Archive for July, 2011

America’s Dirtiest Hotels

July 29, 2011


Dirt-caked bathtubs, molding refrigerators and mystery stains are just a few of the horrors travelers say they’ve found at the Grand Resort Hotel and Convention Center in Pigeon Forge, Tenn. In the past year, disgruntled and disturbed guests have called the hotel everything from “cockroach heaven” to a “filthy, disgusting dump” and have plastered the Internet with sordid photographic evidence to prove it. That’s bad news for the Grand Resort Hotel since generally the number one reason guests don’t return to a hotel is because of cleanliness issues, says Howard Adler, director of Purdue University’s Center for the Study of Lodging Operations.

From a dilapidated California inn to a mold-infested Myrtle Beach flophouse, these are America’s 10 filthiest hotels, according to a survey of reviews from 2010 on the travel website TripAdvisor.

America’s Dirtiest Hotels

#1 Grand Resort Hotel & Convention Center, Pigeon Forge, TN

#2 Jack London Inn, Oakland, CA

#3 Desert Inn Resort, Daytona Beach, FL

#4 Hotel Carter, New York City, NY

#5 Polynesian Beach & Golf Resort, Myrtle Beach, SC

#6 Atlantic Beach Hotel, Miami Beach, FL

#7 Rodeway Inn, Williamsville, NY

#8 Super 8 Estes Park, near Denver, CO

#9 Palm Grove Hotel and Suites, Virginia Beach, VA

#10 Econo Lodge Newark International Airport, Elizabeth, NJ

Grand Resort Hotel & Convention Center, Pigeon Forge, TN

The Grand Resort Hotel & Convention Center in Pigeon Forge, TN, ranked the dirtiest hotel by TripAdvisor members in their 2010 reviews.

Photo: Courtesy of TripAdvisor

Karen Drake, senior director of communications for TripAdvisor, said that overall, traveler ratings for cleanliness are climbing, but “some properties still need to clean up their act. All told, 85 percent of TripAdvisor travelers who reviewed these 10 properties recommend against staying there.”

All hotels on the list were contacted and offered the chance to comment.

The grand champion: the aforementioned Grand Resort Hotel, cited by reviewers for “chewing tobacco spit oozing down the halls and corridors; spiders actively making webs in every corner of your room,” and “carpeting so greasy and dirty you wouldn’t want to sit your luggage down, let alone walk around barefoot.” Photos uploaded to TripAdvisor by guests of the hotel show an unsettling tableau of bed stains, peeling paint and blackened refrigerators.

Toilet and shower in the Jack London Inn, Oakland, CA

Toilet and shower in the Jack London Inn, Oakland, CA

Photo: Courtesy of TripAdvisor

No. 2 on the list: the Jack London Inn in Oakland, Calif. Reviewers complained the parking lot “resembled a post-apocalyptic junk yard,” and noted hallways “reeked of cigarette smoke, body odor and failure.” Another recent guest deemed the hotel’s bed uninhabitable and opted instead to buy an air mattress.

Peeling ceilings, cracked walls and cigarette burns, plus a dirty Jacuzzi, “a few small bugs” on the bed’s box spring, and a balcony littered with old cigarette butts made the Desert Inn Resort in Dayton Beach, Fla., the third dirtiest U.S. hotel, according to reviewers.

A bathroom in a room at at the Hotel Carter, New York City, NY

A bathroom in a room at the Hotel Carter, New York City, NY

Photo: Courtesy of TripAdvisor

The Hotel Carter in New York, No. 4 on the list, has appeared in TripAdvisor’s annual ranking five of the six times it has been published. A Hotel Carter representative wrote in an e-mail that improvements are currently being made on “bed[s], windows, ac, tv, carpets, fixtures” in a gradual, floor-by-floor approach. The Times Square establishment insists that its rooms have been fully booked since April.

The 10 hotels’ appearance on TripAdvisor’s list, published in January, does not appear to have galvanized any of them to clean up their act: Members’ reviews from April until last week continue to give the hotels the lowest possible cleanliness rating.

Garbage piling up at Polynesian Beach & Golf Resort, Myrtle Beach, SC

Garbage piling up at Polynesian Beach & Golf Resort, Myrtle Beach, SC

Photo: Courtesy of TripAdvisor

On July 12, one member said the room at the Grand Resort Hotel and Convention Center “smelled, the beds looked like someone had rolled all in them,” while “the chairs had stains.”

A guest at the Hotel Carter wrote on June 24 that the room phone “was dirty, there was no ironing board…I remove the top sheet to get in the bed and there were blood stains on the sheets underneath.” The hotel’s policy “is after ten minutes in the room they won’t give you a refund. We left fast!” the member said.

If America’s dirtiest hotels think lower prices can lure customers in spite of peeling paint and roach infestations, they’re wrong. “Long term a hotel cannot weather a bad reputation especially for cleanliness–even if it continues to offer discounts or money off when a guest has a problem–word of mouth–either directly or through the internet by blogs or reviews–can be devastating,” says Purdue University’s Adler.

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Lacker Says More Fed Stimulus Would Increase Inflation Rather Than Growth

July 28, 2011


Federal Reserve Bank of Richmond President Jeffrey Lacker said additional monetary stimulus would likely raise inflation further while not providing a substantial lift to economic growth.

“Given current inflation trends, additional monetary stimulus at this juncture seems likely to raise inflation to undesirably high levels and do little to spur real growth,” Lacker said in a speech before the Dulles Regional Chamber of Commerce in Chantilly, Virginia.

Federal Reserve policy makers meet Aug. 9 to assess the economy and monetary policy. U.S. central bankers have kept their benchmark lending rate in a range of zero to 0.25 percent since December 2008 and expanded the central bank’s balance sheet to $2.8 trillion in total assets in an effort to support growth.

The Fed’s Beige Book, a survey of regional economies released yesterday, said economic activity slowed in eight of 12 Fed districts. The recovery, which began in June 2009, has failed to pull the unemployment rate below 9 percent in all but two of the past 24 months of expansion. Lacker called the rebound in gross domestic product “disappointing” and said it remains to be seen if the economy rises to previous trend rates of around 3 percent annual growth or settles at a lower trend rate.

“When coming out of a recession, real GDP has typically grown several percentage points faster than the 3 percent long- run trend rate,” Lacker said. “This time, real GDP has risen at a 2.75 percent annual rate since the end of the recession.”      

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Yeeeehaw! Buy This Wild West Town for $799,000

July 28, 2011


Scenic SD 1Scenic SD 2Scenic SD 3

There are a lot of great real estate bargains on the market right now but this one takes the cake — You can buy an entire town for $799,000.

That would buy you a one-bedroom apartment in Manhattan but here in Scenic, South Dakota (that’s the real name) it buys you 46 acres, according to the official listing, including a post office, convenience store, saloon, dance hall, museum, a historic train depot, two homes (one stick built, one modular) and two jails (one working, one not). It comes with stunning views of “prairie” and “meadow” according to the listing.

Scenic used to be a booming Wild West town and it’s owned by a real, live cowgirl and former rodeo star, Twila Merrill. If you don’t believe that last part, check the official listing — — which includes a link to her being honored by the Cowgirl Hall of Fame in 2006.

Alas, every cowgirl knows when to hang up her hat and let the next rodeo star mount the horse. Merrill isn’t in the best of health so she and her daughter have put the town up for sale, hoping someone will come and breath new life into it.

Maybe someone in Hollywood will buy it and turn it into a set for western films or a reality series. Maybe someone could turn it into a Wild West museum town to rival Colonial Williamsburg.

Of course, it would make a perfect gift for that lady who has everything. Imagine the day-after anniversary conversation: He bought me a whole town!

Whoever buys it, let’s hope they heed the advice Merrill relayed in a recent interview:

“There’s not a horse that can’t be rode but there ain’t a cowgirl that can’t be throwed.”

Well said, Miss Twila. Well said.


Pony Treats:

The Quotable Cowboy. For more cowboy wisdom, check out CoolnSmart’s cowboy quotes, including some oldies but goodies like “Don’t squat with your spurs on” and “Never slap a man who’s chewing tobacco.”

The Naked Cowboy. And, who could forget New York’s own Naked Cowboy, who is quite quotable himself. You can quote him or get married by him in Times Square – he’s now a licensed reverend. But wait, don’t answer yet, you also get Naked Cowboy Oysters. Cowboys are a little different in these here parts.

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Lack of financing may derail growing housing investments

July 28, 2011


Investors are a driving force in the housing market, but their enthusiasm is constrained by limited financing options with more investors forced to pay cash for their homes as debt-driven financing remains restricted. And with housing supply only set to increase, the ability of these investors to absorb the overhang may substantially decrease.

Primary activity in the nation’s key housing markets is made up of a significant portion of hard cash buyers operating in the distressed property space. Of this number, only 40% or so are estimated to have access to excess capital.

Seventy-five percent of investor transactions last month were financed with cash, according to researchers who compiled the Campbell/Inside Mortgage Finance HousingPulse Tracking Survey. While investors are welcomed into the market for keeping sales flowing, an earlier report from HousingPulse warned investor cash levels would eventually be depleted, leaving the market in the hands of first-time homebuyers — many of whom no longer qualify for credit because of tightened underwriting guidelines.

Looking forward, researchers who compiled the report expect home prices to dip further in 2011 due to limited financing options for investors and a growing gap between the supply of distressed properties and sagging demand from first-time buyers. One market source interviewed by the firm expects price declines of at least another 10%.

"The fact that the recent rebound in existing home sales has been predominantly driven by cash buyers and investors places a question mark over the sustainability of that rebound," said Paul Dales, U.S. housing analyst for Capital Economics, back in March. "The concern is that there may be a limited pool of such buyers and that first-time buyers will not be able to fill any void."

The survey showed the proportion of first-time homebuyers in the housing market dropped to 35.4% in June, compared to 37.3% in May. At the same time, the HousingPulse Distressed Property Index dropped to 44.7% in June from 46.7% in May. Even with distressed properties clearing the market,  HousingPulse noted "the gap between first-time homebuyers and distressed property supply was 9.3 percentage points in June," suggesting that housing supply far exceeds demand.

Not to mention, the market remains fearful of the eventual unleashing of the growing shadow inventory of foreclosed and short sale properties.

In the report, Campbell/Inside Mortgage Finance quotes an anonymous California real estate agent as saying "there are tens of thousands of homes that have not even received a notice of default that have not made a mortgage payment in months or years."

The same agent said there will not be a bottom until the "economy turns in earnest and or the default inventory is exhausted."

The study concluded that investors have played a significant role since the end of the homebuyer tax credit by accounting for more than 20% of home purchases on average.

Middle-class Americans seem to believe the dire forecast about home prices and future sales, and remain unlikely to meaningfully get into moving up the property ladder, much less buying second homes.

Sixty-three percent of citizens surveyed for the First Command Financial Behaviors Index believe America is already in a double-dip recession, About 55% of those Americans who see the nation in the grips of a double-dip recession consider the weak housing market to be one of the key causes.

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FHA May Be Next in Line for Huge Bailout: Delisle and Papagianis

July 27, 2011


The nationwide decline in house prices has created a vacuum in the U.S. mortgage market. Private financing for home loans has all but dried up and the U.S. government is now guaranteeing almost every new mortgage. Fannie Mae and Freddie Mac have received most of the media’s attention, but policy makers need to focus on the third leg of the housing- support stool: the Federal Housing Administration.

The FHA has some major accounting problems. Left unaddressed, they could spook the markets, lead the FHA to seek a federal cash infusion and further enrage taxpayers. These outcomes can be avoided — but only if policy makers are more transparent about the risks involved in guaranteeing mortgages.

The FHA provides private lenders with a 100 percent guarantee against defaults on home mortgages that meet certain underwriting criteria, such as a minimum down payment and credit score. Traditionally, the FHA has served first-time homebuyers and low- to moderate-income families who pay an insurance premium for this loan guarantee.

As private-financing options have disappeared, the role of the FHA has grown. Its market share has increased to about 30 percent today from 3-4 percent in 2007. That’s because the agency is now practically the only game in town, accepting borrowers with down payments of as low as 3.5 percent. As the last few years have made clear, sizable down payments — or “skin in the game” — are the key to avoiding defaults in the near term and to achieving a stable housing market in the long term.

FHA’s Bottom Line

So how has the FHA fared financially in serving borrowers with low down payments? As the housing bubble burst in 2007, and the number of mortgage-related defaults started to climb, the FHA’s capital reserves declined to $3.5 billion from $22 billion.

This means that the FHA is on the verge of requiring a bailout to support its outstanding mortgage guarantees, which are projected to exceed $1 trillion in 2011.

The credit quality of FHA lending can be improved with better underwriting standards, such as requiring higher down payments and premiums. Unfortunately, it’s difficult to sound the alarm because flawed accounting measures show that new FHA loans will be profitable for the government. As a general rule, each year the government sets insurance premiums high enough to give the appearance that they will more than cover any losses from homeowners who default.

Budgetary Illusion

But no one should take comfort in the FHA’s projected profit. It’s purely a budgetary illusion.

According to the Federal Credit Reform Act of 1990, federal-budget analysts must strip out any costs that the government incurs when it bears market risk in guaranteeing loans, including mortgages. Market risk is the likelihood that loan defaults will be higher during times of economic stress and that those defaults will be more costly. Excluding costs for market risk is particularly irresponsible at a time when foreclosure rates are elevated and doubts remain over whether home prices will fall further.

If the rate of loss on the FHA’s new guarantees ends up higher than expected, that will probably be because the overall economic recovery has stalled. In such a scenario, any entity guaranteeing mortgages — be it the taxpayer-backed FHA or a private company — will suffer bigger-than-expected losses.

Taxpayer Risks

Skeptics might dismiss warnings about the FHA’s ballooning market share. They would defend the government’s current accounting rules and argue that the growth in FHA loans (at the expense of private-sector lending) is a perfectly logical policy goal. In their view, the government is a more efficient provider of mortgages because it can borrow at lower interest rates than any private financial institution.

What’s missing from this analysis is that the government enjoys low borrowing costs only because it can shift market risk onto taxpayers.

Put another way, there is only one reason why investors lend to the government at lower rates than they charge private mortgage insurers, even if they all insure identical mortgages: The government can call on taxpayers to repay bondholders if FHA loans result in higher-than-expected defaults. Few taxpayers would choose to bear that risk free of charge.

Rewriting the Rules

Some lawmakers understand this and are working to change the government’s accounting rules to include market risk. At the request of Representative Paul Ryan, a Republican from Wisconsin, the Congressional Budget Office recently took the official budget estimate for new FHA loans and added in the cost of market risk that taxpayers bear in guaranteeing the mortgages.

Under this more comprehensive methodology, the CBO determined that FHA loans would swing to a loss of $3.5 billion from a projected profit of $4.4 billion next year. In a 10-year budget window, this could mean a difference of $50 billion to $70 billion, depending on market conditions.

Accounting issues often seem arcane or even trivial. But the growth in FHA lending has turned a seemingly small problem into a large taxpayer vulnerability. The current accounting rules will also make it harder politically to shift some of the housing market back to the private sector. Congress should own up to the full costs and risks that taxpayers bear to guarantee mortgages.

The last time Congress delayed action in this area, taxpayers got stuck bailing out Fannie and Freddie — at a cost of more than $160 billion and rising.

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Mortgage Bankers Reverse Course on Loan Limits

July 26, 2011


It was barely a few months ago, albeit a few thousand degrees ago, that I moderated a panel of mortgage types from the major banks, including the Mortgage Bankers Association’s new president David Stevens, formerly FHA commissioner.

Stevens and I have been talking housing for many years now, so I’m well aware that he is not exactly the ambivalent type.

When I suggested to the panel that the risk of a double-dip in housing was great and that winding down Fannie Mae and Freddie Mac now could be detrimental to the housing market, Stevens was adamant that housing was well into recovery, and all those home price and mortgage delinquency reports I was citing were backward looking and not indicative of the current state of the market.

Now Stevens is reversing course.

This morning he put out a statement advocating a continuation of the higher loan limits at the GSE’s (Fannie and Freddie) and the FHA for one more year. “The temporary loan limits authorized by Congress have benefited consumers and the housing market during what has been a turbulent period for our nation’s economy,” Stevens said in the statement. “That decline is not over yet.”

The statement was a little dry for me, knowing the source, so I called Stevens for a little elaboration. He stated right from the get-go that he is still bullish about the future of the housing market, which is not exactly saying he feels great about it right now.

"It looked very clear at the beginning of the year that we were heading toward a flattening of the market, but we’ve seen clearly an impact to the housing market which is not solely a result of the U.S. economy. It’s brought on by general uncertainties: Oil prices spiked for a while, which hit confidence, there were a lot of impacts both domestically and internationally," he continued. "I think the view right now that I have is that this is a relatively inexpensive initiative that could support the housing market at a time when pulling back makes no sense."

When I suggested that this was in direct opposition to the MBA’s stand on GSE reform, which includes reducing loan limits in order to bring private capital back to the market, he said there was always a "caveat in the white paper for market conditions." He also says private capital is still too nervous about the state of housing to come back in force now. As for the FHA, which he has maintained consistently has far too large a market share right now, "If FHA is still too big, it is the sign of an unhealthy system, but it doesn’t mean pulling back is the right answer. We must continue providing support."

Lowering the current loan limits (a maximum of $729,750 in the most expensive markets) would really affect just 5 percent of the housing market, although that percentage is far higher in certain local markets. Stevens says that’s enough to hurt the overall market right now, and that we still need another year of recovery before we take such a risk. He notes over an over that it really costs the government nothing and doesn’t "score" in the budget.

I’m wondering when the banking industry starts putting its money where its mouth is, now that it’s making money again. There has been all this talk about getting government out of the housing/mortgage market, but no real movement in that direction. There have been some hikes in fees, but nothing really dramatic. The change in the loan limits was supposed to be the first step, something everyone agreed on. Now, not so much. There is certainly risk in lowering the limits, given that we are operating in a housing market that was beaten to a pulp and is still limping. But rehab takes some pain; if we really want a private sector mortgage market, and I’m not advocating one way or the other, but that has been the party line in both parties, then we need to start somewhere.

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Freddie Mac ready to launch Servicing Success Program

July 26, 2011


Freddie Mac posted details about its new Servicing Success Program Monday as the government-sponsored enterprise prepares for the Aug. 1 launch of the initiative.

Through the program, Freddie hopes to offer servicers a more "robust and balanced approach" to setting standards for what the GSE expects from its servicing clients in the field.

The program will not only set performance bars, but will provide a stream of feedback on servicer strengths and weaknesses. It also will allow for open dialogue to give servicers the information they need to improve the performance of their portfolios.

Freddie’s Servicing Success Program directly evaluates each servicer’s performance when it comes to investor reporting, remitting and default management.

Through the program, Freddie will rank servicers monthly based on points they earned when servicing loans the previous month. The August rankings will be available on each servicer’s performance profile Web page starting Oct. 7. This ranking system will replace Freddie’s traditional performance-tiered rankings.

"Today’s announcement marks the beginning of a significant advance in the scope and sophistication of servicer performance management," said Tracy Mooney, senior vice president of single-family servicing and REO at Freddie Mac. "The robust, balanced approach we are launching in 2011 underscores Freddie Mac’s commitment to invest in the future of U.S. homeownership by strengthening servicing practices and enabling servicers to more effectively preserve homeownership."

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Reverse-mortgage market carries on

July 26, 2011


No need to panic, financial advisers are saying in the wake of Wells Fargo and Bank of America leaving the reverse mortgage business. Homeowners who have reverse mortgages with those banks have no reason to worry, as the banks will continue to service those loans.
What’s more, homeowners who might be seeking a reverse mortgage will still have at least one large provider — MetLife Bank — and plenty of small independent firms from which to choose.
But though there’s no reason to panic, there are still plenty of questions to be answered. What does Wells Fargo and Bank of America leaving the business mean for the reverse mortgage product and the industry? What does their departure say about the future direction of housing prices in the U.S.? Do Wells Fargo and Bank of America have a crystal ball that others don’t? And what should folks who might need or want reverse mortgage do now or in the future?
By way of background, reverse mortgages are — in the big scheme of things — a relatively new product in the world of retirement income, and there’s much confusion over how they work.

Reverse mortgages
Here’s what the national trade group, the National Reverse Mortgage Lenders Association, says about them: "Reverse mortgages are available to seniors 62 years old and older with significant home equity. They are designed to enable elderly homeowners to borrow against the equity in their homes without having to make monthly payments as is required with a traditional ‘forward’ mortgage or home equity loan. Under a reverse mortgage, funds are advanced to the borrower and interest accrues, but the outstanding balance is not due until the last borrower leaves the home, sells or passes away. Borrowers may draw down funds as a lump sum at loan origination, establish a line of credit or request fixed monthly payments for as long as they continue to live in the home."
Those who have a reverse mortgage originated by Wells Fargo or Bank of America have no need to worry, said Peter Bell, president and CEO of the National Reverse Mortgage Lenders Association. "All current Wells Fargo reverse mortgage borrowers will continue to be serviced and funds made available," Bell said in a statement. Ditto those who had one with Bank of America.
In a statement, Wells Fargo said it was leaving the reverse mortgage business in part because of "unpredictable home values." And Bank of America said in February that the staff and resources used by the operation were needed in other parts of the company.
Experts, however, said Wells Fargo’s departure was less about falling house prices and had more to do reputational risk and the business line’s contribution to company’s revenues and profits. "To really understand what caused Wells Fargo to leave the industry, you also need to understand how small their reverse mortgage division really is," said Colette A. Gray, a senior loan officer and reverse mortgage specialist at Home Safe Reverse Mortgage. "With a 26 percent share of the market and a No. 1 position in the industry, their reverse mortgage division represents only a tiny 1.2 percent of their overall retail volume. The potential damage to their reputation in foreclosing on the comparative few in technical default is overwhelming. It simply isn’t worth the risk to them."

One major bank
With Wells Fargo and Bank of America gone from the business, there will be just one major bank — MetLife Bank, a part of MetLife Inc. — and lots of smaller independent players in the business. "Homeowners interested in a reverse mortgage will still have plenty of providers from which to choose," said Bell. "Wells Fargo’s departure means that a significant portion of market share will be re-distributed among other participants in the reverse mortgage business."
And that redistribution could be good news for providers and customers alike. As one member of a group focused on reverse mortgages on LinkedIn said: "It is a shame that most of ‘the big guys’ are abandoning the reverse product but at least for those who still have outlets to place their loans, perhaps the playing field will become more level again."
And the fact that the providers are small should be of no concern to homeowners seeking a reverse mortgage, said Jeff Lewis, the chairman of Generation Mortgage Company. "The product is government-insured, so consumers should not be concerned about whether their provider is a large institution or not," he said. "Actually, they can continue to expect to get more personalized service from smaller organizations, as they have in the past."

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America’s Most Expensive Home is for Cowboys

July 25, 2011


This $175 million luxury cutting horse and cattle ranch is in a valley next to the town of Jackson, WY.
Photo: Forbes Images

Even as so many Americans struggle under the weight of their underwater mortgage loans, in the high-rolling world of billionaire real estate, 2011 has been a year of record-breaking uber expensive properties. In March billionaire investor Yuri Milner plunked down $100 million for a Silicon Valley estate, breaking previous purchase price records in the U.S. Just last week, billionaire heiress Petra Ecclestone became the new owner of the Spelling Manor — an estate whose $150 million asking price had garnered it the title of America’s most expensive home for sale. Just days later, a new property is taking over that “most expensive” title: the $175 million Jackson Land & Cattle ranch.

Jackson Land & Cattle hit the sale block this week, listed with John C. Pierce of Hall & Hall, a ranch real estate firm. The property’s owner is Richard Fields, chief executive of Coastal Development, LLC, a gaming and resort development company. Fields’ $175 million compound encompasses more than 1,750 acres of rolling, green land just outside of Jackson Hole, Wyoming, in Teton County. The expansive ranch hosts cattle and horses. Aspen, evergreen and timber trees stud the hills interspersed with large hay meadows. There are three fishing ponds, a spring creek and over 800 acres of irrigated meadows. The Teton Range of the Rocky Mountains rise up in the distance.

The ranch’s biggest draw is certainly not the residence. The home itself is an old barn that’s been converted into a quaint three bedroom residence. There’s also a four bedroom guest house and two employee apartments. No, the real draw is the world -class 52-stall equestrian center.

View of the Tetons from the stable grounds.
Photo: Forbes Images

The equestrian center started life as an English-style riding center. Fields had it retrofitted for cutting horse training, a Western style of riding in which a rider and his horse separate an animal out from a herd (think of the horseback maneuvers ranchers in western movies do). The center is designed by renowned western architect Jonathan Foote, perhaps most famous for his use of distressed woods, glass and Montana moss rock. Fields convinced the architect to come out of retirement and re-skin the center with rough-cut stone and barn wood. There’s an outdoor riding rink and an indoor one from which you can gaze out windows onto the mountains.

The 52-stall equestrian center was designed by Jonathan Foote.
Photo: Forbes Images

“You can fish and ride and hunt and you’re still only three minutes from downtown Jackson Hole,” says Jonathan Pierce, the property’s listing agent. And for billionaires — the prospective buyers of this pricey piece of nature — the locale comes with benefits. Most notably on taxes. Wyoming doesn’t have a state income tax or an estate tax; even property taxes are low. Jackson and its neighboring areas host a plethora of secondary homes since taxes also don’t have to be paid on out-of-state retirement income. In response, the area draws a substantial number of ultra wealthy residents like Walmart billionaire Christy Walton, the world’s richest woman. Indeed Teton County is one of America’s wealthiest counties per capita.

A notable factor contributing to Jackson Land & Cattle’s price is the fact that it carries entitlements for up to 35 home sites. In other words, if a buyer doesn’t want all that land for himself, he can subdivide and sell parcels of it. Even so, there are hopes that the estate’s buyer won’t find it necessary to do that. “We are dealing with a very capable seller who is hoping for a conservation outcome on the property, although certainly not dictating that,” explains Pierce. “It’s a signature property that the entire community would love to see someone come along that shares Mr. Fields’ appreciation for the open space.”

More than 800 acres of irrigated meadows add to the unrivaled views.
Photo: Forbes Images

That aspiration aside, Pierce acknowledges that that subdivision opportunity definitely contributes to the hefty price tag. Though he chooses not to compare the two properties, neighboring 1,840-acre Walton Ranch is asking a mere $100 million. Despite the two ranches’ comparable sizes, the Walton Ranch’s land is much more heavily protected and only two or three additional home sites would ever be allowed on its acreage.

As for who exactly will want to cough over $175 million to buy this huge western compound? “People wanting the absolute finest property in the absolute finest resort community in the country can give me a call!” chuckles Pierce. Go get him, billionaires.

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Beware US real estate scammers

July 25, 2011


Many Israelis are now buying and selling American real estate, trying to take advantage of a strong shekel and a weak United States real estate market.

However, real estate scams are probably as old as real estate itself, and savvy investors can make mistakes, especially if they are deceived by their attorneys and real estate advisors.

With investors pooling their money into real estate trust funds, there are multiple opportunities for con artists to conceal theft from the trust fund. As the trust fund managers collect monies from an ever-increasing circle of clients, they pay out “dividends” based not on returns, but on new investments.

In one real estate ponzi scheme, investors purchased deeds (interests in land) that were marketed as being secured by California real estate. In fact, the deeds were either unsecured or far more risky than promised. Many of the “investment counselors” were not licensed as required, and the appraisals were inflated. The ponzi scheme promised rates of return of 18% to 22%, with loans not exceeding 80% of the value of the property. It was all a multi-million dollar fraud.

In another case, a Harvard Law graduate, who was a former US Attorney, teamed up with a tax shelter specialist to defraud property owners. The owners provided a limited power of attorney over two residential properties to a relative of the tax shelter specialist. The attorney promised that the relative with the power of attorney was as honest “as the day is long.” A short time later, while the owners were in Israel, the “honest” relative and various acquaintances obtained outside loans on the properties and moved another relative into one of the homes. When the property owners demanded to be made whole, the scam artists threatened to “grind the owner into the ground.” And, when the owners took legal action, the attorney had another tenant manufacture a claim of sexual harassment against the owners.

Sometimes, an enterprising buyer will pay a small deposit to tie up a property in escrow, perhaps for ninety days, while looking for another purchaser. When the transaction closes, the original seller is paid by the ultimate purchaser through the escrow. This kind of transaction is sometimes referred to as a “double escrow,” and often the original seller has no idea about the additional premium collected by the middleman.

This arrangement can become fraudulent where the attorney represents multiple parties in the transaction and conceals the facts from the seller. Generally speaking, attorneys only represent one side in a transaction, especially in a real estate transaction, to avoid conflicts of interest. The attorney should disclose all the facts about the transaction and obtain written consent.

A real estate scam artist often has a certain flair. The scammer gains the confidence of the victim with brash self-assurance and by displaying badges of success: money, cars, and an impressive home. Then, the scammer confuses the investor with a get-rich-quick scheme that is incomprehensible, yet delivered with such bravado that otherwise prudent, successful people write enormous checks to buy something they do not understand.

As a young attorney, I remember sitting in a meeting with a brilliant transactional and tax lawyer who was being sued for fraud in Los Angeles. He was dazzling. He had the entire defense team in the palm of his hand. We thought he was a genius, we admired his character, and we could not believe that he had done anything wrong. As the case proceeded closer to trial and after the defense team considered the evidence, it became clear that like the investors we had also been fooled.

Some simple rules apply: Understand how the transaction works: what is being bought, what is being sold and how the investment makes money. If it looks too good to be true, it probably is. Be careful about trusting strangers. A power of attorney is a potentially dangerous instrument. Finally, always have qualified third parties, who are not interested in the transaction, review the deal.

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