Lee Greif Blog

By ROBBIE WHELAN

St. Joe Co., a large Florida real-estate developer that owns resorts on the Gulf of Mexico, filed suit against oil-services company Halliburton Co., seeking more than $1 billion in damages related to the Deepwater Horizon oil-rig explosion and subsequent oil spill.

In a complaint filed in state court in Delaware late Wednesday, St. Joe said that Halliburton, which provided key structural work on the oil well, "ignored multiple warning signs" that could have prevented the disaster.

St. Joe, which owns 577,000 acres of land in Florida mostly within 15 miles of the Gulf and is the biggest landholder in the Florida Panhandle, said the April disaster resulted in huge losses for the company when hundreds of tourists canceled vacation plans to stay at its resorts.

The company's stock price fell by 40% in the weeks after the blowout, resulting in a $1 billion decline in market capitalization. The shares have remained depressed even since BP stopped the gushing oil on July 15.

Although Halliburton had workers aboard the rig the day of the explosion, it was not responsible for making most decisions on the well.

Halliburton, in a statement, said it has not seen the lawsuit yet, but from what it has seen in the media, "it appears to be without merit and we will vigorously defend it."

Gulf Coast residents, businesses and environmental groups have filed hundreds of lawsuits against Halliburton, BP PLC, which operated the well, Transocean Ltd., the rig's owner, and others, seeking compensation for damage from the spill. The suit by St. Joe is one of the first by a publicly traded company claiming damages, in part, due to a loss of investor equity.

For the full story go to The Wall Street Journal

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By Nick Timiraos

Once the housing market is stabilized, the federal government should dial down its support for policies that promote homeownership over other investments, writes former Treasury Secretary Hank Paulson in an op-ed in Friday's Washington Post.

Weighing in on the debate over housing-finance policy,  Mr. Paulson sounds a note of caution in rushing to revamp mortgage-finance giants Fannie Mae and Freddie Mac. Overhauling the companies, and rolling back other homeownership subsidies, shouldn't be done "until the housing market is stabilized and housing prices are likely to rise."

Mr. Paulson oversaw the government's takeover of Fannie and Freddie through a legal process called conservatorship two years ago. At the time, the conservatorship put the companies on a  path towards overhaul in 2009. But other legislative items and financial crises overwhelmed the Obama administration's agenda, and the Treasury late last year took steps to extend the government's conservatorship of the companies.

The former Treasury secretary and Goldman Sachs chief executive defended his decision to put the companies into conservatorship, a less extreme alternative to receivership, calling the government support of the companies "the most effective of the stimulus efforts undertaken in the past two years":

This stimulus was aimed squarely at the driver of our financial and economic crisis: the decline of home prices. Without public support, ensuring that mortgage financing was available during the worst moments of the financial crisis and the ensuing 22 months, the housing market would have ground to a halt, home prices would have spiraled downward, foreclosures would have skyrocketed, and financial institution balance sheets would have suffered greater losses, leading to a prolonged downturn and the loss of millions of additional jobs.

Home sales are still suffering despite record-low mortgage rates, and the availability of low-cost mortgage credit is vital to avoid a further housing decline that tips the economy back toward stagnation. It will take time to reach consensus on the government's proper role in subsidizing housing and how to replace the [companies] with a more stable construct that reduces risk to taxpayers and the economy.

Mr. Paulson made clear his preference for converting Fannie and Freddie into one or two private-sector entities that would be set up along the lines of a heavily-regulated public utility and that would offer an explictly-backed credit guarantee on certain issues of mortgage-backed securities. The companies massive investment portfolios should be wound down, he said.

But he called on policymakers to go beyond simply revamping Fannie and Freddie:

A significant root cause of the crisis was the combined weight of government policies promoting homeownership; these are apparent in [Fannie and Freddie], the Federal Housing Administration, the Federal Home Loan Banks, the federal tax deduction for mortgage interest and various state programs. Homeownership was overstimulated to the point that it was unsustainable and dangerous to the broader economy....

We should go further and reduce the subsidy for homeownership that helped create the crisis. The central place of homeownership as part of the American dream reflects a bias of our society that is unlikely to simply end. Policymakers may well decide that we should continue to facilitate lower-cost mortgages through a subsidy to mortgage credit guarantors. Even so, the scope of the subsidy should be reduced by rationalizing and reducing the missions of the FHA and the successor(s) to Fannie and Freddie. I would recommend limiting the availability of the subsidy to smaller mortgages or lower-income buyers or both. And the price the government charges this new private-sector entity for its credit guarantee must be high enough to leave room for a robust private-sector mortgage market that serves taxpayers and homeowners equally.

for more Real Estate news Click Here

Consumer Confidence Dropped Again in July

By CONOR DOUGHERTY And NATHAN BECKER

Home prices rose in May but were expected to lose momentum with the expiration of federal tax credits, while consumer confidence sagged--both signs that the economic recovery remains fragile.

The S&P/Case-Shiller 10-city and 20-city home-price indexes increased 1.2% and 1.3%, respectively, in May on a non-seasonally adjusted basis. Compared with a year earlier, the 10-city index rose 5.4% and the 20-city reading climbed 4.6%.

The Case-Shiller index measures three-month moving averages, so the latest figures reflected prices in May and the two previous months. The increases were welcome signs for an economy on the mend, but largely reflected temporary factors. Home prices typically go up in spring, and the now-expired homebuyers tax credit led to brisker sales over the period.

Figures for June show home sales have slowed considerably since the expiration of the tax credits this spring. Sales of existing homes slid for the second-consecutive month, the National Association of Realtors said last week. The group also said inventories rose and prices remained fairly stable.

Still, housing analysts have taken a dimmer view of the outlook for home prices. Among those surveyed by MacroMarkets LLC in July, 60% expected home-price declines this year, up from 40% in May, the second-straight month of diminished confidence.

Las Vegas saw the biggest year-over-year price declines, at 6.5%. The biggest gainer from the previous year was San Francisco at 18.3%. The biggest month-over-month gains were in Minneapolis, up 2.8%, and Atlanta, with a 2% rise. Except for Las Vegas, each of the 20 markets measured by the Case-Shiller index rose for the month.

In another sign of pressure on prices, the Commerce Department reported that the homeowner-vacancy rate, defined as homes that are empty and up for sale, was 2.5% in the second quarter, flat from a year earlier but high by historical standards.

Separately, the Conference Board's Consumer Confidence Index fell to 50.4 in July, the second-consecutive decline and the lowest reading since February. Consumers' views darkened about both today's economy and their expectations for the months ahead.

Economists Say High Hopes for a 2010 Rebound are Unrealistic; Prices Keep Falling in Hard-Hit Metro Areas

I am just a person with a strong faith, who has sold $3 billion in real estate, and has been a commission sales person since he was a junior in high school. That's more than 30 years ago.

One thing I have learned about life. Life's lessons are based on principles, on truth. The principle of gravity is the same today as it was yesterday and will be tomorrow. So are sales principles. We come to understand them through experience.

I quit looking for 'keys,' 'steps,' 'pitfalls,' and 'secrets' a long time ago. I started looking for "lessons," because as I look back on a 30-year career in commission sales, I remember the lessons that matter are based on principles.

To apply them I must believe them to be true, and therefore I, not anyone else, would have to act on my belief, not someone else's. The sales lessons came at unexpected times in a variety circumstances, many of them outside of real estate sales.

As you read these three lessons, look back on your own experience, and think of lessons you learned and the situation you were in. What have you found to be true in your sales career?

The first lesson I learned was my first day on the job as a junior in high school when I started selling shoes at Cannon Shoe store. The manager was Mr. McKee. I was to be paid six percent commissions.

I reported for work and he led me directly to the stock room. With his bald head reflecting the glare from a bare light bulb hanging from the ceiling, his steely eyes peering over his glasses and his boney index finger pointed at me taught me a lesson I never forgot.

"Son, I want to teach you something about selling, and I don't want you to ever forget it."

"Yes, sir."

"Are you listening to me?"

"Yes, sir."

Mr. McKee then gave me the shortest, clearest sales lesson I ever heard.

"Get their money." Three little words. This might be a little crude for a sales book cover, but it is in fact the truth.

Then he told me how to do it.

"If you cannot find a pair of shoes the customer is looking for, turn them over to me. You do not get paid to show shoes. You get paid to sell shoes. Do you understand?"

Even as a 16-year-old I understood. I was not guaranteed a nickel. I was not expected to know the inventory on my first day. And I better turn my prospects over to Mr. McKee or face a one-man firing squad.

Fortunately, it was a retail operation, so I did not have to worry about prospecting. I just focused on meeting the needs of the prospects who wanted to buy shoes, then hopefully help them purchase socks, shoe polish and women's hose, at the counter.

There is nothing quite like the thrill of a crowded shoe store for a young commissioned shoe sales clerk on an Easter Saturday, when you basically just take orders.

Some may argue, me included, that 'taking orders' is what many commission sales people in real estate services did for the last 15 years or so, until around 2007.

We are no longer in the find your dream home business. We are in the reassurance business.

By the time they talk to us via email or phone, prospects have already eliminated more 'dream' homes than we could ever show them. They need help and reassurance that they are making the right decision, and it is based on a whole lot more than 'location' these days.

One thing has not changed. Our job as commission sales people is to sell them what we have to sell. We are not in the business to show homes.

The second lesson learned was the importance of dealing with a person who is ready, willing, and able to buy what I am selling. If one of the three is missing, I have a suspect, not a prospect.

Fortunately, for me, Mr. Byrd, the president of the baby furniture manufacturing company, was the best I ever knew at delivering qualified prospects. I managed a six-county direct sales staff for Mr. Byrd.

Again, I did not have to 'prospect' for a living. The company did it for me. I focused on lead follow up, setting appointments, and making home demonstrations. It was like getting listings, you might say.

Mr. Byrd taught me that if the prospect was not ready, willing, and able to make a purchase today, she was a suspect. I acted as if I knew what he was talking about, but until I actually sold a package to a buyer who did not qualify for the loan, I had no idea what he meant. I learned at that instant what "not able' meant.

My prospects were expectant mothers. My product was baby furniture. My benefits were safety, peace of mind, and value.

Showing this to a woman who was not pregnant made no sense, because there was no urgency or need. It is like showing a home to a person not financially qualified to purchase it. Mr. Byrd knew how to deliver prospects, not suspects.

Lesson number three came from the greatest real estate sales agent that I ever knew. Her name is Doria. She always has a good prospect, just got a listing, or is going to a closing.

The lesson: Not Asking For The Business Gets Expensive

I asked her one day, what her prospecting secret was. She said, "No matter where I am, I always ask someone if they know someone who may be thinking about buying or selling a home."

Then she proceeded to tell me about when she was out for dinner, how she asked the couple at the next table if they happened to be looking for a second home and how she sold them a luxury condominium the next day.

"Do have any idea what "not asking' would have cost me? $9,000," she continued, referring to her commission.

"We have not, because we ask not," she reminded me. "It's one of the principles I know is true."

Think back over lessons learned in your own life. My guess is that you are not only applying these lessons, but are sharing them

Lots of things seem to be out of commission these days. By remaining true to and applying principle-based lessons, you should not be one of them.

Published: July 22, 2010

There has been much (uninformed) debate on the web about the possible existence of a tax on real estate sales within the new health care bill passed by Congress and the President this year. It's been called a "sales tax", "transfer tax", "income tax", and some have even said it doesn't exist at all.

Let's set the record straight--no politics, just facts. This is a tax that affects a very small number of Americans directly. It is, however, particularly significant for waterfront and luxury real estate owners. It could also be significant to builders, contractors, tradesmen, and others in the real estate industry who are dependent on real estate sales for their employment. (Thanks to Lane Bailey over at ActiveRain for the thorough analysis of the subject--some of his research points synopsized here).

There is indeed a tax that affects the sale of real estate in the new health care law passed this year.

Starting in 2013, individuals with incomes over $200,000 will have to pay a 3.8% tax on profit from the sale of their primary residence or investment properties over a certain profit threshold. The exact amount will be based on a formula that includes the profit from the property and the income above $200,000. The tax is not an income tax, but rather it is a "payroll tax"... officially it is a Medicare Tax.

This new tax applies to investment income, dividends, real estate profits-- all "unearned income".

Here's the gist of it:
A person with an income of $200,000+ purchased an investment property for $400,000.
The home is now sold for $1,000,000, a $600,000 profit.
The full $600,000 profit is applied to the new tax rate of 3.8% ($22,800 new tax) plus the usual income tax rate.
-or-
A person with an income of $200,000+ purchased a primary home for $400,000. 
The home is now sold for $1,000,000, for a $600,000 profit.
The first $250,000 profit is tax-free.
The additional $350,000 is subject to the new 3.8% tax, costing $13,300 (plus the applicable income tax).
-or-
A married couple with an income of $250,000+ purchased a primary home for $400,000.
The home is now sold for $1,000,000, a $600,000 profit.
The first $500,000 profit is tax-free.
The additional $100,000 is subject to the new 3.8% tax, costing $3,800 (plus the applicable income tax).

A married couple who makes less than $500k profit on their primary home will pay no extra tax, and a single person who makes less than $250k profit on their primary home will pay no extra tax.

30-year mortgage rates remain at 4.25% for well-qualified consumers willing to pay 1 point origination. 15-year fixed mortgage rates are at 3.625%.

FHA mortgage rates mirror those of conforming mortgages for the most part. Today's FHA 30-year fixed-rate is solid at 4.25% with low risk of a sudden jump. A 30-year fixed FHA loan with an interest rate of 4.25% at 1 point origination will have a higher APR then that of an identical conforming mortgage because of MI and other FHA fees charged exclusively on FHA loans.

30-year fixed jumbo mortgage rates are all the way down to 5.125%, after being in the high 5's for most of the first half of 2010.

Wells Fargo is advertising a 30-year fixed-rate of 4.5% with an APR of 4.686 on their website, down from last week.

All rates mentioned in this article are verified by FreeRateUpdate.com who researches over 2 dozen wholesale lenders' rate sheets for brokers on a daily basis.

Published: July 21, 2010