Monday, September 13, 2010

You have to respect this idea...

Actually, this is about as slimy as it comes in the real estate market which is really saying something. Developers around the country discovered a beautiful concept (well, beautiful in the eyes of the developer) -- behold, the 1% resale fee!

Here's the concept: Every time a house sells over the next 99 years the original developer gets 1% of the final sales price.

"A growing number of developers and builders have been quietly slipping “resale fee” covenants into sales agreements of newly built homes in some subdivisions. In the Dupaix contract, the clause was in a separate 13-page document — called the declaration of covenants, conditions and restrictions — that wasn’t even included in the closing papers and did not require a signature.

The fee, sometimes called a capital recovery fee or private transfer fee, has been gaining popularity among companies that have been frantically searching for new ways to gain access to cash in the depressed housing market."

I don't have a huge problem with concept of a resale fee but the term is absurd (99 years!?!?) and sliding it into a contract without requiring signature is slimy.

Where will this go next? Well, I'm sure there are certain architects refining their contracts to include a 1% resale design fee :) Maybe, the window manufacturers will start looking for a cut of the resale price as well.

Sorry, for the slow posting last week. The markets continue to march forward on little positive data here is a recap.

a) The mortgage indexes continue to rise as the effect of the tax credit starts to wane.
b) Initial Claims for unemployment fell more than expected but there was a huge issue with the data b/c of Labor Day.
c) Australia and Canada Aug jobs data beat forecasts. I can't speak to Australia but I suspect that some of the same small sample issues that impact the Canadian data are impacting Australia. Again, both Australia and Canada are well positioned over the next 50 years because of their abundance of natural resources, but Canada's dependence on the US economy would give me pause.

Negatives
a) Lots of questions about the adequacy of the European bank stress tests and Deutsche Bank wants to raise more capital (bonus points: make a connection between DB and NY-23)
b) German data was below expectations
c) Individual investors are back to their highest level since April this is usually means something negative is coming.
d) Wholesale inventories keep growing.

Finally, as we mark the 9th anniversary of the horrible events of 9/11/01, I've been struck by the hypocrisy of much of the commentary surrounding the proposed Islamic center in lower Manhattan. As a point of reference, I bought the second suit I ever owned in the old Burlington Coat Factory store that formerly occupied the building. The fact that anything within 1/4 mile of the WTC is "hallowed ground" rings hollow to anyone that has actually lived or worked in lower Manhattan.

It is very interesting that no one seems to be troubled by a certain adult entertainment facility that is located on Murray St. just 2 blocks from the World Trade Center . Or if you're feeling a need to get your betting fix for the day there is an OTB located within about a block of the WTC. Apparently in today's America the Freedom of Religion is limited while Freedom of Pron and Gambling lives on...

Ok, I'm off my soapbox.

Cheers!

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