Real Estate

What on Earth Does Attornment Mean?Suppose ABC Rent-a-Car wants to build a commercial building on a specific, high-traffic-count lot in the City.  ABC Rent-a-Car offers to buy the land from the property owner, but the commercial property owner wants to leave this valuable commercial lot to his grandchildren and great-grandchildren.  He refuses to sell. The commercial property owner, however, is willing to lease the land to ABC Rent-a-Car on a long term basis.  ABC Rent-a-Car tries to negotiate a lease of the land for 99 years, the longest term allowed by law.  Had the commercial property owner unwisely leased the land to the car rental company for 100 years, the courts would have ruled that this lease was in fact an installment sale!  Title to the property would pass to the car rental company.  The maximum term of a land lease is 99 years. The old man, however, refuses to lease the bare commercial land for longer than 75 years, which the car rental company decides is sufficient.  The parties execute a land lease for 75 years at an amount that pays the old man a return of about 8% annually on the value of the land, with a cost of living escalator every five years.  This would be a very typical deal. The rental car company, however, insists on a land lease clause requiring any future lender to sign a Subordination, Non-Disturbance and Attornment Agreement .  After all, it’s only fair.  The rental car company is going to spend $800,000 constructing a building on the property at the rental car company’s own expense.  What a deal!  The property owner gets $40,000 a year triple-net rent on his land lease AND when the lease expires, both the land and the building revert back to his heirs.  (I recently ran across a wealthy family trust that has the land lease on an entire city block on Michigan Avenue – the hottest shopping strip – in Chicago.  The land lessees built skyscrapers all along that block, and these skyscapers are poised to revert back to the grandchildren of the trust settlor after 99 years.  Holy Smackeral!  We’re talking about a billion dollars worth of buildings!) Okay, let’s scroll forward about ten years.  Suddenly the old man is in need of some dough.  Maybe he just got a young, new wife.  He takes his land lease to the bank and pledges it to the bank for a $500,000 loan.  When the bank pulls a title commitment (preliminary report), they find out that ABC Rent-a-Car has recorded their land lease against the title.  The bank contacts the attorney for the rental car company and says, "Hey, we want to record our mortgage against the property, and we have to be in first position.  We please need for you to subordinate your land lease to our mortgage." Counsel for the car rental company then responds, "Okay, we’ll agree to subordinate, as long as you sign our Subordination, Non-Disturbance and Attornment Agreement."  The attorney exchange documents and cut a deal.  The new first mortgage is recorded, and the car rental company subordinates it’s land lease. The old man’s new wife ends up being a spendthrift and drives him into bankruptcy.  The bank forecloses on the property, which is now improved with a gleaming, modern automotive center.  The REO property manager for the bank contacts ABC Rent-a-Car and tells them, "Hey, our foreclosure just cut off your lease.  You were paying only $40,000 per year for this beautiful facility, but the fair market rent for the property is now at least $100,000 per year.  You’ll have to start paying us $100,000 per year if you want to continue to rent the property." "Not so fast, Bucko," replies the attorney for the car rental company.  Please check the Subordination, Non-Disturbance and Attornment Agreement that your bank executed.  Under the terms of that agreement, your bank promised not to disturb our existing lease if you foreclosed.  Now that you have completed the foreclosure, we certainly agree to attorn .  Attornment is a word from feudal times that means acknowledging a new lord.  In this case, the rental car company acknowledges that all future rent is owned to the new landlord, in this case the bank. Need a commercial loan?  You can apply to 750 different commercial lenders in just four minutes using C-Loans.com .  And C-Loans is free!

Make a PDF of Your Commercial Loan Package and Email It to Scores of Commercial LendersIf you are a commercial mortgage broker, you just have to use the new PDF-creator software on C-Loans to make your commercial loan packages.  It’s free! Just input your commercial loan into C-Loans.com as usual.  Go ahead and submit your commercial loan to six commercial lenders. After you have submitted your commercial loan to six commercial lenders, an option will appear that allows you to create a PDF with just one click.  After your commercial loan package has been converted to a PDF, simply save it to your desktop.  Once the commercial loan PDF is on your desktop, you can then create an email addressed to 40 or so commercial lenders and attach the PDF.  You can even attach color photo’s to your commercial loan package, making it look very, very professional.  And remember, both C-Loans.com and this software are free.

Pretty Scary Report from 60 MinutesThe television show, 60 Minutes, recently aired a terrifying report that suggests that the housing meltdown is less than 50% completed.  The problem is that 2.5 trillion in Alt-A and Option ARM’s are coming up for rate readjustments in late 2009 and 2010. Here’s a link to the report: http://www.youtube.com/watch?v=iUuROWEMjm0&eurl=http2F2Fprivate2Fmeltdown.html&feature=player_embedded

Moving to a new house is a thrill, and will probably offer lots of benefits to your children if you have any: separate bedrooms, a bigger play area, maybe even the possibility of their first cat or dog. Yet despite all that, your children  may not share your excitement at moving. As child and family therapist Debbie Essex told us when we were writing our book Nolo’s Essential Guide to Buying Your First Home , “One of the reasons moving is tough on children is that they’ve usually had very little input into the process — they just feel like their lives are being disrupted.” One way of helping kids deal with those feelings is to read them (or gently suggest they read) books about other children who’ve gone through the same thing. In fact, I’m told by a Berkeley librarian that such b ooks get a lot of requests. We mentioned a few good books in our Nolo guide, but more are out there, even a few recently published goodies. Here’s a list of some I’ve come across: Plum Fantastic , by Whoopi Goldberg and Deborah Underwood (Hyperion, 2008): Alexandra Petrakova Johnson moves from a small southern town to New York City, where her mother enrolls her in ballet lessons despite her wish to become a speed skater. She must learn to make new friends, conquer stage fright, and more.  Aldo Applesauce , by Johanna Hurwitz (Puffin, 1989): Aldo, a fourth-grader and vegetarian from New York, adjusts to his family’s move to a small town. Anastasia Again , by Lois Lowry (Yearling, 1982): Fans of Anastasia Krupnik will enjoy watching her deal with her parents’ move to the suburbs. Mr. Rogers’ Moving , by Fred Rogers (GP Putnam): I’m from the generation that watched Mr. Rogers so much that I can still sing “It’s a Beautiful Day in the Neighborhood”, so I have to trust this nonfiction, read-along guide for toddlers! Alexander, Who’s Not (Do You Hear Me? I Mean It!) Going to Move , by Judith Viorst (Atheneum, 1998): The title says it all, at least until Alexander has said goodbye to all his favorite things and come around to the idea of moving.

A Broken Condo is a Project That Didn’t Sell OutCommercial loan brokers should be on the look-out for broken condo projects.  There is a good chance to make a nice commercial loan brokerage commission. A broken condo project is a residential condominium project that didn’t sell out.  The unsold units are usually converted back to multifamily rental housing. I spoke with a major commercial loan officer at a large bank today.  This bank makes portfolio apartment loans.  I asked him if it is possible to finance broken condo’s. His reply surprised me.  He indicated that, of course, that if none of the condo units were sold, that a normal apartment loan is a no-brainer.  But he also indicated that if only a handful of the units were sold that a portfolio loan on the rental units would be possible.  However, he stressed that if too many of the units were sold as condo’s that such a deal would be impossible.  How many is too many?  Certainly if 25% of the condo units had been sold, the deal would be difficult to finance.  I was left with the clear impression that if only 10% to 15% of the condo’s had been sold that his bank would definitely consider financing the apartments. Need a commercial or multifamily loan?  You can apply to hundreds of commercial lenders in just four minutes using C-Loans.  And C-Loans.com is free!

It’s Getting More Difficult for Hard Money Lenders to Raise Lending CapitalIf you are commercial mortgage broker, you should not be trying to place large, hard money, commercial loans.  Large commercial loans just aren’t closing these days. One of the reasons why is because hard money commercial lenders are having a difficult time raising money.  Before the real estate crash of 2007, most hard money commercial loan brokers raised their money using mortgage funds.  When the markets crashed, all of their depositors try to pull their money out of these funds.  The situation has not improved since October of 2007. Therefore very few hard money commercial lenders still have mortgage funds with which to make large commercial loans. Instead, if a hard money commercial lender wants to fund a commercial loan today, he has to syndicate a fresh group of private mortgage investors.  This is a whole lot of work.  Therefore very few hard money commercial lenders are making commercial loans larger than $3 million today. Need a commercial loan?  You can apply to 750 different banks and hard money commercial lenders in just four minutes using C-Loans. See Also

First-time home buyers need all the help they can get. So I thought I’d compile a list of helpful tools for home buyers and share it through the blog. Many of the tools on this list are available through this website, and you can access them through the menus at the top and to the right. In particular, I’d like to focus on web-based tools that can make your home buying process much easier. As a first-time home buyer, you’ll find the Internet can be incredibly useful. So without further babbling on my part, here’s a list of my favorite online resources. Online Tools for Home Buyers 1. Mortgage Quotes — On the mortgage page of this blog, you’ll find a link that allows you to get quotes from lenders. You would fill out some basic information online, and then have offers sent to you by email. It’s by far the fastest way to get the ball rolling with home loans. So it deserves to be on this list of home buyer tools and websites. 2. Credit Scores — When you apply for a mortgage (item #1 above), the lender or broker will look at your credit score. They’ll look at other things too, but your credit is key to getting approved for a loan. So it’s wise to see where you stand, before you start applying for loans. You can request your credit score online for instant access. Then you’ll know if you need to improve it, or if you’re in good shape. Click the link above to get started. It’s another great tool for first-time home buyers and mortgage shoppers. 3. Home Insurance Quotes — Before your lender allows you to close on the home, you’ll need to have a homeowners insurance policy in place. You’ll probably have to bring a copy of the policy to the closing with you. Here again, the Internet can be a useful tool for home buyers who need insurance quotes. You can start by researching the topic online, in order to choose the best coverage. And when you’re ready, you can even get online quotes from insurance companies as well. 4 . Foreclosure Listings — If you’ve watched the news or read a newspaper in the last month, you’re probably aware of the foreclosure crisis that has swept our nation. Right now, there are more foreclosed homes on the market that ever before. And because these properties are often priced below their market values, they represent a great opportunity for first-time home buyers looking to save money. You can use the listings available through our website to find these homes in your area. 5. Consumer Credit Blog — We operate this Q&A blog on the Home Buying Institute, our sister site. If you have questions about credit scores as they apply to mortgage qualification, you’ll find it here. And if you don’t find the answer you seek, you can send your question to the editors to have a response posted online. It’s a great tool for home buyers who are learning about credit for the first time. I hope you find this list of tools helpful, and I encourage you to spend some time online researching them. There are dozens of other websites that can help you navigate the real estate process, in addition to the ones I’ve listed above. And from a research standpoint, I’d put this blog at the top of your reading list too.