From my Cincinnati peeps….. Has anyone thought of something similar here: Cincinnati suing banks over empty eyesores
Read the story carefully. Lots of financial institutions want it both ways. They essentially want to foreclose on you, but don’t want to file the paperwork to actually make the transaction and then incur the liabilities of actual ownership. Can’t have your cake and eat it as well. I bet we could come up with a list of properties comparable to what is being litigated over in Cincinnati in half a heartbeat. The legal netherworld lots of institutions are operating in when it comes to foreclosure is about as close to market failure as we come. Where’s Coase when you need him?
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One could go back over the whole month and really find a trove of parsable stuff still worth poking at, but best to stick to the present. Recent news is the spate of Downtown buildings that are up for sale or disposal by various means. As always, the real stories go deeper than the headlines.
Maybe there is a silver lining lurking out there in all of this? Some of those large Downtown transactions will likely not be able to escape the exorbitant transfer taxes levied by both the City and School District of Pittsburgh. Nominally the city gets 2% of the transaction value, while the school district gets 1% (and the state its own 1%). In reality, the tax is rarely paid on large corporate owners because the buildings in question are typically ‘owned’ by their own holding company which stays the same. The ownership of the shell company changes hands, and that transaction is not taxable in itself. I wonder if a creative lawyer might be able to challenge the veil so to speak for some of the impending transactions downtown and find a way for the city to collect on more of those potential transfer taxes. Must be some lawyer willing to work on commission on this?
Imagine though. If, as is reported in the news, the Steel Building is being sold for $250 million, in a highly leveraged deal mind you, there would theoretically be a $7.5 million payment to the two public entities. $5 mil to city and $2.5 to school district. Not going to happen of course (or could it?), but lots of the buildings formally going through sheriff sales will not find it as easy to escape the tax. The steel building has been a boon for city finances in the past. In 1987 its nominal transaction value was a cool $billion even. The city didn’t get its $50 million in transfer tax, but it did wind up with $4.4 million from the 1984 sale of the building. The city had to sue to get an additional 444K which pushed that haul up to nearly $5 million. Adjusting for inflation that would be worth almost $11 million today which would not be underappreciated given the fiscal climate on the 5th floor.
Yet that is just one of the many buildings up for sale Downtown. Take for example the Old Alcoa Building, which literally is in foreclosure and will literally change ownership at some point after the sheriff’s sale. That transfer tax will likely be paid, but of course it is not worth what the Steel Building is worth. The price listed on the sheriff’s sale notice is $10mil, nearly identical to what the building was said to cost before it even was finished… skip the 60 years of inflation adjustment and it is not such a bad deal. I found amazing this version of the story in the Trib which suggested the building is worth around what it’s scrap metal content is worth. That gives a whole new meaning to demontage and I am not sure Construction Junction could handle so much new inventory.
It’s a bigger story than the building value of course. Now go and read Neil Peirce’s snippet history of the Alcoa Building’s transfer from Alcoa to the Southwestern Pennsylvania Commission. Technically it wound up being owned (reluctantly it seems)by the Southwestern Pennsylvania Corporation which is now being dragged into bankruptcy itself as a result. That part of the story is the real story here. A bad real estate deal is par for the course over the last few years. This deal, however, is dragging into bankruptcy what was meant to be the center of regional planning for the entire region. The Southwestern Pennsylvania Corporation is the alter ego of the Southwestern Pennsylvania Commission and in some sense the successor to the Southwestern Pennsylvania Regional Development Corporation (SPRDC). Over the decades many keep trying to drag SPC, the region’s Metropolitan Planning Organization(MPO), into being something that it is not. This one episode should be a big lesson why that may not be such a good idea and one might want them to stick to their knitting. It’s not like transportation planning for the region is not hard enough in itself. How they got dragged into this whole real estate imbroglio is an important story at the core of our perpetual topic of regionalism.
In other words, this isn’t about the building.
But since we are talking about the building, who remembers the original XPlorion built into the first floor. Not the current version, but the original Google-Earth’ish-Before-Keyhole virtual reality Autometric powered one?
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In October the number of U.S. properties for which a foreclosure filing was received declined for the third month sequentially according to a RealtyTrac report released on Wednesday. The report is a further indication that foreclosures are beginning to subside and that the housing sector is stabilizing.
According to the report, total foreclosure filings in October dropped 3.3% from September.
Several foreclosure-laden states are seeing glimmers of hope in the October data. Nevada — one of the hardest hit states in terms of foreclosures in the past year — saw filings actually fall 4% from a year ago, the first ever year-over-year decline in the state since RealtyTrac began recording their foreclosure statistics in 2006. Florida also saw a 4% drop — also the first year-over-year decline in that state since July 2006.
Wednesday’s positive foreclosure news is yet one more result of the improving housing sector.
Can anyone think of a more value destroying transaction than foreclosing a home in a dead real estate market. There are more than 700 houses in Detroit listed for less than $3000. And there not selling. In this climate banks can’t possibly expect to recover much of anything from a foreclosed. Considering legal costs, taxes and maintenance the banks would surely be better off just letting the borrower stay in the house. And of course all of these foreclosed homes are killing property values, which leads to more foreclosures. And I haven’t even talked about the impact on evicted individuals.
Governments should offer reduced taxes on foreclosed properties if the former owner is allowed to remain in the house. This is a win win win solution. The borrower gets extra time in the home to figure out there next move. The city can stabilize property values by keeping a glut of foreclosed homes off the market. But the big winner is the bank who can hold on to the house at little cost until the market improves.