President Obama is now in the oval office and the time to begin delivering on campaign promises begins now. That’s why MyNextAuction.com, an online auction provider, announces they are ready for the auction action.

The country is anxious to see what changes will arrive with the new president.  During the campaign, the foreclosure crisis was a primary focus and President Obama promised resolve and relief. So, what measures will be taken?

Whatever the immediate action, MyNextAuction.com, is ready to help. According to a recent Associated Press article, President Obama says that urgent action is needed to address the slumping economy and there’s still time to take dramatic action.

Most recently, President Obama’s top economic advisor reported that the remaining $700 billion in financial rescue funds will be used to support the credit markets for businesses and families and to help reduce home foreclosures. “Our goal is to work with all groups - seasoned real estate investors and first-time home buyers”, says Nicholas Varzos of MyNextAuction.com. We have a team of real estate experts who are ready to educate consumers about what to know before purchasing a foreclosure; show them how to steer clear of scams; explain liens; and more.

 

Tough Commercial Real Estate Market Lingers

Jan 5, 2009 - The Sacramento Business Journal

Grubb & Ellis Co. on Monday released its 2009 global forecast that predicts a troublesome year for commercial real estate in the U.S., including Greater Sacramento.

“Several forces contributed to the decrease in Sacramento’s investment market in 2008, primarily the unavailability of credit, and this will linger through the coming year,” said Robert Dean, executive vice president and managing director of Grubb & Ellis’ Sacramento office. “As in 2008, the majority of real estate investors will be low on leverage and long on cash in 2009.”

The company’s forecast predicts investment activity will increase nationally, however, by 15 percent as distressed properties are repossessed and sold, mostly those acquired in the past couple of years with floating rate loans. The brokerage expects loan delinquencies and foreclosures to increase but also expects equity to flow into the market from private, institutional and offshore investors. Investors holding an estimated $300 to $400 billion will be drawn by falling prices.

“The economy will struggle in 2009,” said Robert Bach, senior vice president and chief economist of Grubb & Ellis, speaking on a national scale. “We expect total payroll job losses in the range of 1 to 2 million in 2009 on top of the 2 million in 2008.”

A lack of tenants in the Sacramento office market has made landlords more aggressive and creative with incentives.

“In 2009, look for private tenants to remain tentative in response to economic uncertainty,” Dean said. “Leasing by the state of California continues to bolster the Sacramento office market and provide a safety net, essentially keeping the local vacancy rate below 19 percent.”

Speculative development in the Sacramento industrial market has ceased but demand has also waned. Preferred locations will perform best over the next year, the company predicts.

“The depth and duration of the local residential recession has virtually assured retail’s struggle,” Dean added.

 

No Recovery for Real Estate as Speculators Dominate Sales

By Kathleen M. Howley - Bloomberg

Jan. 8 (Bloomberg) -- As the U.S. housing recession enters its fourth year, there’s no sign of a recovery because speculators account for most of the rise in sales.

While the purchases are trimming the inventory of unsold properties, most of those bought by speculators will likely return to the market when prices rise again, hampering any recovery, said Nobel laureate economist Joseph Stiglitz and Yale University Professor Robert Shiller in interviews.

“We’re creating a shadow inventory of homes that will be right back on the market as soon as the economy and the housing market begin to improve,” said Stiglitz, a Columbia University professor of economics. “We could see a double-dip in the housing recession if that happens.”

Banks owned a record $11.5 billion of repossessed homes in the U.S. at the end of the third quarter, according to the Federal Deposit Insurance Corp. Foreclosures accounted for almost half of all U.S. purchases in November and homes in default helped increase sales 83 percent in California.

There were an average 3,100 foreclosures per day in the U.S. in November, according to RealtyTrac Inc., an Irvine, California real estate data company. That’s triple the 1,000 per day average in 1933, the worst year of the Great Depression, according to the Federal Reserve Bank of St. Louis. The repossessed properties offer opportunities for investors, who typically buy homes at auction and rent them out until prices increase and they can sell.

‘Flippers’ Rule

“You don’t have it in strong hands, you have flippers,” said Shiller, who helped create the S&P/Case Shiller real estate price indexes. “These speculators are preventing the market from crashing now, and when they get out it could fall again.”

U.S. real estate prices and sales may begin to stabilize in 2010, said Stiglitz. A worsening economy and growing speculation will delay the recovery further, he said.

“Assuming we don’t overshoot, we could be back at equilibrium in 12 to 18 months, but there are reasons to believe we might overshoot,” Stiglitz said.

In November there were 4.2 million homes on the market, falling from an all-time high of 4.6 million in July, the National Association of Realtors said in a Dec. 23 report. The U.S. median home price plunged 13 percent from a year ago, the fastest pace since the 1930s, the trade group said.

Resale Planned

Dario Moscoso of San Diego tracks notices of default and negotiates directly with banks if a home doesn’t sell at auction. He bought a three-bedroom foreclosed house in San Diego three weeks ago for $490,000, half of what it would have fetched a year ago. He’s renting it for $2,500 a month and plans to sell when prices rebound.

“We hope to put it back on the market in about a year,” Moscoso, 52, said in an interview. “We’ll gauge the market and see how it goes.”

The “speculative fervor” blamed by former Federal Reserve Chairman Alan Greenspan in July, 2005, for causing a price bubble is returning at the bottom of the property market in part because investors have the edge in buying foreclosures, said Dean Baker, co-director of the Center for Economic and Policy Research.

Baker said he considered buying a Washington home at a foreclosure auction last year until he learned the terms of the sale. Winning bidders had to complete the deal within 30 days, half the time of a standard home purchase, or lose their deposits. It was a risk he didn’t want to take.

No Competition

“Regular homebuyers are excluded from the foreclosure market because the rules favor professional investors and that lack of competition is driving down prices,” Baker said. “This is a place where the government could step in and stop housing’s downward spiral by encouraging a more user-friendly process.”

Banks that have received federal bailout funds should be forced to sell foreclosures in a way that gives homebuyers a fair chance, said Stiglitz. Lenders repossessed about 850,000 properties in 2008, according to RealtyTrac.

“In past housing recessions, we didn’t see as many mortgages under water, so it didn’t matter if the focus was on speed and not on maximizing value,” Stiglitz said. “Now, the same banks that created the problems by mismanaging their risk are mismanaging the disposal of their assets.”

Foreclosures typically are sold “as is” and the properties sometimes aren’t available for viewing before bidding, said one auctioneer in Massachusetts.

No Viewing

“If you’re a first-time buyer with a young family, do you really want to buy a home sight unseen and risk losing your down payment?” Stewart said, minutes before starting a foreclosure auction in Boston. “Investors know how to close a deal quickly and they don’t care what it looks like -- they’re either going to rent it or flip it.”

Speculators may soon see some competition as state and local governments start receiving the $3.9 billion allocated by Congress in July to buy and renovate foreclosed properties and sell to families who intend to live in them.

Communities have 18 months to spend the federal money or lose it, according to the Housing and Economic Recovery Act of 2008 that authorized the program.

Florida will get $541.4 million from the federal government for the so-called Neighborhood Stabilization Program, which allows the states to direct the funds to local housing groups. California will receive $529.6 million, Michigan is getting $263.6 million, Ohio is slated for $258.1 million and Nevada for $143.9 million.

‘Tipping Point’

“Neighborhoods devastated by foreclosures are at a tipping point,” said Mark McDermott, of Columbia, Maryland-based Enterprise Community Partners. “Getting these properties into the hands of community groups, instead of speculators, will go a long way toward stopping the downward spiral.”

The $11.5 billion of homes held by U.S. banks at the end of the third quarter, the highest on record, was more than double the $5.3 billion of the year-earlier period, according to the Federal Deposit Insurance Corp. in Washington.

Robert Arnold, a real estate investor who rents out a dozen homes near Orlando, Florida, says he’s ready to sell when demand rebounds.

Arnold bought an Orlando foreclosure in June for $60,000, about a third of its appraised value, and spent $20,000 repairing it. Four months ago he rented it for $950 a month. In November he bought a three-bedroom house for $25,000 in Longwood, Florida, and hopes to rent it for $900 a month, about six times his $150 mortgage payment.

“Most of the houses I buy are junkers, but with a little work they become cash cows,” Arnold said.

 

Prominent Real Estate Exec Found Dead In Apparent Suicide

EAST DUNDEE, Ill.  - The chairman and CEO of a Chicago real estate firm was found dead of an apparently self-inflicted gunshot wound Monday in a car in a northwest suburban wildlife preserve.   About 8:20 a.m. Monday, the Kane County Sheriff's Department was notified that there was a man in a red Jaguar in one of the parking lots at the Max McGraw Wildlife Preserve at 14N322 Rt. 25 in unincorporated East Dundee, according to a release from the sheriff's office. The man was identified as Steven L. Good, 52, of Highland Park, according to the release. Good was chairman and CEO of the Sheldon Good and Co. brokerage. He was found by a maintenance worker seated in the Jaguar with a gunshot wound to the head, the release said. While the Kane County Coroner's office has not officially identified the victim, Coroner Dr. Charles West said toxicological tests were being conducted on a 52-year-old male and the case "was being handled as a self-inflicted gunshot wound." No suicide note was found, police said, and it was not known how long Good was at the preserve before he was found. Good, according to his biography, served as a director of the Chicago, Illinois, and National Associations of Realtors, and has been a member of the Realtors Commercial Alliance Committee. He also served as 121st president of the 16,500-member Chicago Association of Realtors. Good, the company biography said, has been involved in the sale of more than $4 billion worth of real estate, including commercial, office, retail, industrial, residential, and vacant land sites. "Mr. Good is the driving force behind the expansion of the company, which has been ranked as the largest firm in the United States exclusively conducting real estate auctions, and was previously ranked as the sixth-largest commercial brokerage

 

 

The Year of the Buck: All-Cash Buying in a Down Market

Whether an economy is flourishing or failing, certain individuals will discover opportunities to capitalize on the current economic climate. In today’s tight lending market, it seems that all-cash buyers may be those individuals. As most residential and commercial investors wait on the sidelines for a more positive lending environment, those who can provide funding upfront are finding the market to be more than agreeable.

The Commercial Mortgage-Backed Securities (CMBS) market, which has historically produced a number of lenders eager to compete for loans, has been dry since late 2007. In fact, only $12.2 billion of commercial loans were securitized in the first nine months of 2008, which means this year could produce the lowest rate of securitized commercial loans in 10 years, according to Commercial Real Estate Direct. This has led institutional and commercial investors to secure financing through alternative lenders, namely savings and loans banks. However, many banks are requiring significantly more equity upfront, sometimes requiring a down payment of 30 percent for the loan to even be considered. Others are requiring developers to pre-lease a higher percentage of housing, office and retail units—usually around 70 percent—in order to finance a new project. Even if all these requirements are met, however, most lenders are not likely to loan more than 65 percent of a property’s value. Add higher interest rates and shorter amortization periods and you have the perfect formula for a hostile lending environment.

This is the first buyer's market in the U.S. since 2003

The residential market is even worse than the commercial market. Anyone with less than impeccable credit will find it difficult—if not impossible—to obtain any loan, let alone a loan with favorable terms.

Capitalizing with Cash

Though most investors must wait for the lending environment to turn around, those with cash on-hand can capitalize on the first buyer’s market that America has seen since 2003—one in which all-cash buyers are all but guaranteed to be the winning bid on properties, from foreclosed single-family homes to underperforming shopping centers and any property in between that features an owner desperate to sell.

Sellers know how just how poorly the lending environment is, and if lenders can’t trust a buyer enough to provide a pre-approved loan, then sellers have no incentive to risk a protracted closing process, only to possibly see the deal fall through before it is completed. Working with an all-cash buyer, the seller is assured that sufficient funds will be available.

There are other incentives that favor all-cash buyers. A typical closing for a buyer who requires financing is 30 to 45 days for a residential property. If an all-cash buyer is ready to sign on the dotted line and write a check for the full amount, the seller need not worry about appraisal or loan funding contingencies, which can be tedious and often cause a promising sale to fizzle. This is especially true of loan funding contingencies, as pre-qualified buyers may still be denied their loans if their financial situation or employment status changes or was incorrectly reported. Appraisal contingencies are also risky in such a volatile market. A property may not appraise for the actual purchase price, leading a lender to ask for more money down from the buyer or a discounted rate that reflects the appraisal price from the seller. Eliminating these contingencies expedites a property’s closing, which can happen in as little as three days with an all-cash buyer.

Purchasing a property with cash assures the seller that the buyer is serious. When it comes to bank-owned properties, this can be essential. The very nature of auctions assures that some people will bid with little to no intention of actually purchasing. Many banks have been burned in the past by investors who bid on numerous properties, but only intend to follow through on the ones that produces that best deals for them, as they do not have the money to purchase all of the properties. Because of this, many banks will reject a bid if they feel the buyer is untrustworthy. Being an all-cash buyer is one sign that puts a bank’s mind to rest because it knows the buyer has the means to purchase the property. For this reason alone, many bank-owned listings will specify “cash buyers only.”

All-cash purchases are much easier for sellers. Though one may argue that having the cash on hand is not the same as actually handing that cash over, it is a step in the right direction that makes a seller confident the deal will close. The importance of this good-faith mentality cannot be overemphasized. A serious seller only enters into a negotiation with a buyer because he or she believes that it will result in a closing. Until escrow has closed and the check has cleared, however, that deal has a million different ways of falling apart. This can result in lawsuits, hefty fees and, in some cases, a seller that becomes so disenfranchised with the sales process and so distrustful of buyers that the property is pulled off the market.

In order to avoid the headaches, stalled plans and a losses from property devaluation, many sellers will readily accept a lower bid from an all-cash buyer over a generous bid that would require financing.

Accepting Limitations

All-cash buyers are clearly primed to take advantage of the down market, which should last throughout most of 2009, if not 2010. Not only can they purchase assets at significantly lower prices because of the real estate bust, but they can do so with little to no competition from investors who must secure financing, which eliminates a lot of the marketplace. Even with these advantages in place, however, all-cash buyers do face some limitations.

For one, many who traditionally invested in stocks and bonds are pulling their money out in favor of a more stable, long-term investment vehicle like real estate. So even though the standard competition for assets may have exited the market, another group is looking to take its place, as many paper-based investors have seen what large sums of cash can get them in this marketplace.

Another limitation is the mentality of som sellers. Despite the lack of demand and fewer buyers, many sellers aren’t willing to accept that realistic asking prices today are significantly lower than the inflated prices of years past. Instead of accepting the lower prices that both the market and, traditionally, all-cash buyers demand, sellers who aren’t in a bind are simply pulling their properties off the market or standing firm in their asking prices, even if it means that the properties won’t sell for two or three years. In turn, all-cash buyers who have certain buying criteria, which usually include a prime location and a reasonable price, may not be able to find what they are looking for, despite a lack of competition within the market.

In such tough economical times, it is often said that cash is king because it is the one commodity that everyone wants and no one can get. This statement is still accurate by today’s standards. However, as with every deal that seems too good to be true there are still limitations that all-cash buyers face. Before plunking down a significant amount of cash in an outright sale, all-cash buyers should be sure to conduct their own due diligence. This will allow all-cash buyers to evaluate their financial status within the current marketplace, how that status would be affected if they invested large sums of cash into real estate and whether they can afford, both psychologically and monetarily, to deal with any fallout that may occur from a change in their financial status or the marketplace.

 

Riding the housing bust

Investors are scooping up foreclosed properties, afraid of missing the real estate opportunity of a lifetime. Want to join them?

By David Whitford editor at large

Last Updated: December 23, 2008: 2:36 PM ET

Magazine) -- If you want to mark the moment when real estate morphed from every American's dream investment into every American's nightmare, try the third quarter of 2007. That's when the foreclosure rate, which had been slowly creeping upward for three decades and was flat all spring, suddenly leaped 32%, from .59% to .78% of all mortgages.

In late 2006, Friedman got a call from some former clients at Bear Stearns who were tracking early signs of acute distress in the housing market. A new wave of foreclosures was about to crash. (This was at least six months before Bear's own subprime blowup.) "C'mon guys," was the word the auctioneers got from the bankers at Bear. "Time to go!"

Welcome to the other side of the housing bust. As home prices continue to skid and foreclosure rates soar (up a further 38% since the third quarter of 2007), something else is happening: Across the country, shrewd investors alert to outrageous bargains are beginning to stir. In California and Florida, thousands of small investors are crowding auction venues; in places like Phoenix and Las Vegas they're grabbing seats on foreclosure bus tours featuring free champagne and onboard massages.

The opportunists range from first-time homebuyers to the most sophisticated of investors; billionaire John Grayken of Lone Star Funds, who made a fortune during the S&L crisis, snapped up $6.2 billion in distressed mortgage-backed securities from Merrill Lynch in July.

Make no mistake, it's likely that we have not bottomed out yet. According to the latest figures from the National Association of Realtors (NAR), the median existing-home price was $183,300 in October, down 11.3% from a year ago. That's the sharpest yearly price drop since NAR began reporting such figures in 1968. For the third quarter, the closely watched S&P/Case-Shiller national home-price index posted a 16.6% decline in home prices from a year earlier, worse than the 15.1% drop posted in the second quarter. Across the board, experts predict further declines in 2009.

But more than Hank Paulson, Sheila Bair, or Ben Bernanke, it's this first wave of bargain hunters who will tell us when a housing recovery will happen. They're the ones diligently buying down excess supply, restoring order and balance to a dysfunctional market. So let's visit the front lines and see what they're up to.

Here we go: to a raucous house auction in L.A.; a meeting of a real estate investors' club in Broward County, Fla.; and along for the ride on a limousine tour of foreclosed properties in and around Phoenix. No doubt some of the people we'll meet will wind up losing their shirts. But just as surely, among them will be those who will profit - spectacularly, and before anyone else does - from the recovery that one day must come.

SOUTHERN CALIFORNIA AUCTION FEVER

Ever been to a foreclosure auction? No, probably not. Okay, you'll need a driver's license or another government ID, a $5,000 cashier's check, and a personal checkbook to cover the balance of the 5% deposit on your new home (unless the five grand does it; plenty of houses sell at auction for less than $100,000). And if I were you, I'd bring earplugs.

On a Sunday afternoon here at the dowdy, vaguely Moorish expo center adjacent to the historic Shrine Auditorium in Los Angeles, the public-address system is cranked way, way up. A trained auctioneer is sprinting down the list at a 30-sales-per-hour clip. Two big floor fans are blowing at his backside, but still he sweats.

In front of him are row upon row of folding chairs filled with bidders, 885 of them officially registered, their ranks swelled fourfold by spouses, co-workers, babies in strollers, and assorted posse members. All ages, all races, of all apparent means; a motley collection of "end users," as they're known in the trade, as opposed to wholesalers, landlords, and other pure investors. They balance in their laps bid cards, auction catalogs, and platters of nachos from the concession stand.

"Auctions are a pretty simple game' an auctioneer explains to me during a walk around the block to escape the noise. "The more people that you get to see your ads, the more people that will go to your open houses. The more people that go to the open houses, the more people that will show up at your auction. The more people that show up at your auction, the more competitive the bidding, and the more we sell."

According to DataQuick, California was averaging 2,000 new foreclosures every business day until a recent procedural change took effect. Auctions have an important role to play in restoring sanity to the market - by "blowing through the inventory" and putting families back in houses. "There is nothing good about having them empty, and everyone knows it," auctioneers say. "The banks know it, the government knows it, we know it. Getting this stuff moved through the system is all good."

Current renters Ray and Jaclyn Attefat (he's a jewelry salesman, she teaches ballet) have their eyes on a three-bedroom, two-bath ranch on a sub-quarter-acre lot in Glendale, "previously valued" at $930,000. Starting bid: $290,000. Like so many who were priced out of the market in the past few years, the Attefats, who have two young children, are hopeful that their time has come. Alas, not today. Their limit is $400,000. When the gavel drops on this one, it goes for $560,000 (plus a 5% buyers fee). That's okay, they seem to be telling each other with their eyes. And they pack their strollers and push toward the exit.

Standing nearby is Hector Alvarado, a broker, here to observe the bidding on several properties he's been showing but so far hasn't been able to move. If they sell today, the auctioneer will cut him a piece of the commission from the bank; if they don't, he'll keep trying. Seven out of ten sales that Alvarado brokers these days are bank-owned properties (statewide in California, the latest official figure is 51%). Recently the New York Times reported that old people are having to delay moving into retirement communities because, like everybody else, they can't sell their homes; all that's selling are foreclosures. "This is what's going to help get me through this nightmare," says Alvarado. "The new sellers are the banks. They're my best friends."

Behind the big blue curtain that separates the auction floor from the dimly lit staging area, I find the auctioneer sitting alone with a sandwich while a colleague spells him at the gavel. "So what about you?" I ask. "Are you buying?" He looks at me like I'm crazy. "I am not a residential real estate investor," he says; then he says it again. "I am not. Under any circumstances. I am not at all tempted."

SOUTH FLORIDA VULTURES STIRRING

The International Game Fish Association's Hall of Fame, hard by I-95 in Dania, Fla., claims to house the world's largest collection of angling artifacts. On the first Wednesday of every month, around dinnertime ("Finger food will be served as usual to the first 200 attendees - so get there early!"), it starts filling up with a different kind of artifact: South Florida real estate investors.

Dade County, Broward County, Palm Beach County - not many places in America got hammered harder than those places did. The average price for an existing single-family home in Fort Lauderdale, for instance, was $354,000 a year ago; today it's $252,500. Condos? You don't want to know. But the same thing is happening here as in other distressed markets: People are buying, be they brave or foolish, even as prices continue to drop.

On a recent night the mood in the packed room is hopeful. Everybody's looking to get back into the game, but recognizing that the rules have changed. Flipping is no longer an option, says attendee David Dweck. "Those are the people who are in trouble, because their only exit strategy was appreciation," he says. These days it's all about cash flow: How soon can you turn it over? How fast can you make it habitable? Can you make enough rent to cover the carrying costs?

Bill Leon, president of the Broward Real Estate Investors Association, is setting up the sound system for tonight's featured speaker, a widely feared local tenant's attorney who has promised to teach novice landlords how to write a bulletproof lease. Leon is a wholesaler, meaning he looks for steep bargains he can resell in a hurry to landlords and rehab specialists. "I buy 'em one at a time, and I sell 'em one at a time," he says. He has a phone number, 1-800-PAYCASH, that he advertises on TV. "Let's say I can buy that $100,000 house for 60. I sell it for 70, let an investor make 30. I always have to leave enough on the table for the next guy."

Leon's been doing this for 20 years, through up markets and down. Never before has he witnessed such desperation. "We're seeing buys that are unprecedented," he says, "people that are afraid not to sell because they don't know where the bottom of the market is." Leon doesn't know where that bottom is, either ("and I live in it," he points out). But he's seeing movement. Six months ago he'd look at 20 to 30 deals to get a good one; now, he says, he looks at ten. "I'll tell you, someone wants to be an investor in this market, you'll not see this again for many, many, many years."

The next day I go riding with Dweck, whose business card identifies him as a RE/MAX broker, a wholesale buyer and a hard-money lender - that's a guy who'll give you cash to buy a home when a bank won't, fast, at 15% interest plus points. We take a turn around Parkland, Fla., a bedroom community of 22,000 in a remote stretch of northern Broward County adjacent to the Everglades.

We're hunting for foreclosures, and they're easy to spot - the empty driveway, the uncut grass ("There are snakes," Dweck says), the swampy, fluorescent-green water in the swimming pool. We turn into the Parkland Golf and Country Club, 790 super-exclusive gated acres (Olympic swimmer Dara Torres lives here) enclosing what Dweck describes as "a significant amount of pain." He shows me a thick sheaf of printouts: 44 current listings, some asking for as much as $2 million, nearly all of them "contingent on third-party approval," meaning they're short sales (a negotiated form of preforeclosure) or are already in foreclosure.

Dweck has a friend who bought here on spec, putting down $100,000 on a $1.6 million home just before the bottom fell out. Dweck says he told his friend to renegotiate the price down to $1 million or walk. "You sure don't want to close on that," he says. "That would be financial ruin, guaranteed."

So where does Dweck look for bargains today in South Florida? "Workforce housing," he says, in ethnic neighborhoods in older towns like Pompano Beach. He shows me tiny bungalows on small lots that once sold, incredibly, for $300,000 but can be had now for as little as ten cents on the dollar, then fixed up and sold at a profit or rented in a heartbeat. "People have been beaten down by fear, negativity, constant media bombardment," says Dweck. "There is a silver lining. The future looks bright."

PHOENIX, ARIZONA DESERT DEALS

"Dead-dog smell," says broker Sheresa Pompay, standing in the kitchen of 4514 West Mitchell Drive with her sunglasses on.

Whoever was living here obviously left in a hurry. There's a box of Cocoa Puffs in the cupboard, an open bottle of shampoo in the shower, a bunch of what used to be grapes on the kitchen counter - now they're raisins - and an unopened letter by the light switch at the back door. It's from the local elementary school, addressed "To the parents of ..." And that smell. Not an actual dead dog, I don't think. Just a very strong odor of decay. According to Pompay, that's a good thing. "The more it smells," she says cheerfully, "the better deal you're going to get, the more money you're going to make."

Pompay's partner, Derek Turner - one of half-a-dozen lenders, brokers, investors, and contractors along for the tour today in Pompay's rented limousine - wants to buy this place. The bank lists it for $92,900. He thinks he can get it for, "like, 30, 35 thousand," or slightly less than he paid not long ago for a nearly identical bungalow next door.

"This is basically what our template is," Turner says, leading me through the one he bought. "We come in, we just paint, put in a new baseboard, put in raised-panel doors instead of those flat-panel doors. These old windows, they're single-pane, so we just replace all the broken glass, polish up the steel, paint 'em up, make it clean. And then the floor and new cabinets and stuff." He'll accomplish all that for about $12,000 - "That's with landscaping and everything" - and then he'll put the property back on the market and try to sell it for $80,000. Already he has two potential buyers lined up.

After the tour disbands and the limo goes away, Pompay and Turner get in my rental car and we keep driving, north to DC Ranch, a fancy new subdivision on the outer limits of Scottsdale. Stucco mansionettes with orange tile roofs and heavy front doors, tight lots, curvy streets, a park in the middle with a playground set.

The house they want me to see sold for $765,000 in 2007. The bank seized it in August, but not before the previous owner, ruined and angry, exacted his revenge - a not uncommon phenomenon these days. "This house has been stripped," the offer sheet warns. I don't know what that means ... until I step inside. He took the dishwasher, the stove, the refrigerator, the carpets, the kitchen cabinets, and the tile backsplash. Also the light fixtures, the switch covers, and every last interior door. He even ripped the whirlpool assembly out from underneath the hot tub in the master-bedroom suite. The bank wants $369,900: "Sold as is, seller at this price will not make any repairs."

Discouraged? Good, says Pompay. "I love the people who read about all the gloom and doom, because they stay on the sidelines and go, 'It hasn't hit bottom.' Whatever. By the time everyone jumps back in, we'll be out and doing something else." She sighs dreamily. "I just want to buy," she says. "Everything out there. I just want to go out and buy it all."

 

A Cliffhanger of a Listing

By JOSH BARBANEL
NYTimes: December 26, 2008

COULD the ghost of the luxury real estate market yet to come, as Dickens might have put it, already be here, gravely hovering above the 20-foot-high glass walls of a gutted penthouse atop the Trump International Hotel and Tower in Columbus Circle?

Tina Fineberg for The New York Times

1 Central Park West

With many of the largest hedge fund fortunes sagging, and many a millionaire bereft after the Bernard Madoff scandal, the idea that the hooded figure of foreclosure and bankruptcy could be pointing a finger at some of the most expensive real estate in the world, rather than subprime suburban ranch houses, suddenly seems plausible.

Last week came word that the Italian film producer Vittorio Cecchi Gori had put his 5,500-square-foot penthouse, with a 50-foot-wide glass-walled living room, on the market for $28.5 million. The appearance of a luxury listing in the week before Christmas is unusual. And a peek at state and federal court records showed that the property, at 1 Central Park West, was in the midst of what may end up as the biggest residential apartment foreclosure sale in Manhattan in recent memory.

The records show that at the end of October, Justice Joan A. Madden of State Supreme Court in Manhattan granted a foreclosure judgment against Mr. Cecchi Gori, in connection with $14 million in a secured mortgage on the apartment, as well as additional debts to the same lender, a subsidiary of the Fortress Investment Group, totaling as much as $30 million. But after the justice's ruling  and before a referee was appointed to oversee the sale the corporation set up by Mr. Cecchi Gori to buy the house filed for bankruptcy in federal court in Manhattan.

The bankruptcy court allowed Mr. Cecchi Gori to hire Howard Margolis, an agent at Prudential Douglas Elliman, to market the property and try to get a higher price than could be obtained at auction. (The proposed listing agreement, included in the court record, calls for a 5 percent commission for Mr. Margolis if the place is sold in conjunction with a co-broker, and 4 percent if sold without one.)

The problems of Mr. Cecchi Gori, who produced more than 200 Italian films, including il Postino and Life Is Beautiful, both of which won Oscars, began long before the economic downturn. But brokers said they could be a harbinger of trouble. Mr. Cecchi Gori is facing the potential loss of two other houses, according to New York court records: a penthouse in Fountain House, an apartment building in London facing Hyde Park with a value of about $14 million, and an 8,400-square-foot single-family house on Robert Lane in Beverly Hills worth about $8 million in 2006.

While the New York foreclosure case was pending this spring, Mr. Cecchi Gori was jailed by Italian authorities and held for four months in connection with an investigation into an Italian bankruptcy filing. In October after his release, he assailed the Italian criminal justice system and proclaimed his innocence. Mr. Cecchi Gori bought the Columbus Circle penthouse from Donald Trump for $10.4 million in 1998, a few months before the United States release of Life Is Beautiful, a Roberto Benigni film that won three Academy Awards, including best actor for Mr. Benigni and best foreign film.

Mr. Trump had paid $5.1 million for the five-bedroom apartment in 1997 and had announced plans to move in. But after a split with his second wife, Marla Maples, he offered it for rent at what was then the extraordinary sum of $100,000 a month. Six months later, Mr. Cecchi Gori bought it.

Building records show that in 2001, Mr. Cecchi Gori demolished the interior of the apartment, tearing out walls, the steam showers and the salmon-colored marble slabs installed in the hallways by Mr. Trump. Although he obtained a permit to rebuild a few months later, the work was never done, and the interior is still unfinished.

As his financial problems worsened, Mr. Cecchi Gori stopped paying his condominium charges, and according to the filing, he owes more than $62,000 to the condo board and $69,000 in back taxes.

Mr. Margolis said that within a matter of days, the apartment received at least two offers. There have been people waiting for this apartment,he said. As soon as I put it on the Web there were calls. It is really spectacular, it is a matter of who wants to go in and purchase it. But the asking price, $5,180 a square foot, is about 20 percent more than the most expensive high-floor apartment sold in that building when the market was strong. Mr. Margolis declined to disclose the offering prices so far.

 

Chinese tour groups go house-hunting in U.S.

The cash-rich visitors are looking for bargains in the plunging market. The trips are part of a broader trend of individuals and businesses in China seeking greater investment opportunities abroad.

By Don Lee and David Pierson
December 7, 2008

Reporting from Shanghai -- Caravans of cash-rich Chinese in Hummers and Lincoln Navigators have been weaving through American neighborhoods in recent months, looking for foreclosures and other bargain properties to buy.

With housing prices crashing in the U.S., home-buying trips to America are becoming one of the more popular tour group packages in China. New U.S. visa rules for Chinese tourists and a loosening of foreign investment policies by China have made it easier for people such as Zhao Hongjun of Beijing to go house hunting across the Pacific.

The 48-year-old owner of a media company went on a two-week road trip through the U.S. last fall, visiting scenic sites and checking out properties from Los Angeles to New York. He's been following the swoon in prices ever since, and next month he's considering joining another prospecting group that is heading for San Francisco, Los Angeles and Las Vegas, three of the hardest-hit housing markets in the U.S.

Zhao's budget: $1 million.

"L.A. is not bad; a lot of Chinese live there," he said, noting that he was interested in both apartments and houses.

The tours are a new twist on an old phenomenon.

Overseas Chinese have been buying Southern California properties for years. What's different now is that they are starting to do it in large groups and quite openly.

"Before, it was kind of private, a quiet thing among friends," said Jamie Lee, a Chinese American who runs the Los Angeles Convention and Visitors Bureau office in Beijing. "Now it's full-blown. . . . It's huge." Some of these groups "are talking about going every two weeks."

Chinese home-buying missions in the U.S. are part of a broader trend of individuals and businesses in China seeking greater investment opportunities abroad. This week government and business officials from China's southern Guangdong province will arrive in Los Angeles to create a regional chamber office.

Certainly, a wave of Chinese bottom fishers won't end the housing woes in Southern California, where by some measures the median price has sunk more than 40% since the spring and summer of 2007.

But it could help rev up sales in some places, including the UC Riverside area and the San Gabriel Valley, home to large Chinese American communities and mentioned by some potential buyers as places of interest.

Ling Chow, president of the San Gabriel-based Chinese American Real Estate Professionals Assn., says brokers and agents welcome the mainland tours -- anything to shake the doldrums of the market crash.

But Chow, who mostly serves mainland Chinese buyers, is more skeptical about any new wave of Chinese home buyers making a significant imprint. Unless they're willing to spend more than $400,000, they'll probably be disappointed in the available homes. Chinese are culturally inclined to buy new homes and prefer high-achieving school districts, demands that drive up prices.

Chow said Chinese buyers' affinity for paying in cash will benefit them during the credit crunch. Many of her mainland clients have paid with cash, often for mansions and condos in Arcadia, where they can begin the immigration process or leave their college-age children to live alone.

The Chinese do have a lot of cash to spend. The central government holds the biggest stockpile of foreign reserves in the world, nearly $2 trillion, most of it in dollars. And the Boston Consulting Group estimates that there were more than 391,000 millionaire households in mainland China last year, up from 310,000 reported the previous year.

Still, Beijing has been cautious about outward investment, given the uncertainties of the financial crisis and heavy losses that its sovereign wealth fund has sustained buying stakes in American financial institutions such as investment bank Morgan Stanley. In addition, China's economic growth has slowed sharply in recent months as the nation's exporters have been hurt by slumping U.S. demand, and China's own real estate market has been sluggish.

But home prices in the U.S. have fallen more sharply than in China, and many Chinese consider the American market highly alluring as a place to invest and live because of the United States' developed economy.

The purchasing tours in the U.S. grew out of similar trips by well-heeled Chinese back home.

Investors from Wenzhou and other entrepreneurial hot spots were known for chartering buses to visit such cities as Shanghai to shop for apartments. Now some of them are signing up with outfits like Soufun.com, the real estate website that is sponsoring the home-buying trip next month from Beijing to California and Nevada.

Liu Jian, chief operating officer at Soufun Holdings, said his group's tour would focus on homes priced between $200,000 and $300,000, just at or below the median for Southern California. More than 300 people have registered for the trip, which could last 10 days and cost each person about $2,200, excluding airfare.

 

It’s hammer time

By Nicola Venning - Financial Times

Published: November 29 2008 00:30

“My heart was racing and it was very exciting as the hammer came down,” says Lyn Brocklebank, a London nurse. As the gavel knocked for the third time on lot 30, she and her partner, Joshua Groenendijk, both in their early 30s, hugged each other in exhilaration and relief. They had just bought their first home – at auction. “It will need about £100,000 spent on it,” says Groenendijk who works as an IT systems manager, “but this was the only one in Herne Hill.”

Across the UK, the US and, increasingly, continental Europe, property auctions are buzzing like never before. This is partly due to the subprime mortgage meltdown, rising foreclosures and an increase in sales due to financial distress. But concerns about a prolonged recession and widespread redundancies have prompted even solvent developers and individual homeowners to try auctions as well, attempting to create a bit of urgency in an otherwise stagnant market. As a result, the offerings now available through real and online bidding rooms include a broad range of properties at bargain prices.

The Essential Information Group, which tracks property auction information in the UK, says more than £2.5bn of property was sold at auction from the third quarter of 2007 to the second quarter of this year, a 46 per cent rise on the same period four years ago. It is a similar story in the US, where the total gross sales of residential real estate sold at live auction increased by 46 per cent from 2003 to 2007, according to the National Auctioneers Association. Although there are no statistics yet for this year, in a recent survey by the NAA, 48 per cent of auctioneers reported more interest from clients wishing to sell personal property through them. And, even in Europe, where there is no tradition of selling homes at auction, the sector is taking off.

Whether distressed or not, vendors are turning to these types of sales because “you get speed and certainty and transparency” in an otherwise shaky economic environment, says David Moore of Feather, Smailes & Scales in Harrogate, northern England.

Procedure varies by country but most properties will generally have a reserve price, the average time to sell – or “knock down” – a lot is about three minutes and, in the UK and Europe, the contract is binding when the hammer falls. (In the US, it is when the seller accepts the bid.) Successful buyers, many of whom will be pre-registered, provide a deposit cheque – 10 per cent of the bid price in the UK – then sign a memorandum of sale. Times to closing range from 20 days in the UK to 30-60 in the US, since legal information has already been provided. In the UK the average cost to the seller is 2-2.5 per cent of the purchase price plus a marketing fee of £500 on average that is payable even if the property doesn’t sell.

For buyers, the advantages are obvious. “It’s definitely cheaper” and faster than buying through an estate agency, says Groenendijk, who with Brocklebank paid exactly the guide price, £360,000, for their three-storey, end-of-terrace Victorian house in a leafy area of south London. “Houses like this in neighbouring streets around here are on the market for about £600,000.”

Auctioneers Allsop recently sold a multistorey property on the edge of London’s upmarket Chelsea for £880,000. It was formerly bed-sits and will therefore cost a lot to refurbish but similar properties in the area might sell for more than £1m. Estate agency Savills, meanwhile, has a four-bedroom mid-terrace townhouse in Mitcham, Surrey, near Colliers Wood Tube station, in its December 8 auction catalogue with a guide price of £145,000, about £100,000 less than houses in the area were fetching a few months ago.

The discounts are even greater in foreclosure sales. In the UK, the typical repossessed house sells at auction for 10-30 per cent less than the market price. Allsop recently sold a three-bedroom Cotswold cottage near Chippenham on behalf of Halifax for £157,000, above the guide price of £135,000 but below the £180,000-£350,000 price range agents cite for similar properties in the area. EIG meanwhile has details on one new city-centre apartment in Leeds that was purchased for £237,999 in March 2006 but sold at auction in September for £90,500 – a 62 per cent drop. “Ye olde honeysuckle cottage with damp is selling cheap but the new-build development home repossession is selling very cheap,” says Moore.

Supply is also skyrocketing. At one of Allsop’s London events in October more than 500 of the 670 lots were repossessions. “It is the largest [number] we have ever had in a catalogue”, says Gary Murphy, a partner at the company. “Increasingly these properties are unsaleable through any other means because there is no finance available and the owner-occupier cannot get a mortgage.”

British Home Group, which runs auctions in central Florida, had 200 applications from vendors for its auction catalogue this November but only accepted 18 homes in the upmarket resorts of Reunion, Bella Collina and Hammock Beach. “We are looking for quality and a willingness to take a minimum bid,” says Bill Cowie, managing director.

“Realistic selling price expectation” often means a discount of up to 50 per cent and, in the current climate, occasionally as much as 80 per cent off the agency listed price, he adds. Sometimes in “absolute auctions”, which is the latest trend in the US, there isn’t even a reserve price. “Vendors are saying ‘I will sell at whatever the price’ and more people are doing this,” Cowie says.

Steve Good, chairman and chief executive of Sheldon Good, one of the top US auctioneers, has also noticed an increase in the number and range of properties coming to market via his company and competitors, including internet sites, as opposed to traditional realtors. “We see everything from starter homes to mansions that were originally priced at £30m and are now reduced by a third,” he says, particularly in hard-hit property markets such as southern California, greater San Francisco, Phoenix, Miami and Detroit. At first there were few takers but now the low prices are attracting bargain-hunters. “Trophy homes in desirable beach resorts and warm-weather communities in south-east Florida and throughout California are good buying opportunities,” he says.

Accelerated Marketing Partners, a company that auctions groups of homes on behalf of US developers that need to sell quickly, also says business is booming. “Demand has been growing exponentially” as people realise the quality of cut-rate property available, says company co-founder Jon Gollinger. “The market is moving down and prices are moving down after every sale.”

The company recently auctioned 33 luxury apartments in Long Beach, California, selling one 1,651 sq ft unit, originally with a guide price of $1.5m, for $995,000. In another development in West Palm Beach, Florida, two-bedroom condominiums normally on the market for $546,000 sold for $240,000. “You would not typically see these sort of developments at auction,” Gollinger says.

Sheila Harrison, a commercial property agent from the UK and frequent visitor to Florida, is one buyer taking advantage. When the banks foreclosed on a development of 28 condos in Naples, her favourite holiday spot and one of the wealthiest communities in the US, she decided to bid for one sight unseen. In March, when sterling was much stronger against the dollar, she paid $204,000 in cash for a new four-bedroom, 1,650 sq ft property. Similar apartments had recently sold for $392,000 and “all we had to do was furnish it”, she says. Even if the Florida market sees a prolonged downturn, she’s happy with the deal. “I will go there for about five years and then sell it for what I paid for it. What is wrong with that?”

Jorge Zanoletty, a 10-year veteran of the Spanish real estate industry, hopes to draw buyers with similar attitudes, especially Britons, Germans and Russians, to city and coastal markets in his country. He recently set up Tulipp, offering both live and online reverse residential auctions, in which homes start from the vendors’ asking price and then drop until a bid is received. “One of our aims is to regain foreign interest in purchasing in Spain and offering properties at auction is a powerful tool as this customer is more accustomed to this system,” he says. “We have sold 22 sq metre flats in the centre of Madrid and also 400 sq metre luxury apartments in Marbella.” A three-bedroom villa in popular Manilva, Malaga, which would have been listed at €565,000, recently sold at a reverse live auction for €396,000.

The good news for buyers is that these trends are set to continue. Although some agents talk of the deep discounts as a window of opportunity, others have a far grimmer view. “The second wave [of foreclosures] will be builders, who have no way to refinance,” says Good. “The size of this problem will be large over the next 12 to 24 months and it has not hit the market yet.”

Gollinger agrees. “2008-2009 will make the 1990s pale by comparison,” he says. “It has been fairly systemic.”

 

Mumbai Realty Market `Completely Quiet' After Attacks

By Sumit Sharma

Dec. 4 (Bloomberg) -- India's worst terrorist attack in 15 years has caused Mumbai's property market, already faltering in a slowing economy, to grind to a halt.

``The market's gone completely quiet,'' said Shiv Kumar Dembla, a property broker who owns Shiv Real Estate Consultants in Mumbai. ``The future doesn't look bright either. The last six months were quiet, but now it could get worse.''

The city's home sales dropped 21 percent in the seven months to Oct. 31, according to estimates from UBS AG. That was before terrorists held south Mumbai under siege for almost 60 hours, with attacks on luxury hotels, a railway station and a Jewish center leaving more than 195 people dead last week.

Terrorists targeted the foreigners who helped make Mumbai the world's second-most expensive city for offices last year, as companies including Macquarie Group Ltd. and Barclays Plc sought space in India's financial capital. Now, apartment buyers are walking away and developers may be forced to shelve projects as companies rethink the risks of doing business in India, brokers and analysts said.

Mumbai, which accounts for a third of India's taxes, is home to the nation's central bank and primary stock and commodity exchanges, as well as its largest companies and the local headquarters of overseas firms such as Citigroup Inc. and Barclays. The city is the world's sixth most-expensive in terms of apartment rentals, and ranks second in Asia behind Hong Kong, according to a survey released by ECA International in April.

Dearth of Inquiries

``Rentals in Mumbai have climbed up steeply over the past few years,'' Mridul Upreti, joint managing director for capital markets at commercial property broker Jones Lang LaSalle Inc.'s local unit, said in an interview in New Delhi on Dec. 2. ``In the short term, residential prices are going to correct.''

Registrations of new homes in Mumbai dropped 35 percent in October from a year earlier as a slump in demand gathered pace, according to UBS analyst Suhas Harinarayanan. November sales data could be worse, he wrote in a note to clients on Dec. 2, without commenting on the terrorist attacks.

``Several non-resident Indians who were planning to come later this month to purchase properties have postponed their trips'' following the attacks, said Ashwin Mehta, who runs real estate brokerage Astute Acres Pvt. in Mumbai. ``We've gotten hardly any inquiries since last week.'' Demand for housing in south Mumbai was already under pressure because of high borrowing costs and developers' reluctance to cut prices, Macquarie Research analyst Unmesh Sharma wrote in a note to clients Dec. 1.

Dud Auction

An October auction for land near Mumbai's emerging financial district of Bandra-Kurla Complex, home to Citigroup, ICICI Bank Ltd. and the National Stock Exchange, lured just one bidder. Mumbai officials also had to twice defer plans to lease two plots of land for offices in a north-central suburb because of slack demand.

Mumbai, along with New Delhi, will continue to be harder hit by the economic slowdown partly because of their dependence on the banking and financial services industry, Sandeep Mathew, an analyst at BNP Paribas, wrote in a note to clients today.

An index tracking 14 Indian real estate stocks has slumped 87 percent as a five-year rally in property prices ended and the global financial crisis choked off funding for developers. The nation's economy grew last quarter at the slowest pace since 2004, fueling expectations that property costs will decline further.

Home Prices

DLF Ltd., the nation's biggest real estate company, and Emaar MGF Land Pvt., the Indian unit of the Middle East's largest developer, have been cutting prices or offering cheaper homes to revive demand. Yet sales will rebound only if home prices in the nation decline by 25 percent to 30 percent, or borrowing costs drop, UBS's Harinarayanan estimated.

If the government's response to the terror attack fails to restore confidence among overseas investors, demand for office and retail space may drop further, Macquarie's Sharma said.

An added danger comes from private equity firms and overseas developers demanding higher risk premiums for investing in India, said Upreti of Jones Lang LaSalle.

``Investors will start seeking a high risk premium for investing in real estate in India,'' Upreti said. ``So instead of 20 percent to 23 percent returns, you will start seeking 25 percent to 26 percent returns because country risk-premium will go up.''

Nowhere is the fallout more keenly felt than in Colaba, the upscale neighborhood in south Mumbai where gunmen stormed into the Taj Mahal Palace & Tower hotel and a Jewish center, took hostages and fought running battles with Indian special forces.

``People who were earlier planning to buy in Colaba now want to cancel the plans,'' said Narender Bhagwanani, who runs Om Sai Estate Property Consultants. ``They are too scared to live around Colaba.''

 

October 29, 2008, 11:51 am

Many Homeowners Think They’re Immune to Price Declines

Almost half of U.S. homeowners think their homes are insulated from the broader national decline in prices, according to a survey by real-estate Web site Zillow.com

Homeowners don’t see price declines affecting their own houses. (Getty Images)

Despite a financial crisis, market volatility and continued indications of declining home prices, 17% of homeowners told Zillow they think their own home’s value stayed the same over the past year, while 32% said their home has appreciated in value. Zillow estimates that nearly three-quarters of homes have lost value in the past 12 months.

However, the numbers in the third-quarter indicate that more homeowners are seeing the effects the bursting of the housing bubble has on them. In Zillow’s second-quarter survey, 62% of respondents thought that their home value had increased or stayed the same over the past year.

The survey was conducted Oct. 7-9, while stock markets tumbled in one of the worst selloffs in history, making the results all the more surprising.

“The human irrationality in terms of pricing and valuing what is ours has always been a barrier to good decision making, and the housing market is no different,” Duke University Professor of Behavioral Economics Dan Ariely said is response to the survey results. Worries persist that unrealistic expectations by sellers can prolong the housing downturn, as prices take longer to find a bottom.

Most homeowners see stability on the horizon. Some 40% believe their home’s value will stay the same over the next six months, while 21% think their home will appreciate. But that stability ends at their door, as 57% said home values in their local market will decrease over the next six months.

“We’re seeing a fascinating distinction in consumer psychology — on the one hand, homeowners appear to understand the reality of today’s economy and are curbing their household spending, but on the other hand they still aren’t ready to admit that these woes might extend to their own homes,” said Stan Humphries, Zillow vice president of data and analytics. “There’s clearly still some denial.”

The reality gap cut across party lines, though a small disparity was noted. Some 50% of respondents who were McCain supporters said their home had decreased in value, while 56% of Obama backers said their homes had depreciated. –Phil Izzo

 

If you wait for the Robins, spring will be over.

By WARREN E. BUFFETT

 

Times Topics: Warren E. Buffett

THE financial world is a mess, both in the United States and abroad. Its problems, moreover, have been leaking into the general economy, and the leaks are now turning into a gusher. In the near term, unemployment will rise, business activity will falter and headlines will continue to be scary.

So ... I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds. (This description leaves aside my Berkshire Hathaway holdings, which are all committed to philanthropy.) If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities.

Why?

A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.

Let me be clear on one point: I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over.

A little history here: During the Depression, the Dow hit its low, 41, on July 8, 1932. Economic conditions, though, kept deteriorating until Franklin D. Roosevelt took office in March 1933. By that time, the market had already advanced 30 percent. Or think back to the early days of World War II, when things were going badly for the United States in Europe and the Pacific. The market hit bottom in April 1942, well before Allied fortunes turned. Again, in the early 1980s, the time to buy stocks was when inflation raged and the economy was in the tank. In short, bad news is an investor’s best friend. It lets you buy a slice of America’s future at a marked-down price.

Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.

You might think it would have been impossible for an investor to lose money during a century marked by such an extraordinary gain. But some investors did. The hapless ones bought stocks only when they felt comfort in doing so and then proceeded to sell when the headlines made them queasy.

Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.

Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling now to cash are betting they can efficiently time their move away from it later. In waiting for the comfort of good news, they are ignoring Wayne Gretzky’s advice: “I skate to where the puck is going to be, not to where it has been.”

I don’t like to opine on the stock market, and again I emphasize that I have no idea what the market will do in the short term. Nevertheless, I’ll follow the lead of a restaurant that opened in an empty bank building and then advertised: “Put your mouth where your money was.” Today my money and my mouth both say equities.

Warren E. Buffett is the chief executive of Berkshire Hathaway, a diversified holding company.

 

Local Group Seeks Real Estate Investment Options
Wall Street Credit Crisis Limits Funding Resources

POSTED: 11:34 pm EDT October 8, 2008
UPDATED: 11:37 pm EDT October 8, 2008

PORTLAND, Maine -- Local real estate investors hope to eventually make a lot of money once the stock market begins to bounce back. The investors are making sure they have enough money to buy all the homes available to them, News 8's Will Lewis reported. 

The current credit crisis has dried up many credit lines, prompting some investors to seek alternative financing options. The Southern Maine Real Estate Investors Association met Wednesday to look for ways to make more money.

"We have some experienced investors, they know the market. We have some new people that are trying to fit in," said Tim Callahan, the association's director. "Right now, it's a down market. It's a buyers market." Many in the group said there are all types of homes for sale in the area, but the financial situation on Wall Street has shut down some revenue streams.

"People can't get financing as easily as they could before. We're seeing a larger number of people that are interested in alternative financing," said Mark Bevan, owner of Alternative Real Estate, which rents out homes with the option to buy. "We get a lot of people now that are losing their house to foreclosure (who) need to start somewhere. They need a fresh start," Bevan said.

In the meeting, the investors learned about buying homes through tax auctions. Those taking notes realized the housing market rises and declines every 10 years. If they make the right move in the next few months, they may have huge profits down the line.

"There's a golden opportunity to buy properties right now and the people that are buying now are going to be the ones in the next few years that are going to be sitting pretty," Bevan said. Those in the investment group said it is a bad time to flip homes, which is a practice involving investors who buy property, fix it up and resell it right away.

If a person finds a way to buy a property, they could rent it out for a couple of years before selling it.

 

Fabled Investor - Buffett took Advantage of Wall Street Turmoil

Fabled investor Warren Buffett took advantage of the turmoil in the markets last week to make a shrewd $5 billion investment in the beleaguered but best-run major Wall Street securities firm, Goldman Sachs.

Mr. Buffett's Berkshire Hathaway, which owns companies in a variety of industries from insurance to candy making, is purchasing $5 billion of preferred stock with a juicy 10% dividend yield. Berkshire also is getting warrants to buy $5 billion of Goldman common stock at $115 a share, $10 below Goldman's share price when the deal was announced last Tuesday.

More Stock
Goldman issued another $5 billion in common stock on Wednesday. By week's end, Goldman rose to around $137 a share, making Mr. Buffett's deal even more attractive.

Although the deal was widely heralded as a vote of confidence in the market, it looks most like a real money-maker for Mr. Buffett. Berkshire will get $500 million in annual dividends on the preferred shares, which is tax-advantaged for a corporation.

Preferred stock, which pays a fixed dividend but rarely fluctuates much in value, acts more like a bond than a typical common stock. Holders of preferred shares also are paid off ahead of common-stock holders if a company is liquidated.

Plus a Premium
Unlike most preferreds, which are callable after five years, the Goldman preferred held by Berkshire can be redeemed at any time at a 10% premium. This gives Goldman flexibility to pay off the issue if it can obtain more attractive financing later in a calmer market. If the issue is paid off, Berkshire will net a $500 million profit.

Goldman probably could have gotten a better deal by selling $5 billion of convertible preferred stock in the open market or to a group of private-equity firms. But for Goldman, the allure of this deal is the imprimatur that comes from Mr. Buffett. With Mr. Buffett saying that a preferred investment in Goldman is safe, Goldman's lenders and those with whom it trades are apt to be reassured.

This undoubtedly will help Goldman finance its $1 trillion balance sheet, even though Mr. Buffett's purchase is expected to reduce Goldman's earnings.

Wall Street had been waiting for Mr. Buffett to make a major investment in a financial company. For months, there was speculation that he would act, but the investor bided his time and his patience appears to have been rewarded.

The five-year Goldman warrants are very valuable. Berkshire gets an opportunity to buy Goldman stock at half its 2007 peak and for a small premium to the firm's book value of around $100 per share.

 

How to Buy a Foreclosed Home

Posted By:Carlo Dellaverson
Topics:Housing | Personal Finance

Even in one of the biggest housing busts on record, there’s opportunity out there. Barbara Corcoran, founder of Manhattan’s largest real-estate company, explained on Monday’s special the best ways to buy real estate for those who are looking at this as a bottom and want a way in. And it starts with foreclosed sales.

The difference between buying a home on short sale and one that’s been foreclosed on, Corcoran said, is that foreclosures afford you the opportunity to deal directly with the bank. This is preferable because banks have no discernable interest in a particular property – they just want to unload their inventory at rock bottom price. With short sales, you have to deal with individual owners who may still be attached to their homes and thus less willing to negotiate. If you have the option, choose to buy foreclosures over short sales, Corcoran said.

There’s also the auction option. Many people don’t get good deals on homes in foreclosure auction because they don’t know how to play the game. According to Corcoran, there are a few ways you can prepare for auction. The first is to do your homework and go slow. Auctions appeal to people’s competitive emotions, so scope some out to get comfortable before you go all in. And do your homework by knowing exactly what you want to spend ahead of time, including going prepared with a photo of each home you’re interested in. You would be surprised how many people accidentally bid on the wrong homes, Corcoran said.

Finally, Corcoran suggested this little nugget: wear nice clothes and stand near the auctioneer. Why? Because people might think you work for the bank, and then all bets are off – literally.

 

Foreclosure auctions no place for amateurs

Carolyn Said, Chronicle Staff Writer

Sunday, September 7, 2008

Bluetooth devices clamped to their ears and computer printouts in their hands, a dozen real estate investors clustered on the Alameda County Courthouse steps. Most wore hats and sunglasses against the brutal noontime sun. They were there for the day's foreclosure auctions, called trustee sales, the moment when houses cease belonging to the homeowner who fell behind on a mortgage.

These auctions are not for amateurs - buyers must pay on the spot in cash (or cashier's check), clear title is not guaranteed, there are no inspections and no cooling-off periods. Successful bidders often must evict the property's occupants, who may be the previous homeowners or renters.

The minimum bid on many properties is equal to what's owed on the mortgage - which generally exceeds the property value. But as the foreclosure crisis has mushroomed, many banks have begun dropping the minimum bid at the last minute, creating opportunities for the small cadre of investors who pay close attention and have the deep pockets and steel nerves to compete on this arcane turf.

"At the auctions, (many) properties' (minimum bid amounts) now are being dropped substantially. That's the best-kept secret," said Robert Kramer, an Oakland investor who buys both for himself and on behalf of clients who pay him a commission of 15 to 20 percent of their net equity in a property.

Increasing discounts

Statistics confirm that lenders are slashing prices at the trustee auctions and that more properties are being bought by investors - even though the vast majority still revert to lenders.

In August, 1,360 properties sold at California trustee sales were bought by investors, up from 432 in January, according to Discovery Bay's ForeclosureRadar.com, which tracks California foreclosures. But that represents just 4 percent of the 34,000 properties that went on the block. The other 96 percent reverted to the lenders.

"Discounts (at trustee sales) are an order of magnitude higher now than they were a year ago," said Sean O'Toole, ForeclosureRadar's founder and CEO. "We've gone from an average discount of around 3 percent in January 2007 to 38 percent on average in California in August." Of course, because many mortgages covered a home's full value, and values now have swooned, these lowered bids may simply bring prices in line with properties' current worth.

But some discounts are even steeper. O'Toole said one-third of the properties auctioned in August were discounted by 50 percent or more.

Kramer and other investors lie in wait to snap up these bargain properties - but finding them requires considerable persistence and diligence.

Kramer has two staffers who spend hours poring over computer records and then calling trustees or checking Web sites to find the minimum bids - usually determined just a couple of hours before the auction. The staffers also research properties' titles.

'A mad scramble'

If a property sounds promising and priced right, Kramer will hustle over to see it in person - although that's usually just a quick look from outside - contact his clients to see if anyone wants to bid and can come up with the money in time, and then rush to the courthouse steps.

"It's a mad scramble. You have to be ready to roll, have your cashier's checks in different denominations, gas in your tank," he said. "You need jet-propelled shoes. I used to be a New York City cab driver; that helps."

On a typical day, up to 300 properties are listed for a courthouse auction in the seven counties Kramer covers. (Alameda, Contra Costa, San Francisco, San Mateo, Solano, Sonoma and Marin.)

"We cherry-pick," he said. "We go after the ones in better locations where the investors can hold the properties or flip them.

"People think, 'I'll do five or six foreclosure deals and then I'll retire,' " he said. "It's not that easy. This is a lot of work."

On Wednesday, Kramer leafed through a printout of that day's Alameda County auctions that had been researched by his staff. About three-quarters were postponed. "That means the owner could have filed bankruptcy or is trying to negotiate or has a pending sale," he said.

He pointed to a three-bedroom Hayward house, originally $309,898, with a minimum bid of $140,000. Something that low could mean it's a second mortgage - in which case whoever buys the property will be responsible for the first mortgage. But in this case, his staff learned from the trustee that the actual minimum bid the bank will take is $314,123. The $140,000 is a teaser bid price, designed to get a herd of bidders caught up in a feeding frenzy.

"It's like playing poker; you try to outsmart competitors," Kramer said. "I always look for an older loan. Most are from 2006 or 2007. If they're from before 2004, then there's likely to be some equity."

He stopped at a listing for a San Leandro triplex. Originally $848,000, it was being offered with a minimum bid of $468,000. "Wells Fargo is willing to take a hit of almost $351,000 on that, and the taxes are already paid," he said, looking at the spreadsheet.

Kramer dialed one of his investors and read off the property specs. "Comps (recent similar sales) are in the low $600,000 to low $700,000s," he said. "There's definitely juice in this. Can you get over there to take a quick look-see?"

Forty-five minutes later, the client said he didn't want to bid on the property.

Another good prospect, a four-bedroom off Skyline Boulevard in Oakland, was selling for $517,500, compared with $831,000 owed on the mortgage and comps in the $700,000 range. The house was rented out for $3,800 a month. Property records show the original owner paid $1 million in 1997, the year it was built. "That's sad," he said. "I think this will get bought in the high $500,000 or low $600,000s."

But he didn't have a client with the means to bid on the property. "I've filled up my investors' buckets," he said.

His staff pointed out some good buys in Pacifica. He couldn't get to the relevant courthouse in time to bid, so he called some friendly competitors. If they were unaware of the property and bought it at his suggestion, he'd get a referral fee.

At the courthouse steps, a dozen investors were gathered. Auctioneer Marc Ramsland started by rattling off a lengthy list of properties for which the foreclosure auction had been delayed, for reasons such as bankruptcy, mutual agreement or beneficiary's request.

Once he actually started auctioning properties, there was little action. For almost every property, after reciting its statistics and requesting bids, Ramsland was met by a resounding silence. "Are there any further bids?" he would ask. "For the second time, are there any further bids? There being no bids, the property will revert back to the beneficiary" - meaning the lender holding the mortgage.

1-cent strategy

When Ramsland got to the big house off Skyline, one man whispered urgently into his cell phone and then bid - exactly one penny more than the $517,500 minimum. The man, who declined to give his name, was the winning bidder at $517,500.01 and handed over a series of cashiers checks to pay.

Kramer approved of that 1-cent strategy. "Why bid $1 over when you can save 99 cents?" he said. "The key is to buy as close to the opening bid as possible."

An obvious limitation for auction investors is having enough liquid funds to cover a bid, especially because many investors have their cash tied up in properties they want to keep. While there is no chance to seek conventional financing before making a bid, a few investors do double-duty as "hard money lenders," providing funds to their fellow bidders on the spot.

John Shiells, who was sitting under the sparse shade of a nearby bush, said he wears two hats, as a bidder and a lender to other bidders. He comes armed with enough funds in cashier's checks to make loans. His terms are simple and lucrative: He makes one-year, interest-only loans at 12 percent and five points (5 percent of the loan amount). Prepayments are not allowed. Borrowers must put up 30 percent of the purchase price themselves. "Investors don't default when they've got their hard money involved," he said.

Many of the courthouse investors have been at it for years, so the current downturn is just a replay of similar real estate slumps they've seen in past decades. They have a wry camaraderie about their unusual profession.

"Marc here sold me the house I live in now years ago," at a foreclosure auction, one said, referring to the auctioneer.

"I've never lived in anything but a foreclosure," another man volunteered.

"Me too," said another, to chuckles. "I get all my furniture from foreclosures, too."

Glossary

Trustee sale: Final step in foreclosure process, when a property is sold on the county courthouse steps. Most often it reverts to the lender, but sometimes investors bid if they see a good deal.

Deficit bid: When a lender drops the minimum bid to less than what's owed on the mortgage.

Crier: The auctioneer.

Teaser bid: An artificially low minimum set by the lender to stimulate bidding; the crier is instructed to bid on the lender's behalf against investors to ensure that the property doesn't sell for this low amount.

California auctions

Month	Foreclosed properties sold	% of foreclosed properties*
January	432	3.4%
August	1,360	4.0

*Properties not bought by investors reverted to lenders.  

First American is lone title insurer bearing good news

By Matt_Carter
Created 08/01/2008

It's looking lonely at the top for First American Corp., as the nation's leading title insurer is the only company in the industry to report good news during the second quarter.

First American said Thursday that it racked up $42 million in profits during the quarter ending in June, as cost-cutting measures outstripped a 20 percent year-over-year decline in revenue, which fell to $1.72 billion. The results beat analysts' expectations and represented a turnaround from the same quarter a year ago, when First American lost $66 million.

In a press release, First American said its second-quarter results could be hurt by a $37.3 million investment First American Title Insurance Co. has in Mercury Companies Inc. Mercury, a Colorado-based holding company, has been forced to close down title and escrow companies in California, Arizona, Texas, Oregon and Nevada (see story [2]).

First American said it cut salary and other personnel costs in title insurance and services by 24 percent during the second quarter, to $338.6 million, closing 94 offices and laying off about 700 employees. The company's direct operations closed 401,200 title orders for the second quarter of 2008, a decrease of 17 percent from a year ago, and saw orders decline each month of the quarter. Another 30 offices have been targeted for closure by the end of the year.

First American Chairman and CEO Parker Kennedy also said the company has delayed plans to spinoff [3] its financial services and information solutions units into separate companies.

"Given the uncertainty in the real estate and mortgage credit markets, we believe it is prudent to delay the split," Kennedy told investors in a conference call. "Our primary focus at this time is expense management, product development and maximizing profitability. We will split the companies when we see more stability in our markets and when the outlook becomes clearer."

First American's closest rival, Fidelity National Financial, reported [4] on July 23 that profits fell 92 percent, to $6.9 million, despite the elimination of more than 1,200 positions in title field operations and an additional 400 positions in other areas of the company during the quarter.

The nation's third-largest title insurer, LandAmerica Financial Group, surprised analysts on Wednesday by posting [5] a larger-than-expected $50 million loss for the second quarter, sending the company's shares plummeting. LandAmerica said it cut salary and employee benefit costs by 39 percent from a year ago, laying off the equivalent of 3,600 full-time employees in title operations in the last 12 months.

Stewart Information Services Corp., the fourth-largest title insurer, reported [6] a $26.6 million loss Wednesday, as revenue fell 25 percent to $428.5 million. Stewart reported laying off 350 employees in the second quarter, bringing year-to-date head-count reduction to 810, or 9.6 percent of the company's workforce. Stewart has closed 68 branch and office locations this year, and laid off 2,400 employees since the end of 2006.

Old Republic International Corp., which reported [7] a $45 million loss on July 24, has the smallest share of the title insurance market among the top five title insurance companies, but is struggling with losses from its private mortgage insurance business.

In a conference call with investors, Old Republic Chairman and CEO Aldo C. Zucaro said the company does not expect to make any money in mortgage guarantees this year or next.

Although there is "some noise out there" about a recovery, Zucaro said, "We think it's wishful thinking … that a rainbow is about to come up on the good ship lollypop. As we (have) said in the past, our expectations are for a continuation of a relatively stressful period before we can see the emergence of profitability sometime in 2010."

According to the American Land Title Association, the top five title insurance providers captured 93 percent of the market in 2007, with $13.23 billion in premiums written. The top five companies were First American (30 percent), Fidelity (26 percent), LandAmerica (19 percent), Stewart (12 percent) and Old Republic (5 percent).

Title insurance companies -- which also generate revenue selling property information to real estate brokerages and investors -- have struggled during the downturn because fewer home purchases mean less business. They have also seen increased claims on title insurance policies written during the housing boom.

The rapid boom-to-bust turnaround could lead to more industry consolidation, a fact alluded to by Fidelity CEO William Foley. In a conference call with investors, Foley said the company is positioning itself to preserve cash to facilitate potential acquisitions.

As the market has deteriorated, Foley said, "We believe that there would be some opportunities with other underwriters or other large operations across the country to perhaps consolidate."

 

Mortgages Ltd's BK Mess will Affect Phoenix for Years- Suns Owner to Help?

Mortgages Ltd. filed for Chapter 11 bankruptcy protection on June 23, 2008, three weeks after the CEO and owner, Scott Coles, was found dead on June 2, 2008. The company is in discussion with Bob Sarver, owner of the Phoenix Suns and Southwest Value Partners, for an emergency $125 million loan.

Unfortunately, most of the investors' money will be tied up in the bankruptcy and the money that the investors will eventually receive will be a fraction of their investment. Bankruptcies are expensive. The bankruptcy attorneys, accountants and trustees will burn up the investors' capital at a furious rate. When the assets are sold, they will be sold at a fraction of the value in a fire sale in a depressed real estate market.

There will be ripple effects in the Phoenix commercial real estate market for years if not a decade. Mortgages Ltd. was a key player in Arizona's building world. It had bankrolled land acquisition, development and construction for commercial real estate. There is no company to take its place.

In addition, Mortgage Ltd.'s investors' capital of approximately $900 million in capital won't be available for future projects for some time, if ever. Other investors will be leery about investing in commercial mortgage companies, further reducing the available capital.

At the July 1st bankruptcy hearing, the court removed the law firm of Greenberg Traurig as Mortgage Ltd.'s general counsel and has asked Laura Martini, the acting CEO to leave the board of directors. The court did allow her to remain CEO for at least 30 days.

The creditors believed that Mortgages Ltd.'s law firm Greenberg Traurig was maneuvering to control the company by transferring the shareholder voting power from a trust that the Coles set up as Mortgages Ltd.'s sole stockholder to a new limited liability company it created after his death.

All the legal maneuverings reduce the amount of money that the investors and creditors will eventually receive.

John Laub is the Chairman of the Phoenix CEO-CFO Group.

1. "Lender Looks to Robert Sarver's Company. Bankrupt Mortgages Ltd. Asks for $125 Million in Aid." Andrew Johnson. The Arizona Republic. June. 29, 2008.

2. "Mortgages Ltd. Leadership Team Shaken Up." Andrew Johnson. The Arizona Republic. July 2, 2008

3. "High-Profile Projects in Limbo. Collapsed Lender Imperils Downtown Developments." Jahna Berry Andrew Johnson. The Arizona Republic. June. 30, 2008.

 

Auctioneer's championship surprises Jodi Sweeney

Tuesday, July 29, 2008
Jean Caspers-Simmet

Agri News staff writer 

WAUKON, Iowa -- Jodi Sweeney never dreamed she'd win the women's division of the International Auctioneers Championship July 11 in Nashville.  The Waukon 21-year-old's plan was to enter as a learning experience and make it to the finals several years later.

But she found herself one of seven finalists after selling a necklace, binoculars and a children's book in the preliminary round. She is the youngest auctioneer to win the contest and was the youngest of the 22 women who competed. She is the first Iowa female to win.  "I was in shock," Sweeney said. "I never dreamed that I'd win first place the first year."

Sweeney is a senior at the University of Northern Iowa where she is majoring in finance and real estate.  A third-generation auctioneer, Sweeney was raised in her parents, Jeff and Penny's, auction business, Sweeney Auction Services. At age six she helped her father and grandfather, Ray, run tickets from the clerk to the cashier. She attended the Worldwide College of Auctioneering in Mason City in 2006, the same school that her father and grandfather attended.

Sweeney was the first female to win the Iowa Auctioneers Association State Bid Calling Contest last summer.  John Nicholls, the 2006 international men's champion, has given Sweeney advice since he judged the preliminary round of the state competition. Cheri Boots-Sutton, a former female champion, gave Sweeney pointers on her wardrobe.  The finalists went through an interview answering three questions.

"John told me I hit a home run on the interview," Sweeney said. "I tried to focus my answers on how I could help the industry instead of just talking about myself."  In the finals Sweeney sold a vintage men's National Auctioneer's Association hat, a woman's ring and a laptop computer. After she won, she sold the flag that was flown over the Capitol during National Auctioneers Day.

Sweeney won a huge trophy, a ring, $10,000 in prize money and a medal. She already spent part of her prize money buying a lifetime membership in the National Auctioneers Association.  In addition to Nicholls and Boots-Sutton, Sweeney said her parents, especially her father, are her mentors.  "It's tough to take criticism from your dad, but I know he's helping me."

Sweeney works part-time for her parents' auction business and is a contract auctioneer for Rich Penn Auctions in Waterloo. She has assisted with auctions in Iowa, Wisconsin and Minnesota and recently earned her salesperson license to sell real estate.  "I'd like to specialize in real estate auctions," she said. "But I'd also like to keep our farm machinery and household and antique auctions going. We'll see where I fit in." Counting with a pretty chant does not necessarily equate to selling real estate.

 

Know Your New York-Lovin' Russian Oligarchs

This isn't shaping up to be an especially good year for New York's ultra-rich. According to Forbes, Moscow recently overtook NYC as the city with the most billionaires per square mile: Moscow had 74 people worth ten figures compared to New York, which had just 71. But those smarmy bazillionaires aren't staying put in Moscow or even in the de-facto Russian mogul ghetto of London. Many of them are spending time right here in New York: Real estate, oil, and metals scions from Russia and other former Soviet republics have been busy snatching up some of the most expensive apartments the city has to offer. Last month, a 42-year-old fertilizer kingpin named Dmitry Rybolovlev agreed to pay $100 million for Donald Trump's Palm Beach mansion, Maison de l'Amitié. The 59th richest man in the world, worth some $12.8 billion, his purchase includes a 33,000-square-foot home and 6.5 acres of land. But he isn't the only one. After the jump, a list of the novi Russki who spend time in New York—just who these Soviet oligarchs are, how they made their money, and what exactly they're up to in town.

Leonard Blavatnik
A Russian Jew, Blavatnik moved to the U.S. in 1978 when he was 21. He's now worth a reported $7.2 billion thanks to investments in coal, real estate, aluminum, petrochemicals, and plastics. His primary holding company is called Access Industries; he's also a partner in the Renova Group with Viktor Vekselberg (see below). Blavatnik is a part-time resident of the city—he also spends a good deal of time in London—but he's been on a real estate buying spree in New York City over the past year. He owns a East 64th Street townhouse that he purchased from Edgar Bronfman Jr. for $51 million, and is rumored to be behind the 2008 purchase of the townhouse once occupied by Jocelyne Wildenstein. In London, he lives in a home in Kensington Park Gardens that he purchased for $73 million in 2006.

Lev Leviev
A native of Uzbekistan, Leviev moved to Israel and now divides his time between the religious enclave of B'nai Brak and a home in London. Worth an estimated $8 billion, Leviev made a fortune from real estate and oil, but he's best known for his investments in the diamond trade. (He's partly responsible for breaking up the De Beers diamond cartel.) A close pal of Vladimir Putin, Leviev is a devotee of the Brooklyn-based ultra-Orthodox Chabad movement (a former business partner is fellow Chabadnik Shaya Boymelgreen). He's also a major patron of Jewish causes in the former Soviet Union.

Leviev's holding company, Africa Israel Investments, is one of New York City's biggest landlords. The company owns such properties as 23 Wall Street, 88 Leonard, and Downtown by Philippe Starck; it also holds stakes in the Apthorp on the Upper West Side, the Met Life Clock Tower at 1 Madison, the old New York Times building, and an eponymous diamond boutique on Madison Avenue. His diamond company, LLD USA, is headquartered on 47th and 5th. Although he comes to town frequently, his primary residence is in London, where he lives in a $70 million home with a $100,000 bulletproof front door.

Roman Abramovich
41-year-old Abramovich is Russia's second-richest man, with a fortune estimated at $23.5 billion in 2008. Through his fund, Millhouse Capital, Abramovich has significant investments in aircraft and aluminum industries; he's also the owner of the popular British soccer team Chelsea Football Club. He may be most famous, though, for his penchant for spending money. Abramovich is believed to own five jumbo ships (the largest of which is the 377-foot Pelorus) and it was Abramovich who paid $2 million to have Amy Winehouse perform at the opening of his new art gallery in Moscow in 2008.

Abramovich spends most of his time in Moscow and London with his twenty-something girlfriend; with his ex-wife, Irina, a former Aeroflot stewardess, he has five children. His London home in Belgravia is worth an estimated $60 million. (He also has an estate in West Sussex worth $40 million.) But he's now in the process of building the most expensive home in Britain, a manse that will end up costing him $150 million when all is said and done. But Abramovich spends a considerable amount of time in New York, too. He's a regular at contemporary art auctions and in May 2008, he spent $33.6 million on Lucien Freud's Supervisor Sleeping at Christie's—the most ever paid for a painting by a living artist—and then $86.3 million on a Francis Bacon triptych at Sotheby's a day later. He commutes to NYC aboard a Boeing 767 and reportedly stays in the Ty Warner suite at the Four Seasons on 57th Street. The 4,300-square-foot suite includes four terraces and private gym and costs $30,000 a night.

Vassily Anisimov
Worth more than $2 billion accordng to Forbes, Anisimov (or Anisimova) made his fortune in the metal industry, particularly in the aluminum mining business. (One of his business partners was Marc Rich, the ex-husband of Denise Rich; another former business partner is Leonard Blavatnik.) He's also a major real estate investor in New York: His Coral Realty owns a number of properties in the area around NYU and developed the Sugar Warehouse and the Electra, a luxury rental on First Avenue.  He also owns a residential complex in Jersey City.

He's best known, though, as the father of socialite Anna Anisimova, and he occasionally stays with his daughter at the $15 million condo he purchased for her in the Time Warner Center. It's a smaller family these days: In 2000 Anisimova's daughter from his first marriage and his son-in-law were assassinated in Russia.

Tamir Sapir
A native of the republic of Georgia, Sapir moved to the U.S. in the 1970s and drove a cab for a spell when he first arrived. He later made his fortune in the black market electronics trade and chemicals industry before turning to real estate. His first big project, 2 Broadway, resulted in a flurry of lawsuits and accusations of ties to the Mob; more recently, he co-developed the William Beaver House with Andre Balazs and partnered with Donald Trump on the Trump Soho.

Sapir spends most of his time in NYC. He bought the Duke-Semans mansion on Fifth Avenue for $40 million in 2006, but he doesn't live there. (He uses the space to house his massive ivory collection.) He primarily lives in a spread at the Trump Tower, and also owns massive estates on Long Island and in Acapulco.

Viktor Vekselberg
Worth $11.2 billion according to Forbes, Vekselberg presides over the Renova Group with business partner Leonard Blavatnik. The company makes its money in the oil and aluminum industries. Vekselberg was in the news in 2004 after he purchased the famed Faberge egg collection of publishing magnate Malcom Forbes (put up for auction by Steve Forbes) at Sotheby's for a figure believed to be near $100 million. The bearded billionaire owns a lavish spread in Weston, Connecticut and a pied-à-terre in the Park Millennium in Midtown. His daughter attended Yale business school.

Andrei Melnichenko
Just 36, Melnichenko is worth $6.2 billion per Forbes. After making an initial fortune in currency trading, he created an industrial empire with fellow billionaire Sergei Popov. He landed in the newspapers in New York when his MDM-Bank was involved in the scandal in which Russian organized crime rings were accused of laundering $7 billion through the Bank of New York. He's also known for his lavish spending. His 2005 wedding to a Serbian model near Cannes cost him $40 million, including a $3.6 million for a performance by Christina Aguilera. He paid Jennifer Lopez $2 million to perform at his wife's 30th birthday party in 2007.

Roustam Tariko
Worth $3.5 billion, Tariko is best known for creating the high-end brand of Russian vodka, Russian Standard, but he also owns banking and insurance businesses under the Russian Standard name. In New York, he's best known for spending $3 million in 2005 on a party on Liberty Island to introduce his vodka to New Yorkers. Tariko commutes to New York aboard his Boeing Business Jet and says he likes to run in Central Park when he's here. He also enjoys inviting notable New Yorkers to visit him in Russia. He gave Martha Stewart a grand tour in 2007, zipping the domestic diva around the Russian capital in his black Bugatti Veyron, the only one in Russia.

Sergey Gordeev
Just 35, Gordeev made his billion-plus fortune in real estate. He's also involved in politics—he holds a seat in the Russian senate. An avid architecture enthusiast, Gordeev earned a rep as the savior of ugly Soviet-style buildings. Here in New York, he's donated heavily to the Guggenheim. It was Gordeev who bankrolled the exhibition "Lost Vanguard: Soviet Modernist Architecture, 1922-32" at the MoMA in 2007.

Valery Kogan
The chairman of East Line Group, which controls Moscow's Domodedovo International Airport, Kogan has a net worth estimated at $600 million. He was relatively unknown in these parts until he proposed to knock down his 20,000-square-foot home in Greenwich (which he bought for $18 million in 2005) and then build the biggest house the city has ever seen: a 54,000-square-foot mega-mansion complete with 26 bathrooms as well as a dog grooming room and Russian and Finnish baths. Greenwich's zoning commission officially rejected Kogan's plans in May 2008.

Boris Belotserkovsky
A gambling magnate, Belotserkovsky is the co-owner of Ritzio Entertainment Group, Russia's biggest casino company. He's publicly condemned Putin for placing restrictions on gambling in Russia and attempting to relegate casinos in the provinces. That might explain why he spend a good deal of time in New York these days. When he's in town, he's stays at a $5 million condo in the Plaza.

Vladimir Stolyarenko
The CEO of the major Russian bank Evrofinance, the shadowy Stolyarenko bunks down in a $10.1 million condo at the Plaza when he's in Manhattan. He's known for having especially close ties the Kremlin, unlike his Plaza neighbor Belotserkovsky (see above), which must make for awkward elevator conversation.

Boris Berezovsky
Trained as a mathematician, Berezovsky took over a crumbling Russian automaker in the immediate aftermath of the USSR's collapse and parlayed it into bigger things: He's now worth $1.3 billion, according to Forbes, and has since diversified into oil and other industries. Russian prosecutors tried and failed to extradite London-living Berezovsky for crimes he committed during the "wild capitalism" era of the 90s. He later sued Forbes after its Moscow bureau chief, Paul Klebnikov, tied him to to the assassination of prominent television journalist Vladislav Listyev. The case was settled, although Paul Klebnikov was also later assassinated. In recent years, Berezovsky has earned the enmity of the Putin regime by openly questioning the government's involvement in the poisoning death of ex-KGB agent Alexander Litvineko. (Putin et al pointed the finger at him in turn.) Although based in London, he spends a good deal of time in New York, where his Foundation for Civil Liberties is based. He has a pied-a-terre in the Trump International building.