Eminent Domain Blog : Pennsylvania Eminent Domain Lawyer & Attorney : Fox Rothschild Law Firm : Condemnation, Real Estate Valuation : Philadelphia, Bucks County, Pennsylvania

According to the firm RealtyTrac, national foreclosure filings fell to a six-year low in January. The report states that foreclosures dropped 7 percent in January from December 2012, with foreclosure activity down 28 percent from January 2012. It further found that U.S. bank repossessions dropped 5 percent from the previous month and were down 24 percent from January 2012 to the lowest level since February 2008.

One possible reason for the declines, according to RealtyTrac, was a steep drop in California notices of default issued in January, which fell 62 percent from December and were down 75 percent from January 2012 to the lowest level since October 2005.

Of course, areas of the country are still feeling the effects of the recession. RealtyTrac reported that 1 in 300 Florida housing units had a foreclosure filing in January — more than twice the national average and the highest in the U.S. for the fifth consecutive month. Nevada posted the nation’s second highest foreclosure rate for the fourth consecutive month, with 1 in every 344 housing units filing a foreclosure in January. Other states topping the list for highest foreclosure rates in January include Arizona (1 in 501 housing units filing a foreclosure), Georgia (1 in 513 housing units) Ohio (1 in 612 housing units) and Washington (1 in 674 housing units).
 

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New Jersey has adopted a process which may expedite foreclosures on vacant and abandoned residential properties. Under this procedure, vacancy and abandonment must be established by clear and convincing evidence. In that case, a mortgage holder may be able to obtain a judgment and get to a sheriffs sale in 120 days. That is much quicker than using more traditional methods.

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Sandy has created a number of difficult legal problems. One issue relates to the rights and obligations of landlords and tenants when leased premises suffer casualty damage. The obligations of a landlord as an owner of a commercial property to repair and restore casualty damage are generally found in two documents – (i) a mortgage and security agreement and (ii) the lease. My partners have put together a good summary of the relevant considerations which can be found at  www.foxrothschild.com/newspubs/newspubsArticle.aspx

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Market researcher RealtyTrac reports that fewer foreclosure processes were initiated in August 2012 than in August 2011. Foreclosures reached a 17-year high in August 2011. RealtyTrac said the number of homes entering foreclosure is projected to continue decreasing gradually.

Approximately 99,400 homes entered foreclosure in August. This was a 1 percent increase over July, but a 13 percent decrease from August 2011. It is also significantly lower than the April 2009 peak of approximately 203,000 homes that were in foreclosure. The number of completed foreclosures in August 2012 was 52,380 which is a 2 percent decrease from July 2012 and 19 percent from August 2011.

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Philadelphia Trial Court Judges Herron and Tereshko announced in a notice to the bar that they were not going to change a popular residential foreclosure diversion program. There was a proposal to end conciliation for foreclosures after a maximum of four conferences held within 150 days after foreclosure complaints were filed. The Judges stated that the reasons for maintaining the program as it has been conducted include the fact that the number of foreclourses is forecasted to increase and that capping the number of conciliation conferences would harm the program. Judge Herron also said that mortgage lenders, servicers and creditors are not always able to assemble the requisite documents in the time frame. Mayor Nutter also supported the continuation of the program.

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The United States Tax Court recently issued an opinion that contains valuable lessons for any forum. Real estate valuation litigation regularly occurs in the Tax Court.

In Boltar LLC v. Commissioner, the Tax Court granted the government’s motion to strike the taxpayer’s appraisal because it was “unrealiable and irrelevant.” In that case, the IRS and the taxpayer disagreed as to the value of a donated conservation easement on real property located in Indiana. The Court ruled that the taxpayer’s appraiser used the wrong facts and standard in appraising the property and, therefore, struck the appraisal. The government’s notice of deficiency was upheld for the amount stated - only $42,400 out of a total $3,245,000 claimed as a charitable deduction on the partnership return.

Of particular interest was the Court’s harsh criticism of experts acting as advocates for their clients. It stated:

In most cases, as in this one, there is no dispute about the qualifications of the appraisers. The problem is created by their willingness to use their resumes and their skills to advocate the position of the party who employs them without regard to objective and relevant facts, contrary to their professional obligations

In addition, the cottage industry of experts who function primarily in the market for tax benefits should be discouraged. Each case, of course, will involve exercise of the discretion of the trial judge to admit or exclude evidence. In this case, in the view of the trial Judge, the expert report is so far beyond the realm of usefulness that admission is inappropriate and exclusion serves salutary purposes.

The importance of the credibility of experts – and attorneys – cannot be overstated. It is critical to resist the temptation to push experts to unsupportable positions. This is an important lesson for attorneys, experts and clients.
 

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Real estate valuation occurs in a variety of forums and we often find ourselves playing “away games.” Recently, I assisted my partners in our Las Vegas office in a bankruptcy case in which the debtor – our client – owned a number of commercial properties. Las Vegas’ real estate market is one of the hardest hit areas of the country. I was brought in to assist in establishing the value of ten properties in the context of the bankruptcy proceeding.

Several major lending institutions held mortgages on these properties including Wells Fargo, Bank of America and German America. Initially, the valuation “spread” – the difference between the parties’ alleged values of the various properties – was over $7 million. However, we were able to settle the valuation issue for half of the properties. As to the remaining five properties, we alleged that the aggregate value of the properties was $10,450,000. The lenders alleged it was $14,015,000. After three days of hearings, the Court ruled that the value was $11,000,000. Our client was very pleased with the results.

There were a number of interesting aspects of the case. First, it was important to understand the legal nuances of bankruptcy valuation. Whether you are litigating valuation in the context of eminent domain, tax assessment or any other area of the law, it is critical to understand the law in that area. It is also critical to understand the venue of the litigation including the judge, jury or panel that will be deciding the case. In this case, the Bankruptcy Judge, The Hon. Judge Bruce A. Markell, has extraordinary experience in the appraisal of real estate. Therefore, I made sure to tailor my case to his level of expertise.
 

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