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Baltimore attorney John Reiff and two of his law partners fixed bids in Baltimore area tax auctions for more than four years, according to Reiff’s recent testimony[1]. Using a strategy that has been exposed frequently over the past few months, Reiff and his partners used a co-conspiratorial system to buy tax liens at low prices at auction, then collect “millions in fees from debtors.” The investigation of Reiff and his colleagues began after a Baltimore Sun analysis of tax auction bidding showed that while “large numbers of investors participated in annual tax sales, three groups dominated in Baltimore and other counties in the state.”

Maryland is considered a “good state” for tax lien certificate investing because interest rates can be as high as 24 percent with redemption periods as short as six months[2]. While the state does not conduct formalized tax deed sales, more than 24 counties participate in annual sales, which are conducted by competitive bid. By keeping sales prices artificially low, Reiff and his cohorts not only optimized the amount of money they could collect on the liens, but they also prevented the city from recouping the maximum amount possible on the delinquent loans.

Banks and corporate investors represented by Reiff insist that they knew nothing about the price suppression, and Reiff’s testimony does not specify if any of the entities he represented were aware of his actions. Thanks to his testimony, Reiff avoided being charged.

Have you experienced this type of bid-rigging when you participate in tax lien auctions?

Thank you for reading REJournalOnline’s Tax Deeds Investment Newsletter.

Let us know about your experiences below.

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[1] http://articles.baltimoresun.com/2011-03-04/news/bs-md-tax-lien-auctions-20110228_1_tax-liens-property-tax-debts-tax-sales

[2] http://www.tax-lien-certificates.com/tax_lien_certificates_maryland_md.html

The wealthiest investors in the country are targeting commercial real estate for their high-yield investments, sinking more than 3 times the amount of money into commercial real estate in 2010 as they did in 2009[1]. And they have focus; nearly a third of all deals last year were apartment buildings of some kind, reported Real Capital Analytics yesterday. Dan Fasulo, Real Capital’s managing director, pulled no punches: “Commercial property looks damn attractive versus other asset classes right now,” he stated, observing that commercial property has “inflation protection characteristics, plus it gives you a check every month.” He compared commercial property investments to investments in gold.

Multifamily housing is extremely attractive to high-net-worth investors, explained Robert Knackal, chairman of Massey Knackal Realty Services, because this type of large-scale investment offers “higher returns without the onus of managing a property.” Also, he pointed out, other types of investment options like CDs simply are offering yields that are too low to be attractive. Commercial real estate investing is also relatively straightforward compared to hedge funds and other structured investment products, say experts, making this type of investment particularly appealing to investors who want to keep a close eye on their money.

All the signs point to commercial real estate as the place to invest in 2011. Are you going to “follow the money” in this direction or are you interested in other real estate venues?

Thank you for reading REJournalOnline’s Commercial Real Estate Letter!

Let us know what you think of multifamily housing opportunities in today’s market below.

Also, consider checking out this last-chance offer (ends today) to get involved in commercial real estate deals with virtually no money down and access amazing, attorney-verified real estate retirement planning strategies and forced appreciation on commercial properties by clicking here.

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[1] http://www.bloomberg.com/news/2011-03-10/wealthy-u-s-individuals-invest-in-commercial-property-in-quest-for-yield.html

The Obama administration’s flagship foreclosure aid program, HAMP (Home Affordable Modification Program), and HUD’s Neighborhood Stabilization Program (NSP) are both in congressional sites as the House Financial Services committee approved both the HAMP Termination Act (HR 839) and the NSP Termination Act (HR 861) yesterday[1]. The committee believes that ending these programs could save around $30 billion dollars of taxpayer money. Chairman of the committee, Spencer Bacchus (R-AL), hopes that the $30 billion can be used instead in the private sector to create jobs.

Not surprisingly, not everyone on Capitol Hill is pleased with the acts. Maxine Waters (D-CA), who has vocally blasted just about everyone on both sides of the aisle this month, announced that she is “very disappointed in my colleagues on the opposite side of the aisle [and] their mania to achieve fiscal austerity at all costs”[2]. Waters was instrumental in getting the Emergency Homeowners Relief Program – also on the chopping block – included in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

Of course, all of these negotiations could very well come to nothing, as yesterday the White House repeated that it will veto congressional government funding measures if the “undermine critical priorities or national security through funding levels or restrictions”[3]. The president has said repeatedly over the past few weeks that the termination of HAMP undermines his priorities and long-term economic growth.

Do you think HAMP, NSP and the like should go or stay?

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Let us know how you would solve these issues below.

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[1] http://www.dsnews.com/articles/house-committee-advances-bills-to-end-two-more-foreclosure-aid-programs-2011-03-09

[2] http://www.loansafe.org/congresswoman-waters-blasts-republicans-for-voting-to-dismantle-programs-that-help-homeowners-avoid-foreclosure

[3] http://voices.washingtonpost.com/2chambers/2011/03/obama_repeats_veto_threat_agai.html

Yesterday federal prosecutors announced indictments for a dozen Arizona individuals involved in cash-back mortgage schemes that “contributed to the meltdown of the state’s real estate market.” Among those charged were a couple running a Tempe-based international Christian ministry, the Clint Rogers Ministry[1]. Clint and Angela Rogers are accused of diverting more than $2.5 million to themselves and co-conspirators by falsifying loan applications to allow them to buy homes at “artificially inflated prices” after buying the homes at lower values through an intermediary.

The couple face 13 counts of conspiracy, money laundering and wire fraud, and are accused of using their ministry simply as a vehicle to accept the money.

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Let us know what you think should be done about this kind of fraud in the space below.

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[1] http://www.businessweek.com/ap/financialnews/D9LS0U8G1.htm

According to a report released by CoreLogic yesterday, 23.1 percent of residential properties with a mortgage were underwater at the end of 2010. That is up slightly from 22.5 percent earlier in the year, and represents a 300,000-home increase in just three months[1]. These numbers do not surprise many analysts, but they do worry them since underwater homes are a “drag” on the market because they prevent homeowners from exiting those homes via traditional routes like selling and they also stifle the “trade-up” market in real estate, which consists of homeowners buying better, more expensive homes and selling their old ones.

Mark Fleming, CoreLogic’s chief economist, says that these high levels of negative equity will keep housing and mortgage finance markets sluggish even if the rest of the economy begins to recover. Perhaps of equal concern is that 2.4 million borrowers have “near-negative” equity, meaning that they have less than 5 percent equity in their homes. This could quickly turn negative if CoreLogic predictions that home prices will fall another 5 to 10 percent in the coming year.

In light of this news, many in the Obama administration are protesting Republican proposals to cut HAMP (Home Affordable Modification Program) as part of the budget adjustment even more vehemently. In fact, the White House has threatened to veto attempts to do so, saying that the program is a “cost-effective approach to assisting underwater borrowers”[2]. However, the program, which was intended to help as many as 4 million homeowners, has thus far only helped a few hundred thousand and wasted massive amounts of taxpayer money, say HAMP critics.

For many real estate investors, these types of numbers mean more involvement in the real estate market thanks to creative financing and other alternative methods for buying property. Do you think that this is the way out of this mess?

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Let us know what you think should be done about the underwater housing situation below.

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[1] http://blogs.wsj.com/developments/2011/03/08/report-more-borrowers-underwater/

[2] http://online.wsj.com/article/BT-CO-20110308-714971.html

As Bank of America struggles – successfully, according to its executives – to once again become a “growth company,” one way that it is limiting its losses is by selling off commercial real estate[1]. The lender, which has been hit hard by litigation associated with its acquisition of Countrywide and by the robo-signer scandal hopes to decrease the chance of write-downs on commercial loans by selling off those assets now. Given that commercial property prices have fallen 40 percent since their 2007 peak and the bank’s core portfolio fell 28 percent in 2010 alone, this seems like a wise decision in order to limit loss. However, BofA is not exiting the commercial real estate business completely, says its head of commercial banking division David Darnell, but will remain active and involved in a “very disciplined way.” Chief executive officer Brian Moynihan hopes that this move will help the lender continue to expand without acquisitions like those of Countrywide and Merrill Lynch & Company, which led to litigation and serious losses in real estate and mortgage securities.

The lender said in an official statement that although “credit quality for commercial real estate is showing sign of stabilization,” it expects that “elevated unemployment and ongoing pressure on vacancy and rental rates will continue to affect primarily the non-homebuilder portfolio”[2]. By shedding some of its “excess weight” in commercial loans, BofA may be able to reduce its “legacy assets” left behind by other CEOs and limit losses on the books. Do you think that BofA’s actions are a sign that commercial real estate is not done heading down, or does this make you want to buy?

Thank you for reading REJournalOnline’s Commercial Real Estate Letter!

Let us know what you think of BofA’s continuing troubles below.

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[1] http://www.businessweek.com/news/2011-03-08/bofa-selling-commercial-real-estate-assets-risk-chief-says.html

[2]http://www.streetinsider.com/Corporate+News/Bank+of+America+%28BAC%29+Slashing+its+Commercial+Real+Estate+Assets/6353289.html

One of the best things about tax lien investing is that it is one of the most secure forms of real estate investing. In fact, some “gurus” actually go so far as to call tax lien investing “guaranteed” investing. This is because a tax lien usually takes precedence over any other lien on a property, meaning that you are first in line to either get paid for your note or foreclose on the property. However, there are a few scenarios in which your “top dog” status may be challenged.

One such scenario occurs in states that reserve top lien status for their own liens. This is the case, for example, in Arizona. In Arizona, tax liens are considered to be “prior and superior to all other liens and encumbrances upon the property except liens and encumbrances held by the state.” This is not that big a deal as long as you are aware of the rule. Basically, if you purchase a tax lien on a property that is also encumbered by a state-owned lien, you are not first in line. You should check ahead of time to make sure that either:

1. There is not a state-owned lien on the property, or

2. There is enough value in the property to allow for collection of the state-owned lien and your lien. (In today’s real estate market, this second option can be risky since property values are very uncertain in many markets.)

Of course, every state has its own unique guidelines for how tax liens are dealt with. It is your responsibility as a tax lien or tax deed investor to make sure that you are prepared with all of the relevant information on state-specific guidelines before you bid on or purchase a tax lien or deed.

Thank you for reading REJournalOnline’s Tax Deeds Investment Newsletter.

Please leave your comments or questions below.

According to California realtors, a little under half of all short sales fail to close thanks to slow response times on the part of lenders[1]. Despite state regulations governing how quickly banks are required to respond to short sale inquiries, some real estate agents report that it routinely takes one or two months to get an answer from a lender – even though “the process has improved dramatically in the past year” according to Dustin Hobbs, spokesman for California’s Mortgage Banker Association[2]. Hobbs points out that while lenders may be required to provide a response within a short period of time, ultimately, they have to get permission from the entity or entities that actually own the loan. This means “a lot more phone calls, a lot of paperwork, a lot more decisions that have to be made” in the midst of handling foreclosures and other distressed properties. “I don’t doubt there’s a backlog of requests,” said Hobbs.

Unfortunately, this backlog is leading to more foreclosures, say agents. Because it takes so long to get a response on short sales, by the time that the response comes even if it is positive the buyer may be gone. Agents blame this on the banks, saying that “time is of the essence” in real estate contracts and things must speed up. Lenders and even some brokers, however, admit that real estate agents can actually complicate short sales significantly if they are inexperienced or, in an effort to make sure the deal closes, allow clients to enter several short sale purchase agreements at once and then back out of the ones that do not close soon enough, thereby skewing the actual failure numbers. There are also still bookkeeping problems for banks associated with short sales, in that if they foreclose on a home they have some time to report the loss that they may take on the property. Short sale losses must be reported immediately.

The California Association of Realtors has requested that government agencies compel banks to “complete all short sales following HAFA guidelines and to comply with the program’s time frames.” Since most lenders have completed their repayment of TARP funds, this is optional at this time.

Do you think that lenders should still be forced to participate in HAFA?

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Let us know what you think of California’s short sale situation below.

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[1] http://www.latimes.com/business/la-fi-short-sales-20110307,0,6800709.story

[2] http://www.ocregister.com/articles/estate-291142-sell-lenders.html

Since 2008, not much has happened on the commercial real estate retail front in southern California, but Rick Caruso, president and CEO of Caruso Affiliated and mall magnate, believes that he can change that with a new retail/luxury residential model of shopping center[1]. The apartment and retail development, projected at $60 million, will be located near another one of Caruso’s properties, LA’s Grove shopping center.

The complex will be eight stories and consist of 88 apartments over a Trader Joe’s grocery. While smaller than many of Caruso’s other projects, it will play a significant role in the return of development to the area. Caruso, who is “committed…to pushing the bounds of the industry” through the development of high-quality retail centers[2], started the new project after a similar project quickly leased nearly to capacity – and 30 percent above the local average – within a short period after completion.

All over the country, the “right products” are moving in the real estate industry even while others struggle to stay afloat. It looks like new construction – carefully thought-out and designed new construction – could be the key to the elusive element of building that fuels most recoveries and has been notably absent from this one. Do you think that there is a place for new construction in today’s economy, or is there too much old construction for new construction to flourish on a wide scale?

Thank you for reading REJournalOnline’s Commercial Real Estate Letter!

Let us know what you think of building in today’s market below.

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[1] http://www.latimes.com/business/realestate/la-fi-caruso-development-20110308,0,7462076.story

[2] http://www.carusoaffiliated.com/companyProfile/bios/rickc.shtml

While it might be hard to see how the commercial market could move so quickly from a total standstill to having too much action and capital, that is just what many experts are predicting could happen during the “long healing process” in the commercial industry[1]. That’s right: now that things are starting to look better with transaction volumes heading up and great deals being done right and left by careful investors who have waited for just this time to move into the market, analysts believe that copycats could start moving in over the next few years and gumming up the system with “too abundant” capital.

But is that really such a bad thing? The commercial real estate market relies on investor confidence just as other real estate markets do. And renewed confidence in t he market is currently causing the commercial mortgage-backed securities (CMBS) market to double in value while lenders and investing firms are acting quickly to get involved in all related arenas. “The best bargains come in a bad market,” say analysts, pointing out that soon that bad market could start to change its face and become a good one with investors still struggling to get in.

It seems that what this really means is that if you want to get in on the ground floor of the growing commercial real estate industry once more, then the time to act is now. According to the National Real Estate Investor, the commercial real estate sector is in the “early stage of the next real estate up cycle [and]…will attract significantly more investor interest and new capital in 2011”[2]. Of course, you should always analyze your specific deals for yourself before you jump in head over heels, but does this sound like bad news to you or do you think this means that it is time to invest?

Thank you for reading REJournalOnline’s Commercial Real Estate Letter!

Let us know what you think about today’s market conditions in the commercial sector below.

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[1] http://www.nuwireinvestor.com/articles/in-real-estate-and-investment-best-bargains-come-in-bad-56991.aspx

[2] http://nreionline.com/news/real_estate_bets_2011_0307/