Category: Real Estate

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Congressional Proposals to Fix the Subprime Mortgage Mess are a Bad Idea

The recent subprime mortgage crisis has put pressure on Congress to act to bail out troubled lenders and borrowers. The American housing market continues to struggle. According to the National Association of Realtors, sales of existing homes fell by 4.3% in August and the stock of unsold single-family homes rose to the highest number since 1989. [1] More and more homeowners cannot keep up with their mortgage payments, and Congress feels that it needs to act to avoid looking disinterested and out of touch.   There is bipartisan support for several proposals, including giving Freddie Mac and Fannie Mae a greater role in the mortgage market. [2] These proposals are a bad idea. They are misguided and could further damage the long-term housing market.

Freddie Mac and Fannie Mae are private companies that operate under a Congressional charter. [3] They were created to make a market for low-income higher risk borrowers. 

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Casper the Lonely Ghost: Buyers Don’t Want Haunted Houses

As intriguing as haunted houses are, they are not an easy sell.  Whether you believe in ghosts or not, this is the scary truth: if a home has had a murder, suicide, or illness take place in it, it is “psychologically impacted” and carries a supernatural stigma.  [1]  This fact alone may keep buyers away more than any of its physical characteristics.  [2]  According to a study done by professors at Wright State University, psychologically impacted houses take 50% longer to sell than homes with comparable features.  [3]  On top of that, they price at an average of 2.4% less than those that do not come with a supernatural tenant.  [4] And since apparitions are not always readily apparent to the prospective buyer, sellers with stigmatized property are faced with the temptation to keep their ghosts a secret.  Legally though,

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It’s Not Easy Being Green [1]: The Tech Industry Seeks Greener Solutions to Its Rapidly Increasing Energy Demands

I.  Introduction  
Why do companies go green?  A cleaner, more efficient energy solution certainly sounds progressive and looks great on paper, but aside from generating good public relations with environmental groups, is it an economically sound investment?   In the case of the tech industry and its rapidly increasing energy costs and demands, it may be their only option.  Put another way, the answer may be a resounding "Yes."

To illustrate this problem, take for example the ubiquitous IT data center, or the air-conditioned computer farms found at the heart of almost any large technology firm.  [2]  They offer increasingly more complex and useful applications, web pages, internet traffic and processing power, but at significantly increasing costs.  [3]  Data centers are massive energy consumers and may require as much as fifty times the power of a comparably sized office space.  [4]  Despite some recent notable improvements in hardware power efficiency

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Use Rights on Nonnavigable Waterways

 

 

 

Imagine a residential community in which all the residents own tracts of land surrounding a pond that is not accessible to the public. What water surface rights do the landowners have? Can a landowner use the entire pond for boating even if it will interfere with another’s fishing? Can a single landowner keep all others from using the pond for their recreation? Recent state court decisions highlight two very different regimes governing the use rights of nonnavigable waterways. [1]

Historically, state courts have adopted one of two rules governing surface rights over nonnavigable waterways: the common law rule or the civil law rule. [2] Under the common law rule, the owner of part of the lake bed has exclusive use and control rights to the water extending from that property. [3] If ten landowners have equally sized lots adjacent to a pond, each landowner will have exclusive

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Accessing Unclaimed TIF Funds

Developers looking for a new source of revenue during the housing slump should not overlook municipal redevelopment programs. Developing the right kind of project at the right location may qualify one for millions of dollars in government subsidies. Forty-nine states and the District of Columbia have some variation of Tax Increment Financing. [1] More commonly known as TIF, the program lets local municipalities subsidize projects in designated redevelopment areas. 

Illinois was one of the first states to develop TIF. The state enacted the original version of its TIF statute in 1977 for the purpose of promoting development in areas which are “blighted or are in danger of becoming blighted." [1] The program works by using future property taxes to “provide incentives to develop areas which would remain undeveloped if not for governmental assistance.”[2] TIF districts do not create new taxes or automatically increase property taxes. Revenue comes from an increase

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The Dark Side of Land Use Restrictions

     Residential land use restrictions are part of life in most areas in the United States.  There may be land-use restrictions regarding “building height, architectural styles, materials, orientation, view preservation” [1] and even the color of your home. [2] These restrictions may have benefits, to essentially assure quality homes are being built as well as maintain property values by preventing doublewides from being built next to mansions.  However, what happens when these restrictions go too far?  For example, the government may reject a landowner’s building plan not because it fails to meet the technical requirements of local building and zoning codes, but because the board simply does not like what the structure will look like. [3]   Along more disturbing lines, land use restrictions can (and have) made it difficult for hundreds of natural disaster victims to construct decent temporary housing. [4] Welcome to this, the dark side of land-use

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Subprime Slump: Will the Economy Follow?

On February 7, 2007, the Senate Banking Committee heard testimony
which indicated that nearly 20 percent of subprime mortgage loans
obtained in the period from 2005-2006 will result in foreclosure,
affecting over 2.2 million families in the United States over the next
few years. [1]  On Monday, April 2, 2007, the second largest provider
of high-risk, subprime mortgages, New Century Capital Corporation of
Irvine, California, filed for Chapter 11 Bankruptcy protection and
fired 3200 employees in the wake of its own "financial missteps" and
trouble with the SEC and U.S. Department of Justice over financial
statements which failed to accurately account for financial losses the
corporation was suffering, as well as mismanagement of the
corporation.  [2]  With more than 25 subprime lending companies
shutting down over the past few months [3], many are wondering about
the implications for the future of both the subprime market and the
economy.

Subprime mortgages… Read the rest

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Finding REIT Investors through the EB-5 Visa Program

Real estate investment trusts looking for new investors should consider participating in an increasingly popular US immigration law program.  Each year, the U.S. Citizenship and Immigration Service (USCIS) allocates 10,000 visas through the fifth category of the employment-based paths to permanent residency (EB5) to foreign-nationals who invest in the U.S. [1]  Sometimes referred to as the “million dollar green card”, the EB5 has been wrought with frustration due to stringent standards and wary would-be applicants.  In an attempt to make the program more attractive, the USCIS made key amendments and set aside 5,000 visas (of the 10,000 total) to foreign nationals investing in designated “Regional Centers”. [2]

There are generally three paths to the EB5. [3] First, a foreign-national may actively invest $1 million and hire ten employees anywhere in the United States. [4] Second, a foreign-national may actively invest $500,000 and hire ten employees in an area where the

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Turning Brownfields into Big Green: Practical Concerns Regarding Contaminated Real Estate

I.  Introduction

Greenfields, otherwise known as pristine tracts of land, are becoming scarce as demand for residential property continues to rise, yet environmentalist groups are fighting to preserve these undeveloped areas. [1] How, then, can we provide more residential areas to meet the increasing demand, while refraining from construction on previously unused land?  Brownfields very well may be the answer to this fundamental conflict.  Brownfields are “real property, the expansion, redevelopment, or reuse of which may be complicated by the presence or potential presence of a hazardous substance, pollutant, or contaminant.” [2] Some authorities report that there are more than 500,000 abandoned brownfields scattered throughout the United States. [3] While the thought of turning polluted land into a residential area may at first seem unappetizing, brownfield redevelopment is gaining more acceptance as lenders and insurers begin to give financial support for these projects. [4] As more and more builders are

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Investing in Privatized Municipal Infrastructure: Accounting for the Legal Risks

Fortune Magazine recently declared privatized municipal infrastructure “one of the hottest asset classes in the U.S.” [1] Banks and private-equity firms alike are lining up to bid on toll roads, parking garages, and for the first time ever a major U.S. airport. The city of Chicago has plans to privatize Midway Airport, which could go for as much as $3 billion. [2]

Chicago is not new to the privatization game. In fact, the city’s lucrative skyway deal became a model for raising government capital to fund highway construction and pay down debt. In 2004 the city received almost $2 billion in exchange for a 99 year toll road lease. [3] Neighboring Indiana recently announced plans to lease a toll road for 75 years to a Spanish-Australian consortium in exchange for $3.85 billion. [4] It plans to use the money to fund over 130 local road projects. [5] Investors like such

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