Drake, and two high-profile female pop singers.

The last available unit, No. 5S, is listed for $6.23 million by Leonard Steinberg of Prudential Douglas Elliman. Steinberg has not only marketed the development but he bought one of the more conservative units in the place, and reportedly paid $2.76 million for the two-bedroom, two-and-a-half-bathroom spread. It has unobstructed views of the Hudson, 16-foot ceilings and a 159-square-foot terrace. One reason why it is the cheapest unit in the building: It is the only one without access to the sky garage.

According to the property graphic, Sky Garage duplexes face Chelsea Cove and the Hudson River Park, with 3 exposures and unobstructed, protected, sunset views. It includes teak floors, central air-conditioning (I would hope for $5.9M) and high-caliber finishes in the heart of the Chelsea Arts District.

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Homeowners Associations Get Nasty: Foreclose or Sue to Collect Dues

Candy Evans — 2010-07-15T14:44:00 00:00

Filed under: News, Economy

The story of Army Capt. Michael Clauer's family, whose Frisco, Texas home was sold out from under them after his wife failed to pay -- or sporadically paid -- their homeowners association dues, has opened the floodgates to reports about how brutal HOAs are becoming. The reports are especially troubling during a recession, when so many homeowners are having trouble paying their bills.

In 30 states, HOAs have the power to foreclose on homeowners who do not pay up, which has made them even more vilified than the IRS!

And now some are resorting to cutting off utilities: A Georgia woman has been living without water for more than a year now, all because she failed to pay her HOA dues.
Helen Burgess of Marietta, Ga., got behind on her bills after being diagnosed with cancer a few years ago. But she was able to work out payment plans with almost everyone except her HOA. The bank who held her mortgage, her auto note, her credit cards, even the IRS put her on payment plans to catch up. But she still owes the Magnolia Lane Condominium Association, who manages her 76-unit condominium complex, more than $5,000, which includes attorneys fees. Because of that bill, the condo association, which supplies water to the units, cut off her water shortly after June 27, 2009.

For over a year Burgess has been hauling in water in from her niece's home about 10 miles away.

But Magnolia didn't just dry out the tap. They have tried to garnish Burgess' salary and now have banned her and her guests from using the clubhouse and other common areas in the condo community.

Burgess, who is 59, says this is the craziest mess she's ever had to deal with and even asked her pastor to intervene.

Is she working at all with the HOA to work out a deal? Yes, but the association isn't talking about it publicly.

Georgia is one of the states where HOAs are empowered to take such drastic action. Another is Texas, where the Clauer family lives. HOA representatives say they have no choice but to enforce the rules just as any mortgage company would. In HOAs where not enough members are making payments, the management can tip into failure mode rapidly, resulting in deterioration of the property, lack of maintenance of common areas or exteriors, all of which results in a lowering of property values.

Texas State Sen. John Carona (R-Dallas), who serves as president of a huge national realty property management firm with $400 million revenue, says the Texas law that permits HOAs to foreclose should not be changed. Tweaked, but not changed. When you sign for your mortgage, he said, you also sign and legally agree to be a part of the homeowners association.

That's fair -- you are duly warned and don't have to buy the property if you don't like the association's terms (my words).

He advises buyers to read HOA rules carefully before buying. Seek counsel, if necessary. He also says that homeowners who don't pay their share of homeowners association dues force a hardship on other homeowners in the neighborhood, who often have to kick in more for expenses.

Recently, I heard from the president of Select Management Company in Dallas, a firm that represents 25,000 homeowners.

"While it is unfortunate that anyone would lose their home to foreclosure," writes Ted W. Smith, "state law allows the HOA's such action, only following explicit and numerous legal notification to a homeowner."

Smith says that HOAs foreclose on fewer than 1 percent of their communities. (HOA management companies have no legal authority to foreclose or sell anyone's home.) All SMC HOA Boards allow payment plans for homeowners in a time of need. Smith tells me that there are 3,000 homeowners associations in the Dallas area alone, and almost 30,000 associations around the state for a total of 5 million homeowners. HOAs also lower costs, says Smith: They serve their communities and defray city expenses while maintaining beautiful common areas.

In metro Atlanta there are an estimated 10,000 to 15,000 association-run communities. Nationally, about one-fifth of the U.S. population lives in HOA-run communities, a number that grew during the past 20 years as homeowners flocked to the community concept, wanting homes or condos in areas that provided multiple amenities. Amenities require maintenance, upkeep, repairs and improvements. Many of these obligations were once run by municipalities, such as city pools paid for by taxes. Now they are private.

Then came the recession: HOAs were forced to cut back, raise dues and whatever it took to stay afloat. And as more homes went into foreclosure, or stacks of fresh new condo units went unsold, vacant homes did not provide HOA revenue. Kathy Dorough is a Decatur, Ga., attorney who says that a whopping three-fourths of her practice involves collecting HOA and condo association fees. Her firm has about 2,500 open lawsuits, and paying members have been adversely impacted..

And some HOAs are even failing as a result of deadbeat homeowners, says Golding. In fact, he says it is not unusual to see HOAs with 1,000 homes or more not paying HOA dues.

As a result, the companies have had to carry bigger and bigger sticks. Perhaps they ought to give a warming whack? Because, on an individual level -- a soldier fighting for his country, a woman diagnosed with cancer -- it is disheartening to lose your home for any reason.

"Going through this is more frightening than when I went through breast cancer," said Burgess.

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Top Texas Realtors Who Failed to Pay Taxes Could See Jail Time

Candy Evans — 2010-07-14T11:04:00 00:00

Filed under: News, Cities

Texas real estate couple Nicky and Eleanor Mowery Sheets were living on the tip top of the real estate world. But their next accomplishment may be staying out of federal prison.

For 12 years, Eleanor was Coldwell Banker's top-selling Texas Realtor, and she seemed to have every ingredient necessary to become a local Dallas real estate star. Her entry into the business was an inspirational "dumped divorcee rags- to-riches" tale, and Eleanor was a formidable saleswoman from her very first closing.

But once she met and married Nicky Sheets, son of a wealthy Odessa, Texas, eye surgeon and ostrich rancher, the two teamed up as business partners and took over the town. They produced more than 100 million in annual sales. In November 2007, she ranked 17th in the nation with real estate sales of $171 million. From 1997 to 2003, Nicky and Eleanor cleared more than $9 million in commissions during the best real estate market that Texas has ever seen. It seemed there was nothing they could not accomplish, together.

Now the fate of both licensed real estate agents -- their Texas licenses are still active and current --- rests in the hands of two Texas judges.
In March, Nicky plead guilty to individual and corporate tax evasion of $2.7 million, including penalties and interest -- a crime that carries a prison term of up to five years, as well as a fine of as much as $250,000. And just last week, the Dallas real estate world was rocked by the news that Eleanor, his wife of 18 years, had also plead guilty to even more charges than Nicky -- four counts of failure to pay income taxes. She faces up to four years in a federal prison and a $400,000 fine. Now the Dallas real estate community is wondering if Eleanor, the poster child of the successful, pull-yourself-up-by-the-bootstraps real estate agent, will be wearing her once signature orange in a federal prison jumpsuit.

It appears the Sheetses have come to the end of a long, wild ride that almost mimicked Case-Shiller charts: When the market seemed to be flying high on steroids and no end was in site, the Sheetses were closing homes hand over fist, serving some of Dallas' richest -- Mike Modano, Lamar Hunt, former Cowboys quarterback Drew Bledsoe, former Texas Ranger Mark Teixeira. Eleanor and Nicky even co-hosted a fundraiser in 2007 for Dallas Mayor Tom Leppert and listed their home, briefly.

They carefully developed a brand and hired the best marketers to promote it. Eleanor and Nicky worshiped at the feet of national real estate guru Howard Brinton, who taught the "team concept." She listened to inspirational tapes each morning and hired an industrial psychologist to train her staff. She was an early adopter of web technology, and the first Dallas agent to truly "brand herself" by appearing in ads showcasing homes for sale, as if her celebrity status was the draw. They even bought a moving van, painted it with their bright orange logo, and offered clients white-glove moving help if they chose the Sheets team as their agents. They loaned that van to charities, hired a chef to cater a buyer's first dinner in a new home, had an on-call carpenter for home repairs, and used decorators to stage furniture long before it became de rigeur --- anything to get a listing.

Several Dallas Realtors have told me that she also undercut other agents by taking lower commissions.

Eleanor dressed for success in Neiman Marcus couture, and hired experts to style and make her up for her numerous photo shoots. If you lived in Dallas you saw her orange billboards everywhere. Nicky began flying planes, not an uncommon hobby in Texas where cities are spread so far apart. On the surface, life seemed to be better than Hollywood.

But underneath, the empire was crumbling. The couple either couldn't or didn't pay bills. Left unpaid were caterers who fed their guests at open house parties, other agents and vendors such as photographers and graphic designers, and even "The Hamburger Man."

And Nicky had other "problems": He was arrested during an undercover sting operation in September 2000 for soliciting prostitution -- Dallas police officers posed as hookers. Somehow those charges didn't stick and were not publicized in the local news. In 2001, Nicky was threatened with jail time for refusing to file his 2000 tax returns. And as for that plane, Nicky sent his lawyer to Odessa for a court hearing in a plane owned by one of his "shell" corporations, JNS Investments. A creditor who had suffered losses in the ostrich business with Nicky sent his lawyer after the plane, "but by the time he had tracked it from a recently vacated hangar... it had been repossessed."

The pair lived in a home that was modest by Texas millionaire standards: a $1.75 million, 5,000-square-foot country French home with a little yard on a cul de sac, in the less tony part of Preston Hollow but still not too far from the new home of President George and Laura Bush. The Sheets vacated the home for the IRS, who failed to sell it at auction. The home has since been reduced to almost half of the original asking price. I am told that four serious buyers are circling.

While they await sentencing, Nicky and Eleanor are reportedly living in a rental home north of Dallas. In the Department of Justice's release, Eleanor states she she "agrees to pay restitution for all criminal conduct relating to the offense charged in the criminal information, including, but not limited to unpaid taxes and any costs associated with her prosecution." That indicates to many Dallas Realtors that Eleanor is about to come clean and put all her trust in God, perhaps in time to promote a memoir. She and Nicky have frequently been spotted in church, listening attentively to the pastor.

Which is all very ironic. More than 20 years ago, Eleanor had to sell her house to keep the taxman at bay, one of the reasons why she became a Realtor.

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Oil Spill Update: Some Homebuilders Get Hit Hard

Candy Evans — 2010-07-12T11:44:00 00:00

Filed under: News, Economy

Could the Gulf oil spill put a damper on homebuilder stocks? We simply don't know yet. That's basically what an analyst's report out of Citigroup says about the effect of BP's Deepwater Horizon oil spill on publicly traded builders, according to The Wall Street Journal.

Those builders could potentially see shares decline if the spill taints the beachfront communities where they build. And of all the U.S. public homebuilders, which might carry the most spill exposure? The report claims it's Meritage Homes, Inc.

The report also is an interesting look at yet another way that the largest oil spill in the history of our nation has rippled out to areas of the economy besides tourism, real estate, oil production and the fishing industry.

Citi home building analyst Josh Levin says his methodology was "somewhat crude." Levin used builder websites to pinpoint which U.S. builders are building the most in Gulf coastal areas. Levin visited each homebuilder's website and counted the number of active selling communities along the Gulf Coast.

He then divided the number of each homebuilder's Gulf Coast communities by the total number of active selling communities outside the Gulf (those found in other regions of the country) that were also listed on its website. Levin noted something else interesting: The total number of active selling communities listed on a homebuilder's website differed radically from the total community count provided by the homebuilder to the investment community on its most recent earnings call. That is not to assume, he said, that anything nefarious is going on. The beauty of mathematics: Relying on this website data, he was able to assign a numerical percentage of exposure to each homebuilder hammering away on beachfront cottages from Houston, Texas to Sarasota, Fla.

At this point, the entire Gulf Coast has been affected by the spill, with tar balls washing ashore on beaches from Galveston to the Redneck Riviera. Folks at Alys Beach near Destin, Fla. tell me they are getting small spots of oil but the cleaning crews are on-the-spot immediately, cleaning the beach. But what Levin was looking for was those builders who might have too much Gulf exposure, folks like the Jacksonville, Fla.-based St. Joe Co., the second largest landowner in the state of Florida, who practically owned the Gulf beach house market there. St. Joe's stock shares did take a hit from the spill initially, and the company says it is now focusing on commercial development rather than residential.

The homebuilders with the most exposure to the oil spill mess are Meritage Homes, with 32 actively-selling communities in the Houston area out of 147 total U.S.communities, giving it a potential 22 percent exposure; Beazer Homes USA, all over Texas with 27 Lone Star state communities and seven in Florida, yielding a 19 percent exposure. Other biggies include major Texas builder DR Horton, Inc. at 17 percent; Lennar Corp., at 15 percent; The Ryland Group, Inc., at 13 percent; and KB Homes, at 11 percent.

But I wonder if Levin noted another article in The Wall Street Journal urging investors keen on homebuilder stocks to look at who's building in Texas, applauding the state as the poster child of real estate recovery? The oil spill did not seem to dampen the author's positive stand on investing in Texas real estate, especially new-home construction, because of, among other things, our thirst for housing:

"Among those with the best prospects is Texas, which barely participated in the real-estate bubble. Home prices in Dallas, for example, are down only 7 percent from their peak, according to S&P/Case-Shiller.... Texas's greatest advantage may be housing demand. Its population grew by 3.9 million, or 19 percent, last decade, leading to a natural increase in households. The economy is stronger than in most parts of the country, with unemployment also holding at 8.3 percent, below the national rate."

Why so bullish on Texas? Not only did we not, for the most part, have a real estate bubble (individual neighborhoods did), but we also have no state income tax and we enacted stringent consumer protections in real estate after the 1980s. For example, Texas limits home equity loans to 80 percent of the total mortgage debt of the home's fair market value. Example: You own an $80,000 home. You have $50,000 in equity, you can borrow $34,000 against that home -- no more. That way, people can't bet the ranch and use equity to buy multiple homes. We pay some of the highest property taxes in the nation, which also tempers home prices. It's worth noting that Florida also has no state income tax.

"Since it is not yet known what impact the oil spill will have on the various Gulf Coast economies over the intermediate and longer term," wrote Levin, "we find it difficult to draw actionable investment conclusions from our analysis."

Or maybe just look at the whole picture.

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John Paulson Says the Time to Buy a House in the U.S. Is Right Now

Candy Evans — 2010-07-02T12:23:00 00:00

Filed under: News, Economy

The man who made billions betting against the subprime mortgage market seems to have a more positive view of our real estate market these days. John Paulson told a captive audience at the London School of Economics that now is the best time ever to buy a house in the United States.

He's bullish on real estate and gold, and thinks inflation is lurking around the corner. Taking California as an indicator, the hedge fund guru says sunny California has recently been a leading indicator for a positive turn in the housing market.

"And it turned positive seven months ago," Paulson told the group. "I think we're about to turn a corner."
And he's bullish on the U.S. economy. Paulson says he thinks we are at the tail of the credit crisis, which has stifled much home buying. He believes we are in the midst of a sustained recovery with a less than 10 percent risk of a double-dip recession. But while he's bullish on America, he's not as optimistic on Europe, calling it the "one soft spot" in the world.

But Paulson's own investments -- his fund is rated no. 1 in the world by Barrons -- reflect his inflation concerns: His firm is the largest holder of gold exchange-traded funds in the world. Paulson told his London audience that he fears future currency instability and inflation "due to the large amount of quantitative easing."

Paulson said he denominates all of his assets in gold and is bearish on the dollar. And he thinks we'll see high single and perhaps even double-digit inflation in three to five years, which he why he has been known to advise buying as many homes as you can stuff in your pocket.

Paulson bet against the subprime mortgage market, earning between $3 billion and $4 billion for himself in 2007 alone. He is the subject of writer Gregory Zuckerman's "The Greatest Trade Ever: How John Paulson Bet Against the Markets and Made $20 Billion." Of course, his actions stirred up strong emotions and criticism in the U.S. He was highly criticized for creating the Abacus fund for Goldman Sachs, basically a bundle of bad loans, and then betting against them, making windfall profits on the backs of people who were losing their homes to foreclosure. Goldman, of course, also played both sides of the game, buying credit default swaps against the bad assets in case they failed, which they did. Both reaped billions.

But Paulson claims his shorts had no impact on those families. "Without us, the mortgage market would have existed exactly as it did," says Paulson. "(Short-sellers) were a tiny portion of that market, maybe 2 to 3 percent."

So who were the culprits? The mortgage brokers, says Paulson.

"They only cared about generating fees, they falsified appraisals, " he said. "... this was the sad underbelly of mortgage finance in the U.S."

Paulson said his investment methodology has always been to short high-quality, but misplaced credit. When he went looking, he found subprime mortgage-backed securities. As he dug deeper he found mortgage lenders were lending out millions of dollars to borrowers with the poorest of underwriting standards -- they didn't require jobs, assets, or even a credit history. And of course it was zero-down payments for these borrowers. As many put it, lenders essentially put a mirror up to a borrower's nose and if he fogged the mirror, he got a mortgage loan.

"Basic underwriting standards were nonexistent," says Paulson.

So where were the rating agencies? Pauslon says he did argue a bit with the rating agencies, because their modeling techniques actually bewildered him. He exposed a logistical hole in their data. The agencies are backward-looking, but there has never been a period of time in the history of statistical real estate data when housing prices decreased. Thus the models didn't even figure in the possibility that housing could fail -- hello, crater.

But when Paulson exposed this downer, the agencies scratched their heads and and said they couldn't make up any data points or "hypothetical" scenarios to simulate falling housing prices for a big huge "what if." No sir, that would be speculating.

"And Moody's says it doesn't speculate,' " said Paulson.

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Walt Disney World Builds Houses to Attract Baby Boomers to Orlando

Candy Evans — 2010-07-01T17:49:00 00:00

Filed under: News, Cities, Economy

Once upon a time, parents and grandparents just packed up the car and took the kids to Disney World. But soon, they'll be able to live there and take their grandkids to Disney World 24/7 without waiting in line.

The Orlando, Fla., folks who create our fantasy entertainment environments are now creating living environments for baby boomers.

Rich boomers, that is.

Walt Disney World is back in the real estate business, this time with a series of high end, luxury homes in a gated community priced from $1.5 million to --- gulp -- $8 million.
The homes will be in Orlando, within the 40 square miles of Disney's thriving theme parks. The developments will be fashioned as resort communities with special ties to Disney World parks -- private VIP tours of the parks, plus holiday home-decorating, grocery delivery from an on-call concierge service, a fitness facility and spa.

The venture is called the Golden Oak Residential Resort Community. It's located midway between Epcot and Disney World, on 980 acres featuring a golf course, clubhouse, private lake, parks, wetlands and conservation areas, and other luxurious attributes to please high-end buyers. A Four Seasons hotel will join the ultimately 450 homes.

Golden Oak lots will range in size from one-quarter to three-quarters of an acre --- Grandma and Grandpa want space, but not a ranch. And your home, should you buy at Golden Oak, will range in theme styles from Dutch Colonial to Venetian, Tuscan Village to Spanish Revival. Or Island Colonial, complete with pirates -- kidding!

Each of the four development areas will have personalities, though: Kimball Trace, a Tuscan-inspired village; Silverbrook, the quiet life with conservation and water features; Carolwood, which is surrounded by a natural preserve; and the most exclusive of all four exclusive 'hoods, Carolwood Reserve (sounds like a fine wine). Carolwood Reserve likely is where buyers will find $8 million homes.

This is not Disney's first real estate rodeo. In 1996 Disney created Celebration, a 4,900-acre planned community that may well have been the nation's first truly walkable community. The $2.5 billion development was erected a short drive from Disney World and created to evoke a small-town feel with quaint parks, a school, a town-square-centered commercial shopping area with cute porch-front shops, restaurants and theaters.

When Celebration debuted in the late '90s, you could buy a charming traditional frame home for $185,000, or snag a $4 million gussied-up single family. I visited Celebration around 2001 and thought I had landed in the movie "The Truman Show" -- similarly planned Seaside, where it was filmed, is located farther up Florida's Gulf Coast..

The city was designed to encourage you to park your car and walk -- everywhere. It was friendly and people I spoke with had escaped urban nightmares in Mobile and Atlanta to move to Celebration, to give their children a wholesome community with excellent schools. (It also helped that there's no income tax in Florida, they told me.)

According to the The Wall Street Journal, about 6,000 homes have been sold in Celebration, and Disney is now drifting out of the control seat. Median home vales in April were $191,500, according to Zillow, not too much higher than the inaugural pricing. Of course, this is Florida, where homes have plummeted in value, and where there are so many vacant condos, that squatters are moving in. And who knows what the BP oil spill will bring?

Yet Disney seems to think the luxury home market is rebounding. Matt Kelly, vice president of Disney resort real estate development, told The Wall Street Journal that he believes the luxury market is rebounding. And the affluent sector is a place where Disney has not offered a lot of product, except for Celebration. Golden Oak's publicity specialist at Nancy J. Friedman Public Relations in New York City said that an Orlando firm did the market research on the luxury home market for Disney: According to them, it is coming back.

"Disney would not have undertaken this if they were not confident of the market, " says Golden Oak sales agent Cecelia Niles.

No word on how much cash Disney has invested, but the company is taking a small bite of the apple initially. About 25 lots will be available for pre-sale later this year, and the $25,000 sales reservation deposit is 100 percent refundable, says Niles. Lots will be released in September. These first few homes should be finished by 2011, and then Disney real estate honchos will decide whether to plod on. Of course, their timing may be perfect as the real estate market slowly emerges from the doldrums.

Orlando real estate prices may have dropped 50 percent to 60 percent from what they were in the boom, but the exclusive enclaves around fantasy city are holding on. Tiger Woods lives in Windermere, and with Woods' $750 million divorce settlement, his wife Elin could likely buy whatever home she desires.

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Homeowners Association That Evicted U.S. Soldier Gets Death Threats

Candy Evans — 2010-06-30T15:17:00 00:00

Filed under: News

We told you about U.S. Army National Guard Capt. Michael Clauer and his wife, May, who lost their Frisco, Texas home because they fell behind on home association dues. Now the HOA is getting blowback.

In Texas, if you fail to pay your home association dues, an HOA has the legal power to foreclose on your home -- even if you own it free and clear. May Clauer says that she got into a funk over her husband's deployment and failed to pay bills. She let the mail pile up, even the certified letters. May and her parents owned the $300,000 Frisco home free and clear -- May's parents apparently helped her buy the place, which is about 20 miles north of Dallas.

But the Clauers lost their home by failing to pay $977.55 in homeowners association dues.
Now their case is heating up the Lone Star State, and could become a pivotal argument for changing Texas state law. In years past, bills to protect Texas homeowners from the claws of HOAs have failed. But due to the unique circumstances in this case -- Capt. Clauer is in the military, fighting to defend his country in Iraq -- the topic may come up as fast as a summer storm, once the legislature convenes in January. The story is spreading on local and national blogs, and gaining steam in the continuing saga over HOA power in Texas.

Meantime, the Clauer family has been allowed to live in the house under a judge's order, and a federal district judge ordered all the parties to try and mediate a settlement. Everyone involved in the case has hired an attorney -- some may even need bodyguards.

The story has become so hot, in fact, that the Heritage Lakes Homeowners Association and its management company, Select Management, have received death threats. The HOA hired a high-profile Dallas publicist, David Margulies, once an award-winning reporter for the local ABC affiliate, WFAA-TV. Margulies has had some challenging clients: Wal-Mart; a travel company investor accused of deceptive sales and advertising practices; the step-grandson of Anna Nicole Smith, and a troubled tile company. Margulies has been fighting back in the media on behalf of the HOA -- with a second report on WFAA, an in-depth story in The Dallas Morning News, and on local blogs.

The attorney representing the Clauers is banning her clients from interviews pending deposition.

"This is so outrageous," their attorney, Barbara Hale, told The Dallas Morning News. "There's a strong opposition to the power that HOAs are granted in Texas that goes beyond Capt. Clauer and his military status."

Clauer's military status, and whether he was active when the home was foreclosed on, is crucial to the case, according to attorneys. A federal law, the Servicemembers Civil Relief Act, protects those on active duty from certain legal and financial obligations, including foreclosure, without going to court. Captain Clauer was on active duty from Feb 15, 2008 to October 9, 2009.

But the publicist, Margulies, says that Heritage Lakes checked with the military and were told he was not on active duty. In fact, they received a certificate from the military stating that Clauer was not even in the military. Margulies claims that the Clauers were behind on their debts -- including payments to the HOA -- long before Michael Clauer was deployed to Iraq, where he commanded a convoy security company. The irony in this whole situation, said Margulies in an e-mail, is that had Capt. Clauer or anyone else contacted the HOA by telephone, fax, e-mail or regular mail, and told them that he was in the military, there would have been no foreclosure.

"The HOA has a 24/7 answering service, as well as a webpage and e-mail address," says Margulies. "Had anyone contacted the HOA and said the family was having financial trouble they would have worked out a payment plan. The family was two years behind in their HOA dues - not the two payments that Channel 8 reported."

Hale says that in spring of 2009, when May Clauer realized she was behind on the HOA dues, she called and made a payment. Later that spring, the new owner stopped by and asked if the house was a rental -- making no reference to the fact that he had purchased it at auction.

Margulies also wonders how a person could ignore bills for that length of time -- particularly utility bills. When you fail to pay your electric bill, off go the lights.

The difference, says Hale, is that the utilities give you a warning before they cut off service; Heritage Lake Homeowners Association gave no warning. According to the Morning News, the Clauer home was purchased at an auction for $3201 by Mark DiSanti and Steeplechase Productions. The house was sold in May 2009 for $135,000 to Jad Aboul-Jibin of Plano, Texas, also north of Dallas, who also now has an attorney. The attorney says his client is an innocent buyer and simply needs to be reimbursed -- which no one has offered to do thus far.

The HOA is very patriotic, says Margulies; it recently received a flag and plaque for raising money for soldiers during Operation Iraqi Freedom. And one good thing has happened out of this mess. Margulies says his clients, Heritage Lakes Homeowners Association, will now ask people when they purchase a home if they are in the military. And they also will call homeowners as part of its regular protocol during any foreclosure proceedings.

As to who gets to stay in the house, all that may be decided this week -- stay tuned.

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Dallas' Most Expensive Spec Home Ever Sells for 30% Under Original Price

Candy Evans — 2010-06-29T10:39:00 00:00

Filed under: News, Cities

Ever since 2008, many thought brand-new 3500 Beverly Drive in the high-net worth community of Highland Park, smack in the middle of Dallas, was destined to be the home of former president George W. Bush and his wife, Laura. But here we are, two years later and the home remained unsold, until it was reduced to $12.5 million and found a buyer -- Dallas billionaire Scott K. Ginsburg.

It has a basement that parks 8 to 10 cars (or could be a bomb shelter); it was constructed with a solid concrete shell (to withstand a terrorist attack); it was huge and elegant, befitting the former leader of the free world. But 3500 Beverly turned out to be the city's most expensive spec home ever built.

Originally priced at $18 million the 26,000-square-foot home was more than loaded. But when it was completed in fall of 2008, multimillionaires were scarce, running scared; the timing could not have been worse. Financial conditions were not conducive to selling such a mansion to the kind of person who could afford it, even if they could afford it. So 3500 Beverly sat. And sat.

Ginsburg also has a contract on the house next door to (west of) 3500 Beverly, because the one constant complaint I kept hearing from everyone who looked at this home was "the property is not significant enough for a home of this size and stature."

And no room for a real pool, a Texas must-have. So Mr. Ginsberg did what many multimillionaires do in Texas: They buy the home next door, tear it down and create a recreational playground.

The house at 3500 Beverly may be the most significant home in Dallas in years, but there have been a rash of high-end sales recently within the brokerage firm of Dave Perry-Miller and Associates. A $4,950,000 builder's home in the Hillwood (as in Perot, Ross Perot) enclave called The Creeks of Preston Hollow, also just sold, leaving one happy spec builder named Geoffrey Grant. The final price was kept confidential, as some sales are in Texas, but a reliable source told me the house at 10731 Bridge Hollow Court sold for just over $4 million to a Chicago couple. Since the builder paid $2.9 million for the lot, and then spared no expense in the finish-out, that would mean that the new owners have a 13,000-square-foot home that they essentially stole for a bit over $1 million.

Two other significant properties that had once belonged to Kelcy Warren of Energy Transfer Partners (properties he traded for his $46.5 million purchase of Bootjack ranch in Colorado), also just sold: 9122 Inwood Road, listed for $4.995 million and 5323 Rockcliff, listed for $1.895 million.

But Dallas still has a lion's share of high end properties over $3 million that are moving as slow as molasses. There are 119 homes over $3 million listed in Areas 10 (Addison), 11 (Preston Hollow), and 25 (Park Cities) over $3M. Of those, only three, yes just three, have a contract on them.

Now here's a fun bit of irony: One of those listings at over $3 million belongs to Scott Ginsburg, who just bought 3500 Beverly. His 4.66-acre Dallas estate suffered a fire several years ago, and he never rebuilt 4707 Park Lane, Asking price: $10.25 million.

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Alleged Squatter Stakes Claim to Seattle Homes, Says She Is 'Sticking It' to Banks

Candy Evans — 2010-06-28T16:20:00 00:00

Filed under: News, Economy

As if the nation's real estate market did not already have enough problems -- declining sales, credit crunch and the home appraisal nightmare -- now squatters are moving into vacant and foreclosed homes and staking ownership claims.

A Seattle woman who plopped herself into a vacant $3.3 million suburban Seattle mansion with her two kids -- claiming she was squatting in empty foreclosed mansions as a means of "sticking it" to the banks -- now tells the judge she "meant no harm."

Jill Lane, an attractive blonde and co-owner of an online debt recovery business that also claims to help make mortgages vanish, says she made a mistake and is seeking legal counsel.

In previous statements, Lane insinuated she was part of a rebellion that may grow into a national movement. And she told a Seattle Times reporter that she's going to keep staking her claim to the waterfront house at 435 Eighth Avenue where she squatted for almost a month, because no one owns it. Even more, she says she is staking claims to 10 other houses in the Seattle area that have gone into foreclosure and been passed from bank to bank.

And she's doing it all, she insists, not to make money but to make a statement.

Lane told The Seattle Times by phone from Disneyland, where she was vacationing after being released by the Kirkland, Ore., police, that "banks do whatever they want and nobody holds them accountable." She went on to say: "It makes me ill to see what the banks are doing. They aren't using their bailout money to help anyone. So I'm standing up for the people who are being brutalized by banks every day."

"This is a national movement," seconded Jim McClung, a former Bothell real estate agent and owner of NW Note Elimination, a company he runs with Lane that counsels people in how to "eliminate mortgages" as well as take over empty, foreclosed houses.

NW Note Elimination has advertised on Craig's List. The website now says that due "to the wild misrepresentations and slander of the certain new media, namely the Seattle Times and Komo 4, we are restructuring to be accessible only to pre-screened individuals who truly desire to be educated in the fraud that is committed by the banking system as a whole and are interested in empowering themselves with the knowledge to make changes in their personal lives and situations."

Lane moved into the vacant suburban Seattle mansion with her cats, TV, and even her own bed. A man named James Grenz also moved in with Lane and her children, 9 and 7. She treated the property well, according to news reports, and was kind enough to allow the home-stagers to come inside the mansion to rearrange the $80,000 worth of staging furniture to make the house more appealing to buyers.

Talk about plush living: The brand-new home is equipped with an elevator and wine cellar, fitness room, home office, and boasts city and mountain views. It has 7,680-square-feet, six bedrooms, nine baths, a formal dining room, and living room and dens. The holder of the note, First Citizens Bank, says the family showed up, took down the "for sale" signs and even changed the locks on the doors. Lane replaced the "for sale" sign with a "no trespassing" signs.

Ironically, Kirkland police arrested Jill E. Lane, 30, June 22 for criminal trespass after neighbors saw the signs that Lane put up. Before that, they just thought the house had been sold and they had new neighbors.

Currently the home is owned by First Citizens Bank. The Seattle Times also reported that after Lane moved in, she tried to buy the mansion for full price, but her offer was rejected by the bank because she was going to pay for the home using a "bonded promissory note." When police first showed up at the home to remove her, she produced a "legal document" called a UCC financing statement that allegedly showed ownership of the mansion had been transferred to a religious charity she had incorporated only two weeks ago, "Priority Rose Children's Outreach."

The bank hired security and notified police, and now have an attorney fighting to keep the bank as the home's rightful owner.

Squatting is apparently on the rise, a symptom of the nation's foreclosure crisis. The Fort Lauderdale Sun-Sentinel claims home squatting has become a big problem in foreclosure-laden Florida, calling it the "latest fraud in the housing crisis." There were more than 200 cases in Broward and Palm Beach counties alone in recent months, many of them in vacation homes which are not fully occupied by their owners. A bill in the Florida Legislature last spring would have helped cut back on squatter abuses and better protect Florida property owners, but it failed to pass.

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Dallas-Fort Worth Fastest Growing U.S. Metro Area, Says Census Bureau

Candy Evans — 2010-06-28T15:07:00 00:00

Filed under: News, Cities, Economy

We must have something in North Texas that people want; they are all moving here. The U.S. Census bureau reports that Dallas-Fort Worth was the fastest-growing metro area in the U.S. in the past decade.

We added a whopping 1.3 million people, which is a 25 percent increase over the year 2000.

We are holding tight as the nation's fourth largest metro area, and all we have to do is add about 3 million more people and we will match Chicago, my hometown, and the nation's third largest metro area: They've got 9.6 million to our 6.5 million.

Where are these people coming from?

According to Forbes, from the West Coast, the East Coast, Florida, Detroit and Chicago. (Looking at the chart, poor Detroit seems to be bleeding residents.)

The metro area with the highest percentage increase in growth distinction was given to Florida's Palm Coast, whose population exploded by 84 percent over the past nine-years-plus. The population totaled about 92,000 and consists of senior citizens moving there to retire. Growth must have come from their children moving back home, because here's the downer: The area had a 15 percent unemployment rate in April, and being located in one of the four "bad-boy" states for real estate, Palm Coast property values have decreased significantly from Florida's boom years.

Dallas home prices have remained fairly steady and when it arrives, we will lead the housing rebound. Looking at the Case-Shiller Index, Miami's homes appreciated about 180 percent during the boom, maybe more. Dallas homes saw a mere 26 percent climb during the steroid years. In Texas, consumers are also limited to the amount that they can borrow against their homestead, which acted as a sort of financial safety net for many.

Except for a few hot spots, our prices never bubbled up and thus remained within normal grasp. An average home can be purchased in Dallas for about $180,000. Want pricey Park Cities or Preston Hollow? You're looking at $750,000 and up. But great homes can be found in other neighborhoods, ranging from $197,000 in East Dallas to $67,000 in Oak Cliff/Kessler Park. Go north for more square footage, newer construction and softer prices: $185,000. And downtown Dallas is finally acquiring residents: While 130,000 work downtown, 30,000 now live downtown and that number is expected to almost double. Eight-five percent of downtown Dallas residents lease, 15 percent own condos.

Why is Dallas so darn attractive when it's so hot, climate-wise (100 degrees today, thank you) doesn't even have a ocean, or a mountain range, unless you count a four-hour drive to the Texas Hill Country? Oh and we have the highest property taxes in the country. Like many municipalities, Dallas is dealing with a serious budget shortfall and is arguing over raising taxes and eliminating services.

Business, jobs, affordability. City officials say we don't need a water port because we have Dallas/Fort Worth International Airport, which is larger than the island of Manhattan, and provides quick connection with the entire U.S. as well as Latin America. I know of a family who live in Austin because it's cheaper for them to house and educate their children there -- he commutes to Wall Street. One Dallas DJ even commuted daily to Chicago on American Airlines, which is headquartered here.

Texas in general has a business-friendly climate -- no unions, no state or corporate income taxes, affordable housing and we don't strangle people with regulations. And we have jobs, which usually lead to people buying houses.

Did you know that the GDP of Texas is performing better than the U.S. GDP? From 2001 to 2008, Dallas and Houston provided 5 percent of the entire U.S. GDP. We're doing better on jobs, too -- losing jobs at a 2.5 percent rate instead of 5 percent, according to Dr. James Gaines, a research economist at Texas A&M University. We added 300,000 jobs from 2004 to 2007, then lost about 90,000 after 2008. But we're still in the black on those numbers.

We are not the only expanding metro area. Basically, it's all about the South and West. Atlanta added more than 1.2 million people; rival Houston grew by 1.15 million. Raleigh, N.C.'s population jumped 41 percent.

Everyone must be jumping on those Arizona foreclosures, because despite the new immigration law, Phoenix recorded a 1.11 million-person increase, and 900,000 more people moved to Riverside-San Bernardino, Calif.

The mountain states are also gaining: St. George, Utah, 52 percent growth; Provo, Utah, 47 percent growth; Greeley, Colo., 41 percent growth.

The old adage still holds true: Go West, young man. Or maybe just Southwest.

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Shadow Inventory May Stall Real Estate Recovery 18 to 103 Months

Candy Evans — 2010-06-28T11:20:00 00:00

Filed under: News, Economy

Shadow inventory is real estate to sell that we don't yet know about. It's made up of homes that soon will be on the market, but not for the usual reasons.

It includes homes that are usually several months in arrears on their mortgage and about to hit the foreclosure circuit; homes that are 90-plus days delinquent and currently languishing in foreclosure; or bank-owned (REOs) that have not yet been put on the market. But come on the market they will, one way or the other, and at greatly discounted prices - distressed or short sales.

These houses will keep our values flat as long as they exist. How?

Take Neiman Marcus: Let's say you put a discount designer-fashion outlet smack next to Neiman's couture -- if everyone can buy Ralph Lauren and Escada at half-price, they sure won't pay full price at Neiman's.

Neither will homebuyers.

"The biggest problem with the market today is convincing sellers of how much the market has dropped," says Dallas appraiser D.W. Skelton of Skelton & Associates. In Dallas, Skelton is like an appraiser to the stars --- he counts Ross Perot as one of his clients -- and he is not sure we are out of muddy water just yet in what is supposed to be one of the better markets in the country.

Emphasis on "supposed to be": The Standard & Poor's/Case-Shiller analysis on shadow inventory indicates that Dallas may have more foreclosures -- a 43-month supply of shadow inventory. That's along with Denver, Atlanta and Boston. Phoenix may actually be over their peak and heading to a far healthier inventory. In fact, Phoenix has the smallest inventory of shadow supply -- a mere 18 months.

New York City metro has the worst, an 103 month supply, or eight years!

To help understand what that number means, consider this: Most Realtors consider a six-month supply of housing inventory to be a healthy market. When you get on up to nine months, or a year or so, there's more product, more inventory, more competition and lower prices. When it comes to shadow inventory, 34 months is considered the norm.

For the record, the report also assumed that 70 percent of recently "cured" loans would ultimately re-default.

What do you get when you have both high shadow inventory and an uptick in median prices? California.

The median real estate prices in San Diego have risen by 22.5%, spurred by the first-time homebuyer's tax credit.

Shadow inventory is scary, but not insurmountable.

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Texas Luxury Housing: Four Seasons Las Colinas Foreclosed

Candy Evans — 2010-06-25T11:33:00 00:00

Filed under: News, Cities

After months of negotiations, one of the most elegant hotel complexes in North Texas finally has been foreclosed upon by a lender for an estimated $122 million.

The Four Seasons at Las Colinas in Irving, Texas, home of golf's Byron Nelson Championship, and an anchor for nearby home developments, now stands as one of the biggest foreclosures to hit Dallas real estate in the last eight years Dallas Cowboys quarterback Tony Romo even lives nearby. And even though it will not halt the daily operation of the hotel --- most hotels are run by companies contracted to manage the place regardless of who owns the dirt -- it could have a chilling effect on hotel operations, according to experts.

"It won't affect club membership," said an executive from another luxury Dallas hotel, "but if I were a bride choosing a place to have a wedding in six to 12 months, I might wonder if the doors would still be open."

Then, too, the Four Seasons sits on 400 acres surrounded by housing developments. Could this huge foreclosure bring down home values?

Los Angeles-based BentleyForbes was the owner of the Four Seasons property. The operations are under contract by the Four Seasons; the battle is over the structure and dirt. In 2006, when the economy was on fire in Dallas/Fort Worth, newbie owners BentleyForbes took out a $183-million loan from U.S. Bank NA. The company sunk about $60 million into renovations at the hotel -- including the to-die-for lobby, guest rooms, sports amenities and upgrades to the renowned golf course.

Then came 2009. BentleyForbes worked for 18 months with the loan's servicer, CW Capital, to modify the loan and prevent foreclosure; BentleyForbes also worked with its mezzanine lending partner, Chicago-based Capri Capital. A mezzanine lender is like a second lien on a commercial property, usually for a higher interest rate because they are second to the primary lender. According to the Dallas Business Journal, BentleyForbes was able to seal a modification deal with CW Capital, but it was no go with Capri Capital. The lender who bought the property at auction bid the debt, $122 million.

The sprawling resort is surrounded by upscale, gated communities of homes costing from $300,000 to $1.6 million, many of whose owners buy $380 per month sports memberships at the Four Seasons Sports Club to use like a country club, and who are not blinking over the foreclosure.

"The services continue to expand, and the facility is in great shape," says member Mike Sheridan, who lives nearby.

But Sheridan is curious as to why The Sports Club didn't make it on the Most Luxurious Fitness Clubs Across America list --- it should have, he says.

Local appraisers do not think the hotel's foreclosure will have a negative impact on home prices -- Tony Romo lives in the exclusive, gated Cottonwood Valley subdivision directly across the street from the five-star resort whose homes skirt the golf course.

"It will not affect home values," says Dallas appraiser D.W. Skelton of Skelton and Associates. "But commercial foreclosures in general will affect all of our home values. When you start shutting down companies, everything in real estate is going to be impacted."

In a prepared statement, BentleyForbes CEO Tony Manos basically wished the best for the hotel, and said the improvements his company invested in the Four Seasons would help it thrive in the long run.

"BentleyForbes remains certain that its past management efforts and capital investments in the property since originally taking ownership in 2006 have positioned the resort for long-term success," Manos said in a prepared statement. "As the hospitality market recovers from the challenges of the current market realities, the Four Seasons Dallas will be able to fully leverage the extensive improvements to the golf courses, guest rooms, hotel lobby and guest amenities implemented and executed by BentleyForbes on behalf of the property."

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Gulf Oil Spill Real Estate: BP's Payments to Victims May Not Be Enough

Candy Evans — 2010-06-23T08:45:00 00:00

Filed under: News, Economy

Real estate professionals are demanding redress from BP to cover loss of rental income and, some say, declines in property values brought on by the Gulf oil spill. And some residents are getting it.

Real estate experts claim the oil spill has created a 30 percent value decline to Gulf Coast real estate properties -- in an area that was already hurting but was starting to see a glimmer of hope from the housing recession.

CNN reported that at least 446 claims for loss of rental income have been filed in Florida, and $75,727 has been paid out to more property owners for real estate loss values. (Warning: those BP payments might be considered taxable income.)

But now some owners of beach properties wonder if their values will ever recover. HousingWatch talked to a few Gulf residents and real estate professionals who have been afffected:

It was the hottest deal ever, or so said her salivating real estate agent. Journalist Allison Hatfield of Dallas bought a home on Alabama's Gulf Shores in August 2007. Asking price: $160,000. Daringly, she offered $150,000 and thought she was insulting the neighbors. But the developer caved, and Hatfield ended up owning her own little patch of white quartz sand paradise on the Gulf Coast. For a while, the beachfront townhouse in Lakewood Villas was her only home and a wonderful escape from Dallas and New York.

Today, Hatfield is not so sure about her investment. As for the "deal" she got, a similar townhome in the same development is currently listed for sale for $69,900. Same age, fresh paint. That means, says Hatfield, her beach home is now worth almost one-half less than she paid for it. She owes $147,000 on that zero-down-payment mortgage and she makes her payments like clockwork.

"But if I lose my job," she says, "I'm in trouble."

Like many of us, Hatfield got caught in the real estate finance fever of 2007. An Alabama native, she loves the crystal white sugar-sand beaches on this coast and was lured by the wave of development that hit this area after Hurricane Ivan in 2004. Shortly after she bought the beach house in Alabama, she moved back to Dallas and bought a home in Uptown, just north of downtown. Now Hatfield owns two homes, one of which is worth less than what she paid.

Alabama has 26 miles of "white sugar" quartz sand beaches, and the upscale city of Orange Beach is said to have even whiter sands than Florida's popular Destin by far. The area is known as the "Redneck Rivera." St. Louis-resident Amanda Tackett visits often, since her mother-in-law lives on Ono Island (so named because that's what Floridians allegedly said when they discovered they had given such a pristine paradise away to a neighboring state). Tackett was one of the first 40 residents on the island. She and her husband bought their four-bedroom beach house in 1987 to do some serious deep-sea fishing, paying about $200,000.

Now there are more than 4,000 residents on Ono, and dozens of homes once priced for upward of $3 million.

"This place was unrecognizable after Ivan," says Amanda Tackett. Gulf Shores took the brunt of Ivan's Category 3 status and was pummeled by 120 mile per hour winds. After Ivan demolished it, says Tackett, the developers came in and built like crazy just as the rest of the nation was going house-nuts. By 2007, Gulf Shores, Orange Beach and Dauphin Island real estate were on fire.

Then came the recession: $5-million homes going for a fraction in short sales, home auctions that barely move inventory.

"There was a huge real estate auction here a few weeks ago," says Hatfield. "Only 10 sold, and for way less than asking."

Which may sound like a great deal to buyers pouncing on beachfront property at its lowest. But Allison says the costs don't stop with ownership. Her property insurance is so high that she has to buy through a state pool. She can afford her condo, but not the insurance to cover it. They had major real estate issues here before the oil spill even happened, says Hatfield. The problem with the oil spill is the overall harm to the tourist industry -- the empty restaurants and canceled condo leases.

Of all the states whose beaches will be most damaged by the spill, experts say that Florida and Alabama will suffer the most. According to Property Wire, developers in these states say they sell a certain lifestyle that doesn't necessarily mesh with oil-soiled beaches. These states are also vacation central: Vacation rental bookings at Meyer Real Estate were brisk on the coast of Alabama and northwest Florida before the spill, up 20 percent over 2009. But the company has seen about a 15 percent drop in cancellations since late April and bookings are down 60 percent, according to Inman News.

"I had my biggest April since the boom" says Gloria Sims, a real estate agent and distressed property expert in Gulf Shores. "We were coming out of the bust, starting to see an inkling of price increases -- just an inkling -- then this happened."

Tourists may be hesitant for now, but Sims tells me that buyers are burning the phone lines, wanting bargains. She says BP has "thousands" of cleanup crews on the Alabama beaches 24/7, removing any tar balls or mess that washes ashore, first thing in the morning. It's kind of like a restaurant with amazing service, she says, where as soon as you set your fork down on the table, they whisk it off. But buyers who are looking now are savvy number-crunchers: They are driven by low price, not emotion.

Allison Hatfield, though, is still driven by emotion. On a good day, she says, she's happy to have a beach house and looks at it as a forced savings for something that she still hopes is going to be a solid investment in her future. But on a bad day, she feels trapped and angry, like she can never get out and wonders if the Gulf oil spill will confine her.

"Sometimes I'd really like an extra $1,600 per month," she says, "instead of a beach house."

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Dallas Real Estate: $200 Million Project Gets Funded by Police, Firefighters

Candy Evans — 2010-06-18T11:26:00 00:00

Here's proof positive that when the banks stop lending, developers get creative. A $200-million high end downtown luxury condo development in Dallas that had been placed on hold two years ago due to the real estate credit crunch will plunge forward with a unique source for funding: Dallas police and firefighters.

Museum Tower, a contemporary feat of overlapping glass panels designed by California architect Johnson Fain, closed a deal with the $3 billion-strong Dallas Police and Fire Pension System to fund and actually own the project. The developers, Dallas-based Brook Partners and Turtle Creek Holdings, will also hold an economic interest. Once complete, the 42-story tower with 100-plus units will soar over the city's burgeoning arts district with the highest-priced air-dirt in town: $700 to $1,000 per square foot, with an average condominium unit priced at $1,000,000. (Sidenote: One of the partners in the Museum Tower venture is Dan Boeckman, who sold his Preston Hollow home to former President George W. Bush and First Lady Laura Bush.)

Construction will begin next week with expected completion in two-and-a-half years.
The Dallas downtown condo market came out like a lion in 2006, with Ross Perot Jr.'s ambitious Victory Park development. It gave Dallas the state's first W Hotel and the 33-story W luxury high-rise condominium, just steps away from American Airlines Center.

Lucy Billingsley, the daughter of Dallas development icon Trammell Crow, built One Arts Plaza with a safety next of mixed-use: contemporary residential condos above commercial offices and some retail. Next came the Ritz Carlton Dallas, with both a hotel and two residential towers.

Then Swiss developer of local properties, Gabriel Barbier-Mueller, erected the 31-story, Euro-flair Azure, designed by Vancouver architect James K.M. Cheng. Deion Sanders owns a unit there that he's trying to sell for $7 million.

Then came The House by Philippe Starck.

Another development toward Uptown, attached to a historic Dallas hotel designed by Dorothy Draper and remodeled by her protege, Carleton Varney, went into bankruptcy but was recently purchased by a local developer: The Stoneleigh Residences.

The Mandarin Oriental had plans to build a Dallas hotel and ultra-high-end condo development near the W, but those plans were shelved indefinitely and the space is now a parking garage.

In April 2009, Hillwood ceded its ownership stake in Victory and handed both condominiums over to its German lenders, US Treuhand, losing about $100 million.

Thus the news that Museum Tower is back on track is like a giant dose of Prozac in the local real estate community, thrilling downtown dwellers.

"We would not have the hotels -- the $93 million Sheraton, $60 million Hyatt -- and now a $200 million Museum Tower if investors did not believe in the future of downtown Dallas based on the revitalization that has already occurred," says John F. Crawford, president and CEO of Downtown Dallas. It's a nonprofit organization that advocates for the improvement and vibrancy of urban Dallas. "The list goes on and on," Crawford says. "Success is a TEAM sport and we are making great strides in moving the ball down the field -- the best for Dallas is yet to come."

Still, the sales at existing condo projects have not exactly been brisk. Except for the Ritz-Carlton Tower I, none has completely sold out. There are a few foreclosures at the W, and only 10 percent of the 28-story House has been sold.

Two-thirds of the uber-chic Ritz-Carlton Tower Residences II remain for sale, and are being aggressively marketed by the developer, maybe even more so now that Museum Tower is a go.

Ritz sales have been brisk since January, though, when a new marketing team swept in and three nationally renowned designers -- Carleton Varney, Laura Hunt, and Jan Showers -- were called on to deck out three model units.

Critics are concerned about the police and firefighters putting their retirement funds into a project that could take years to sell out, based on current trends. And one of the fund's $27 million investments in Arizona real estate has not panned out very positively: 285 acres in Tucson, on which development has been stalled and squired in lawsuits, leaving a current land valuation of about $2500.

Perhaps that is one reason why the pension fund's administrator feels more comfortable keeping the police and firefighters' retirement dollars closer to home.

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Dallas Real Estate: Kessler Park Stone Castle for Under $600K

Candy Evans — 2010-06-16T17:14:00 00:00

Filed under: Cities

Kessler Park is one of the biggest neighborhood housing secrets in Dallas real estate. For under $600,000, you can own your very own castle.

At $599,900, this home at 1112 South Canterbury Court is a majestic rock English Tudor built in 1932, but you'd never know it. It has had an extra $25,000 of improvements injected and is an excellent buy for the location, architectural integrity and price.

At its current list price, it's 4 percent below the neighborhood's average list price of $611,000.
Except for the rolling terrain and creeks of Preston Hollow, where former President George W. Bush bought his post-presidential castle, most Dallas neighborhoods are fairly flat. Treed, but flat. Drive north to Plano, Richardson and Frisco, you'll see development after development on former cotton fields.

In contrast, Kessler Park, where legend has it the Texas Hill Country begins, is home to rocky cliffs, hills, trees, topography, creeks and homes with architectural integrity. It's an older community that was first developed in the 1920s, south of downtown Dallas.

The updated South Canterbury Court home features a fully remodeled kitchen with custom-period cabinets, granite counters, a stainless-steel Viking gas stove, and a travertine-tile floor. Original hardwoods remain throughout the house, as does a cast-stone entry with three stained glass Palladian arch windows. Plantation shutters, nine-foot ceilings, and original moldings abound. All walls are plaster -- which is rare in Dallas -- and those quaint archways lead to the formal areas. The layout includes four bedrooms, two-and-a-half updated baths, two living areas, a study with see-through fireplace and solid rock walls featuring an arched window to the huge yard made private by an eight-feet-tall privacy fence.

The 2,522-square-foot home sits on more than a one-quarter acre wooded lot with back porch deck.

Many of the area's homes are listed on the National Register of Historic places, and the Kessler Park Historic District boasts an excellent collection of 1920s to 1940s bungalows and large, revival-style houses. Pros: great cult neighborhood for art and historic home lovers. Cons: except for the Talented and Gifted schools, lower-rated DISD schools and a longer drive to Dallas private schools. Kessler is also enjoying the revival of the Bishop's Arts District in nearby Oak Cliff.

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Real Estate Online: Virtual Brokerage Can Help or Hurt Buyers

Candy Evans — 2010-06-11T11:30:00 00:00

Filed under: News

Google is the first to tell you: Somewhere between 80 percent to 90 percent of all real estate searches start online, at a computer or on a mobile device. Today's buyers pull up page after page of homes, compare assets, price per square foot, every detail. Buyers have even bought homes straight off the Internet, without ever being in them. A great way to shop, huh?

Yes and no. Along with the advantages of real estate shopping online comes the risk of being taken in. And as "web-estate" marketing becomes more competitive and sophisticated, it seems likely the risk could increase.

First it's helpful to know how the business is changing for real estate agents.

Sharp real estate agents produce websites, create blogs, post to bulletin boards, engage in social networking, and learn just about every way they can to sprawl themselves across the web to get sales leads. They also spend thousands of dollars buying keywords and other tools that push them to the top of Google searches so that, for example, when you type in "Dallas homes for sale," their website is among the first to pop up.

In fact, pay-per-click can cost an agent up to $3.00 per visitor, and not all of those are solid leads -- buying customers. Some agents feel it's like throwing money away, but they need to market themselves in the world of "web-estate." Naturally, the more money they spend, the better their positioning, so you often end up with the largest, wealthiest brokerages getting the best rankings. You know, those brokers who get half of that 3 percent commission.

Well, that too may be changing.
The Internet-search playing field is getting more level and affordable, even for the smallest agent, thanks to a new search technology: the IDX/MLS SEO fusion pages.

Not to get too techie on you, but a Realtor in Arizona figured out that when people really want to buy a home, they are very specific -- and rather wordy -- in what they search for: "three-bedroom, three-bath home in Richardson school district with 2-car garage and pool." This is called a "long-tail" search, as opposed to a "short-tail" search like "Richardson Texas real estate."

Right now, say SE experts, agents are throwing money at the short-tail search. A few weeks ago, consultant Sean Callahan of Real Estate Marketing Nerds and Multi Media Icon, Inc., discovered that 60 percent to 80 percent of Google real estate searches are those long-tailed phrases -- very specific searches, not general ones.

"Real estate agents are focusing money on the short-tail keywords," says Callahan, "and throwing money away."

Callahan's "long-tail" searches will have a multiplier effect on web listings as thousands of pages of data are created from listings. Every listing that matches one criteria in a long-tailed search will be spread over the web to feed the longer search. Not only will the longer search terms upstage the short key phrases hogged by the big brokers --- "San Diego Real Estate" -- realty agents will pay considerably less -- $.03 per visitor. And those leads will be toward more-targeted, focused buyers who will end up buying. Ka-ching!

"Our research," says Callahan, "shows that over 70 percent of real estate searches are coming from long-tailed keywords, like 'gated 4 bedroom home for sale in Dallas, TX,' and the long-tailed keywords are converting to better quality leads for the agents. "

This can help the real estate consumer by providing a faster search with better data.

Callahan says consumers will get a higher quality source of information from the Internet and more specific criteria in a shorter period of time -- less digging for relevant data.

It could also ultimately lead to cost savings: Brokers know their days are numbered as costs continue to rise. The virtual brokerage is taking shape. As consumers demand commission concessions from their agents, someone is going to get squeezed: the broker.

But consumers also need to know how real estate agents are marketing in the Web 2.0 world, and be prudent. Great photography can turn a pig's rear into a silk purse on the Internet.

Agents are advised to prepare listings for photo shoots as if they were walking the house down the red carpet at the Academy Awards -- they stage, plump, primp, nip and tuck for the cameras.

They create slick videos with soundtracks to draw you to a home. I often advise readers to see a home in it's "natural state" -- some dishes in the sink, papers stacked on the counters, because likely this is how it will look when you live there.

"This is an incredibly powerful tool that should revolutionize the way potential homeowners find houses to view," says Thad Stammen of Audience Experts, an SEO expert who works with select real estate clients in the Dallas/Fort Worth area."

But consumers need to remember that agents are doing everything they can to be web-assessable and present listings that look like they are straight from the pages of House Beautiful."

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Texas Leading U.S. Out of Housing Mess

Candy Evans — 2010-06-10T14:00:00 00:00

Filed under: Cities, Economy

Texas has one of the healthiest real estate markets in the nation; the Lone Star State is currently leading the country in housing starts and population growth. And two Texas metro areas -- Dallas/Fort Worth and Houston -- provided a combined 5 percent of the nation's gross domestic product from 2001 to 2008.

Folks are camping out on the sidewalks to place offers on homes like they did in 2006. And while there hasn't been word of a bidding war in eons, sales are brisk, particularly in the entry-level categories.

Foreclosures are still an issue, but because Texas real estate never spiked and bubbled like certain West Coast and East Coast markets, it never plunged after the fall. And Texas will be the first state to recover from the housing market downturn, leading other states out of the real estate doldrums, says Mike Inselmann, founder of Metrostudy Inc. His Texas-based company tracks home building nationally, and Inselmann made those forecasts to the National Association of Real Estate editors as they met last week in one of the state's hot real estate markets, Austin.
Houston and Dallas/Fort Worth already lead the nation in home-building and population growth, Inselmann told the journalists. The ready supply of new housing in Texas kept prices from overheating. Going back to 1995, Dallas/Fort Worth never got to 10 percent gains in annual home prices, he said, while many markets on the West Coast, and in Florida, Nevada and Arizona did.

Actually, some homes in those areas gained more than 10 percent. Other experts say that the ease of building in Texas also helps keep new homes affordable. When builders don't have to dish out thousands in fees, extra permits and entitlements, they can pass the savings along to buyers. When it doesn't take them years to get approvals, they can have new inventory up in three to six months.

Of course, there are some who say Texas builders rule the roost here.

According to Metrostudy, nationwide home starts are expected to be up about a quarter this year from 2009. The first-time homebuyer tax credit spurred many sales; Wells Fargo reported that 47 percent of real estate sales were to first-time homebuyers.

Now that the credit has expired, the market is cooling. Builders agree that the market has slowed since the credit expired, and now it's a waiting game to see what happens when the real estate market tries to go cold turkey without its booster shot. Veteran agent Tom Rhodes of Dave Perry-Miller points to another reason for the slowdown. He says summer sales in Texas are always slow as people escape the heat.

Home starts in the Dallas/Fort Worth area jumped more than 50 percent in the first quarter, as builders started houses to meet the demand partly caused by the tax credit.

But the pre-owned market shined, too. North Texas pre-owned home sales were up 18 percent in May, the third month in a row of double-digit gains -- fabulous news after negative rates for more than a year. The median price of a pre-owned home in Dallas rose to $151,980, up 2 percent from 2009. And the number of homes on the market was down 2 percent, leaving a 6.6-month supply of inventory. Real estate pros say a six-month home supply is healthy.

Of course what everyone wants to know is -- are we there yet? Have we hit bottom?

The answer seems to be maybe. According to Dr. James Gaines of the Real Estate Center at Texas A&M University, we'll know more in October because we're still on a high from the juicing up of the homebuyer's credit. Foreclosures will stay high, says Gaines, and interest rates are still low.

Gaines also says the banks really don't want to loan out money. Part of the reason why the market is so constipated -- the banks are hoarding cash and buying government securities. When it's hard to get a loan and hard to get an appraisal, it's a tough time to move inventory. Finding jumbo loans is like finding a needle in a haystack. Which is why, even in Texas, the luxury market is selling -- but not without major price concessions. Even the most expensive spec home in town recently lowered it's price, and word is that a buyer is seriously circling.

But here's a scary thought from Dr. Gaines: Shadow inventory - those are vacant homes and condos not even offered for sale right now -- could number as many as 9 to 12 million units. Normal is less than 5 million. Trulia reports that in three Texas cities -- San Antonio, Arlington (between Dallas and Fort Worth) and El Paso -- it's cheaper to buy a home than to rent. In Dallas, the numbers are close, but it appears to be cheaper to rent here than buy.

Gaines says that we need to keep a sharp eye on employment, which is the secret sauce to getting the real estate market buzzing. And there, too, is more reason to thank God if you live in Texas: We are losing jobs at a rate of only 2.5 percent, not the current nationwide average of 9.7 percent, but we are a youthful state, gaining population. One local tale: You can't find a U-Haul from California to Texas because everyone's renting them.

And if he had to call it? Inselmann said that the U.S. home market is "on the bottom and edging up."

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Former Detroit Mayor Trades Gated Community for 5 Years Behind Bars

Candy Evans — 2010-06-03T16:30:00 00:00

Filed under: News

Former Detroit Mayor Kwame Kilpatrick, who pleaded guilty in 2008 to obstruction of justice, is trading his home not far from the Jonas Brothers' in a posh North Texas gated community, for a place with even tighter security: a Michigan prison. He'll change residences because he
violated the terms of his probation.

Kilpatrick had, among other things, lied under oath about an affair with a staff member after sexually explicit text messages became public.

When his legal woes ended his Detroit political career, the 39-year-old former mayor found work as a medical-software salesman with Dallas, Texas-based Covisint Healthcare. He and his family have been living in a 5,866-square-foot home in Lakes of La Paloma in Southlake, Texas, an upscale gated community northwest of Dallas.
The home, which he and his wife lease, has a market value of $1,125,000 and was built in 1998. It has five bedrooms, five-and-a-half baths, a game room, a study, a formal dining room and an in-ground pool.

The Kilpatricks clearly traded up from their 2,839-square-foot rental home three miles away when they moved to the Dallas area over a year ago. His attorney says that someone else is paying the rent. According to the Detroit Free Press, the La Paloma home is also larger than his digs as mayor of Detroit --- there's just 4,004 square feet at the Manoogian Mansion.

While living in the Dallas area, Kilpatrick has said that he has been working on his marriage and trying to be a better father to his three sons. Neighbors in the gated community say he is very friendly -- she not-so-much. Last week, Kilpatrick asked Detroit Judge David Groner to show him compassion.

Judge Groner said, "that ship has sailed."

Groner says Kilpatrick must serve at least one and a half years in prison, but he will be credited for 120 days of time already served. He still has to pay back the balance of the $1 million debt he owes Detroit.

Kilpatrick spent several minutes pleading with Judge Groner to let him return home to his family in Dallas.

After the sentencing, Kilpatrick's attorney, Michael Alan Schwartz, announced he will no longer represent the former mayor as he is taking a new job: general counsel for The Word Network, a religious broadcasting organization.

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