Monday, June 29, 2009
Responding to “Will New Appraisal Rules Help or Harm”
Kathleen Dolar for Investor’s Business Daily, in her article “Will New Appraisal Rules Help or Harm” discussed the new market trend reports, known as the 1004MC or Form 71. These forms were set in place to help lending institutions understand the market trends in the area that the subject property and comparables are located. While the added forms may help the lenders in certain areas and locations in the country, they can also deceive and mislead the lender in other areas, unless the forms are fully explained. The form requires the appraiser to analysis median prices of the comparables. In areas of higher end properties and other areas that have a mixed value in a close proximity these “median” values can be wrong. Guidelines set by Fannie and Freddie require that the comps used be with in 10% of the GLA, close in lot size, within 1 mile of the subject, and prefer all sales within the last 6 months and at least 1 of the 3 comparables sales within 3 months. Finding median values in a mixed value area becomes impossible. A perfect example is in The Hamptons, Long Island NY. To start off many of the appraisers use MLS to get these median prices, unfortunately MLS is not used throughout the Hamptons by all Realtors, therefore not all transaction are listed, and your median values are off before you even start. (In an area like the Hamptons much more work needs to be done then to clicking and print, An Appraiser should know the area and confirm all sales data to ensure arms length transactions possible foreclosure or short sales listings etc..) Another issue is lack of sales due to the poor Real Estate Market. In order to choose a number of properties too get a valid median value, one must first eliminate sales within the 1 mile that does not meet the above guidelines, and only choose the real comparable sales. In an area of mixed properties once you stick to those guidelines you will find yourself with not enough sales to allow you to get a true median value. Areas like this must be explained not filled out on a cookie cutter form, distance guidelines need to be expanded to exceed 1 mile as long as the areas are similar in most ways such as school district, number of properties available for sale, foreclosures etc..
Thursday, May 7, 2009
Banks, Government & "Stress Tests"
By STEPHEN BERNARD, AP Business Writer Stephen Bernard, Ap Business Writer –
NEW YORK – Bank of America Corp. stock rose as investors appeared comforted by reports that the bank has the means to cover a potential $34 billion shortfall in capital.
The New York Times and The Wall Street Journal are reporting that regulators are telling the Charlotte, N.C.-based bank it needs about $34 billion in capital based on results of government "stress tests." The New York Times quoted a bank executive, while the Journal report cited unnamed people familiar with the situation.
Bank of America declined to comment on the reports. The Treasury Department also declined to comment.
Shares of Bank of America rose 81 cents, or 7.5 percent, to $11.65 in morning trading.
Bank of America has been among the hardest hit banks by the credit crisis and ongoing recession. It has received more than $45 billion in government aid already, and has come under heavy scrutiny in recent months for its acquisition of Merrill Lynch.
The need for more capital comes as the government gets set to release the results of stress tests on Thursday that it completed on 19 banks to determine how they would fare if economic conditions worsened. Any of the banks that are deemed to need more capital based on potential future losses will be required to address the capital situation immediately, to ensure they have the necessary protection if the economy worsens.
Banks will have an opportunity to raise the funds on their own before the government steps in to help support them.
For Bank of America, the $34 billion shortfall could be covered in multiple ways, including converting a portion of the government's $45 billion investment into common stock.
But Bank of America's chief administrative officer, J. Steele Alphin, said in the New York Times report that the bank would have plenty of options to raise capital before it would need to convert taxpayer money into stock.
Currently the government holds preferred shares in Bank of America for its investment. Preferred shares are essentially a loan that pays out a hefty dividend. By converting that investment to common stock, it would expand Bank of America's equity base to help lessen the blow if loan losses continue to pile up amid the ongoing recession. Bank of America would also see the dividend payments to the government eliminated, freeing up more cash to cover potential losses.
At the same time, a conversion to common stock would leave the government as one of Bank of America's largest shareholders, a move that might not be welcome by investors or the board of directors.
Other options for Bank of America include selling some of its assets to raise the necessary capital or a traditional common stock offering.
Very few banks have been able to complete traditional common stock offerings amid the credit crisis, though with a recent surge in the market in the past two months, investors are becoming more receptive to the idea. Goldman Sachs Group Inc., which is one of the other banks being reviewed by the government and considered one of the strongest amid the market turmoil, raised capital in a stock offering last month.
Bank of America could also shed assets, such as a portion of its stake in China Construction Bank. A lockup provision expires Thursday that would allow Bank of America to sell about a third of its stake in the Chinese bank, which could fetch about $8 billion, according to the Journal report.
Bank of America has been under intense scrutiny in recent months for its acquisition of New York-based investment bank Merrill Lynch. As part of the $45 billion Bank of America received from the government, $20 billion came in January to help cover mounting losses at Merrill after Bank of America showed trepidation about completing the deal.
Last week, amid shareholder unrest about the Merrill deal, investors voted to split the roles of chairman and chief executive, stripping Ken Lewis of the chairman's position. He still remains CEO.
NEW YORK – Bank of America Corp. stock rose as investors appeared comforted by reports that the bank has the means to cover a potential $34 billion shortfall in capital.
The New York Times and The Wall Street Journal are reporting that regulators are telling the Charlotte, N.C.-based bank it needs about $34 billion in capital based on results of government "stress tests." The New York Times quoted a bank executive, while the Journal report cited unnamed people familiar with the situation.
Bank of America declined to comment on the reports. The Treasury Department also declined to comment.
Shares of Bank of America rose 81 cents, or 7.5 percent, to $11.65 in morning trading.
Bank of America has been among the hardest hit banks by the credit crisis and ongoing recession. It has received more than $45 billion in government aid already, and has come under heavy scrutiny in recent months for its acquisition of Merrill Lynch.
The need for more capital comes as the government gets set to release the results of stress tests on Thursday that it completed on 19 banks to determine how they would fare if economic conditions worsened. Any of the banks that are deemed to need more capital based on potential future losses will be required to address the capital situation immediately, to ensure they have the necessary protection if the economy worsens.
Banks will have an opportunity to raise the funds on their own before the government steps in to help support them.
For Bank of America, the $34 billion shortfall could be covered in multiple ways, including converting a portion of the government's $45 billion investment into common stock.
But Bank of America's chief administrative officer, J. Steele Alphin, said in the New York Times report that the bank would have plenty of options to raise capital before it would need to convert taxpayer money into stock.
Currently the government holds preferred shares in Bank of America for its investment. Preferred shares are essentially a loan that pays out a hefty dividend. By converting that investment to common stock, it would expand Bank of America's equity base to help lessen the blow if loan losses continue to pile up amid the ongoing recession. Bank of America would also see the dividend payments to the government eliminated, freeing up more cash to cover potential losses.
At the same time, a conversion to common stock would leave the government as one of Bank of America's largest shareholders, a move that might not be welcome by investors or the board of directors.
Other options for Bank of America include selling some of its assets to raise the necessary capital or a traditional common stock offering.
Very few banks have been able to complete traditional common stock offerings amid the credit crisis, though with a recent surge in the market in the past two months, investors are becoming more receptive to the idea. Goldman Sachs Group Inc., which is one of the other banks being reviewed by the government and considered one of the strongest amid the market turmoil, raised capital in a stock offering last month.
Bank of America could also shed assets, such as a portion of its stake in China Construction Bank. A lockup provision expires Thursday that would allow Bank of America to sell about a third of its stake in the Chinese bank, which could fetch about $8 billion, according to the Journal report.
Bank of America has been under intense scrutiny in recent months for its acquisition of New York-based investment bank Merrill Lynch. As part of the $45 billion Bank of America received from the government, $20 billion came in January to help cover mounting losses at Merrill after Bank of America showed trepidation about completing the deal.
Last week, amid shareholder unrest about the Merrill deal, investors voted to split the roles of chairman and chief executive, stripping Ken Lewis of the chairman's position. He still remains CEO.
Friday, April 17, 2009
THE 6 KEYS TO INVESTING IN REAL ESTATE IN THE HAMPTONS
With the current Real Estate Values through-out the Country on a downward spiral, Foreclosures at its highest point and banking requirements stiffening, Real Estate Investing does not appear to be the best thing to do. But in reality now is the best time to buy in the Hamptons. Unlike investing in an area that will take more time to recover, such as many parts of Florida, The Hamptons Real Estate “correction” will not be as painful or take as long. Like any other investment tool The Hamptons Real Estate Market has had its ups and downs. In order to profit like any other investment tool timing is crucial, and I think the time is now to find the right property at the right price with the right terms and buy. However please do not invest in an area that lacks location. Remember ……. The 6 keys to Real Estate success is Timing, Price, Terms, Location, Location & Location and a Little Luck Helps.
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