Tag Archives: Real Estate

The Continuing Belvedere Saga

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I have received a lot of visitors from the Reno Realty Blog because of the discussion on the Belvedere.

One thing I noticed is that the link to the RGJ article no longer work. After 30 days the RGJ places its articles in its archives. You can still find the article if you choose the correct term, and are willing to pay to read it.

I will attempt to address some of the comments at RRB:

Jo Amick says:
June 13, 2011 at 6:30 PM

I also think “Tax implications and vacancy rates alone could very well put your return on investment at 4 years + ” to agree with “Nomad”. Guess I got beat to the punch!

I believe that all “tax implications” were wiped out at the Washoe County tax sale.

Renter says:
August 16, 2011 at 1:58 PM
…
Back to the discussion on being an investment opportunities, what seems to kill the deal is the “mechanic’s liens number in the hundreds”. I believe there are over $80K of liens on each apartment there.
…

As I understand the law a tax foreclosure takes priority over all other debts and obligations except IRS liens. Therefore, the mechanics liens were also wiped out.

GreenNV says:
August 16, 2011 at 7:52 PM

OK, this is my understanding. In a foreclosure situation, all the junior lien holders have the right to bid to try to maintain their interests in the property. If they don’t and the Trutees Sale is completed, their claim on the property it expunged.

So for the Belvedere, short sale properties still have the mechanic’s liens in place and should be avoided. Properties that have gone TD should be free and clear of the mechanic’s liens. I think buying a unit from the bank is pretty safe legally (given the other risks), but there are NOT any of the foreclosed units on the market right now. That smells fishy to me, so there may be more to the story.

This would be correct if it were a Trustee foreclosure sale or short sale. The Belvedere properties were NOT short sales nor were they Trustee sales. These were tax deed sales, sold by Washoe County.

By using the tax foreclosure sale route the property no longer has any bank debt, mechanics liens, HOA liens.

The bank did not buy the properties. According to the RGJ, they were all bought by Madjlessi’s lawyer. Therefore, the bank is NOT the seller.

I welcome and invite your comments and especially your corrections to anything where I may have been in error.

Please feel free to Like this post.

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Bank of America Will Accept Back-up Offer in Short Sale

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One of the problems with short sales is the amount of time they take to complete, often as much as 4 to 6 months, or more. The typical retail buyer is not willing nor able to wait around that long and the buyer then walks away from the transaction.

Short sales approval typically take 60-90 days \ after the buyer and seller have signed their contract and all the corresponding paperwork has been submitted to the bank. Closing then takes another 30 days or so. Most buyers don’t want to stick around for 120 days with the uncertainty that they don’t know if the bank will even agree to the short sale or if the terms of the agreement will be acceptable to the seller.The biggest challenge with short sales is to keep buyers interested in the property long enough to see the entire transaction through to the end.

Bank of America recently notified real estate agents that they can now substitute a new buyer without having to initiate a new short sale. This is in the case of the original buyer walking away from the deal. For home buyers and sellers reading this who may not be involved every day in dealing with short sales, this really big change in the real estate market.

This development should help to speed up short sales, if for no other reason that they no longer need to start over.

Read the B of A document: http://sdshortsaleexperts.com/virtualoffice_files//bank-of-america-back-up-offer.pdf

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Foreclosure Overturned by Oregon Judge

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An Oregon judge overturned a foreclosure  and subsequent eviction. This case, like many nationwide, also involves MERS, the Mortgage Electronic Registration System.

MERS was created, in part to avoid the expense of paying recording fees to the local county recorder.

A Wells Fargo & Co. unit foreclosed on Flynn after she fell behind in her payments. Wells Fargo sold the mortgage to U.S. Bank, the second lienholder, in December 2010, Cutler said.

I don’t understand how Wells Fargo could have sold the mortgage.  This may due either to Oregon law or a reporter getting the story wrong.

U.S. Bank tried to evict Flynn from her Vernonia home during a May 24 court hearing. But on June 23, Columbia County Circuit Judge Jenefer Grant ruled against the bank and awarded legal costs to Flynn.

Grant found that the original lender, Eagle Home Mortgage, held beneficial interest in the property. But while Eagle Home eventually sold the mortgage to other parties, the exchanges were never recorded, or assigned, in the county’s recorder office.

“I am concluding the recording never occurred,” she wrote in a two-page ruling. “MERS does not become the beneficiary, irrespective of what is stated in the deed of trust.”

Oregon law requires any transfer of ownership of debt to be recorded at the county recorder.  The banks, by using MERS decided that it was not necessary to comply.

Read more on MERS and Oregon Foreclosure law.

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Belvedere Developer and the Glassman

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Bijan Madjlessi is the real estate developer that was arrested because of dual insurance claims because of a fire at the Belvedere towers condo project.

It appears that he had a history of using and abusing people.  It seems that not paying his contractors and vendors was his standard practice.

One of these vendors was Chad Empey of Petaluma, CA and it appears that he is fighting back.  He has posted videos that explain in detail how Madjlessi ran his operation.  This video is only one of many describing Madjlessi, his operation, and the corrupt bankers that enabled this fraud.

http://youtu.be/zhMpSmAS5tA

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Belvedere Developer also Linked to Failed Bank in CA

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Bijan Madjlessi was/is the owner of the Belvedere Towers condominium project here in Reno and who had neglected to pay his property taxes resulting in the property being seized in a tax foreclosure by Washoe county.

Madjlessi has also been arrested in California for insurance fraud because he filed insurance claims on two separate policies.

Now, it appears that Madjlessi has a very busy man.  He is also linked to the failure of the Sonoma Valley Bank that had three branches in the Sonoma Valley area of CA.

When Sonoma Valley Bank granted him a loan he had already defaulted on a loan from IndyMac bank for the same project.

At the center of the bank’s downfall is a series of large loans made to a small group of North Bay developers who were behind three Sonoma County projects that fell into foreclosure over the past few years.

The bank continued to fund the projects even after it became public in land records and lawsuits that the developers were defaulting on multimillion-dollar loans from other banks and were not paying construction contractors.

At this time I am aware of at least two other failed real estate projects.  He blamed the bad economy.

Read more here.

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Belvedere Developer Arrested for Insurance Fraud

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California Insurance Department officers arrested Madjlessi last week for insurance fraud.

Bijan Madjlessi, who controls the Belvedere Towers condominium project in downtown Reno, has been charged with felony insurance fraud in making multiple claims for losses after the building caught fire nearly three years ago.

Possibly the more interesting parts of the story are the comments that follow.

Read the article here.

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Washoe County Tax Sale and the Belvedere

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Washoe County recently conducted the sale of tax delinquent properties.  According to Nevada statutes the properties are placed for sale if the taxes have not been paid for at least three years.

The RGJ reported on the purchase of 92 condominiums by David Lonich, the attorney representing Bijan Madjlessi of Belvedere LLC.  Madjlessi planned to market the condos in the Sundowner’s north tower, but the economy and the real estate market soured and he was unable to sell as planned.

The lawyer for the developer of downtown Reno condominiums — converted from rooms in the former Sundowner Hotel and Casino — on Wednesday purchased 92 of the condos for nearly $2 million at auction, after his client was delinquent in paying nearly $800,000 in taxes to the county.

But, here is the part that the RGJ, for whatever reason, did not tell.

The story was related to me by people that had attended the Washoe County Tax sale last week.

Lonich bought all 92 units and experienced little or no competition.  Others bid on some of the properties, but were all out bid.

The nature of the tax lien is that it is superior to all other liens. Consequently, when a tax sale is conducted, all other liens are wiped out.

So, what else was wiped out?  Since the taxes take precedence over all else, any financing, or mortgage loans were eliminated. According to notices of default totalling approximately $47.9 million, debt in that amount was eliminated, completely.  The RGJ reported that the property was purchased for $7.89 million.  I’m not clear how debt could grow to 47.9 million.  Nevertheless, it would appear the banks lost, big time.

Likewise, public records showed a total of 359 liens had been filed against Belvedere LLC and the property.  Some of these liens may have been satisfied, but this has not been verified.  A total of 771 documents have been recorded associated with Belvedere LLC and I have not reviewed all of them.  These liens have all been completely wiped out by the tax foreclosure.  Each of these liens represents someone that Belvedere LLC owed money, and each was left holding the bag.

Contractors didn’t get paid.  Vendors didn’t get paid. The HOA didn’t get paid. and even the City of Reno didn’t get paid.

Now, I believe that some of these liens may have been satisfied because some of the units may have been sold but this has not been verified.  Therefore the total numbers may vary a bit, but this is still close.

And what did Madjlessi lose?  You may be surprised to learn that he fared a bit better than his associates, the banks and the contractors and vendors.  He was able to eliminate $47.9 million
in debt for a mere $2 million and he got a lot of his building upgrades for free.

It’s nice work if you can get it.

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The Tenant From Hell

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Landlords, do you have any stories about tenants from Hell?

One story I want to relate: a friend experienced this one, not me.

The apartment was a beach front condo in San Diego. The owner had placed the unit with an agency for short term rentals for the summer. The unit was fully furnished, including kitchen utensils.

The occupant (I would call him a tenant but, tenants usually pay rent) moved in paying with a check. The management company accepted a personal check and what do you know, the check bounced. Can you guess who was on the hook for the bad check? Hint, it wasn’t the management company.

So, now, where short term rentals on the beach could possibly pay for the unit for the entire year, we actually find a long drawn out legal battle to get the interloper out of the unit. And instead of receiving rent the owner received substantial legal bills for the eviction.

And furthermore, when the perpetrator finally moved out of the unit, he took with a lot of the personal property.

Since this happened a long time ago, my recollection of all the details have become a bit sketchy.

I realize that Nevada landlord/tenant law differs greatly from that in California, and that this story probably would not happen here, at least to the same degree.

But, one lesson that I learned from this story was to always insist on cash, or cash equivalent before allowing a tenant to move into a property

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Is High End Real Estate the Next to Fall?

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Real estate has taken a major hit during this economic downturn.  And I don’t expect it to get better very soon.  We may see that high end real estate is the next shoe to drop.

Because Fannie and Freddie have done so much to harm our economy a lot of politicians want to drastically cut their lending limits.  This will likely slow the any impact of the high end real estate market toward our recovery.

The one redeeming factor is that a large percentage of high end real estate is purchased using cash.  But, still expect larger drops in the high end marketplace.

Read more: http://www.zerohedge.com/article/high-end-re-dead-money

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Couple Battles Wells Fargo Bank

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Here’s an interesting story about a couple taking on Wells Fargo.  The accused Wells Fargo of funding a home here in Reno based on a fraudulent appraisal which inflated the value of the home by $200,000.

From my vantage point the story is loaded with too many inconsistencies and sounds much like someone playing the victim card too loud and too often.

According to the Vieiras, the mortgage loan they took out in 2005 with Wells Fargo was based on a fraudulent appraisal that inflated the property’s value by more than $200,000. The appraisal was ordered by the bank and determined the couple’s mortgage, which they were eventually unable to pay, like tens of thousands of other homeowners across the country.

I’m not aware of any cases where appraisals are used to determine anyone’s mortgage.  They are used to determine the value of the property, supposedly to protect the bank’s interest.

The Vieiras said they were first late for their mortgage payment in September, 2009; Wells Fargo foreclosed on the home in June, 2010. Nuno, who is an appraiser himself, said the original home appraisal set him and his wife up for an unwieldy mortgage, and even though it was ruled fraudulent, the couple had no legal recourse.

Notice that even though Nuno is and appraiser himself, he was willing to complete the purchase without disputing the price.  He apparently agreed with the appraisal ath that time.

The Vieiras claim that they have been fighting this battle for the last 6 years.   They purchased a home in Reno, Nevada in 2005.  Coincidentally, that happens to be about 6 years ago.  That would suggest that they had been fighting Wells since the day they closed their escrow.  The home was foreclosed in June of 2010.

I must admit that I’m not always a fan of the banks, but this time I side with Wells.

Read the rest:

http://sanleandro.patch.com/articles/local-couple-takes-on-wells-fargo-bank

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