Real Foreclosures

We recently learned about the foreclosure process in class.  I took it upon myself to learn more about the subject.  One of the first places I go to learn about something I do not know about is youtube.com.  I realize that anyone can acquire posting privileges on the website and not all videos are based in fact, but youtube can be an excellent source when taking the source a video comes from into consideration.

I eventually stumbled upon a video that interested me in particularly after watching several videos about real foreclosure stories.  The one I chose focused on deputies that worked for the state of California.  One of the tasks they undertake on the job is evicting residents out of homes that they have foreclosed on.  Each eviction in this video relates to a Judicial Foreclosure, as the court system has intervened.  Because the video focused on several different foreclosures, it is hard to say what the cause of each one was.  It is likely that the majority of the foreclosures in the video had to do with the market downturn.  The video was filmed in California, one of the states hit hardest by the housing bubble's burst.  Many people were able to get financing on overpriced houses that they could not afford.

This video interested me in particular because it focused on the human psychology that surrounds the foreclosure process.  It is sad to say, but people resort to desperate measures when they are forcibly removed from their home.  Sadly, violence is common in these situations.  The video even references a tragic instance, where an evicted tenant took their own life.

Click here to watch the video

Welcome to Frisco

I am a proud member of the city of Frisco, Texas when I am not a full-time student at Texas A&M.  I have lived in Frisco since I moved to Texas in 2004.  I previously lived in Florida before moving to Texas.  The city was named for the St. Louis-San Francisco railway that passed through town.  This railway is why the city was established originally.  Frisco has seen a resounding amount of change over the years, going from farm town and railroad destination to burgeoning suburb.  

Frisco is located in both Collin and Denton county, just north of the city of Plano.  Frisco's population has sky rocketed to 129,574.  This is astounding, because most of the population growth has come in the last decade.  The city's population was at 33,714 when the 2010 census was taken.  This means the city's population has increased by 284% in 12 years.  For some perspective on how rapidly Frisco's population has grown, the city was named the fastest growing city in the entire United States in 2009.  

Frisco is primarily filled with married families.  67% of households consist of married couples, most with children.  Only 21.7% of all households had no family presence.  97% of Frisco's population has at least a high school degree, and 62% of the population has a bachelor's degree or higher.  Because most households are two parent families, the median income for the city is quite high.  The median income is $109,086. 

Most attractions and businesses are family oriented.  Frisco is filled with high priced homes, and large pieces of real estate.  Stonebriar Mall is one of the largest malls in the state of Texas.  It was opened in August 2000.  The mall includes 165 stores, and a 24 theatre AMC movie theatre.  

Stonebriar Mall

In the year 2005, the city of Frisco built an IKEA store.  IKEA is the largest furniture manufacturer in the world.  The Frisco IKEA sits at the city limits and is built right above a large welcome to Frisco sign, that welcomes visitors to the city.  

IKEA Frisco

My three personal favorite landmarks in Frisco are Dr. Pepper Arena, Dr. Pepper Ballpark, and FC Dallas Stadium (formerly known as Pizza Hut Park).  Frisco has a glut of minor league organizations that all play in one of these three buildings.  Dr. Pepper Arena is where the NHL's Dallas Stars practice, and where the minor league hockey team the Texas Tornados play.  Dr. Pepper Ballpark is where the Texas Ranger's AA baseball team the Frisco Rough Riders play.  FC Dallas Stadium is my personal favorite of the three.  FC Dallas Stadium is in the center of town.  FC Dallas Stadium is where the MLS team FC Dallas plays their home games.  FC Dallas Stadium is also one of the two stadiums where all FISD football teams play their games.  I personally got to play out many of my high school hero fantasies at FC Dallas Stadium as the center for the Frisco High School Raccoons football team (I am not making that up. I went to Frisco High School, home of the Frisco Fighting Raccoons).  FC Dallas Stadium is the location of Jimmy Buffett's concert in Frisco.  This is my favorite concert event of the year.  The stadium parking lot transfers is too an enormous lot filled with cars, RV's, and golf carts filled with people ready for the city's largest party of the year.  People plan their schedules around the Jimmy Buffett concert each year, just so they won't miss out on the biggest event the city throws each year.

Dr. Pepper Arena

Outside view of Dr. Pepper Ballpark

View from the outfield of Dr. Pepper Ballpark

Jimmy Buffett at FC Dallas Stadium

FC Dallas Stadium as Pizza Hut Park

My Favorite Guest Speaker Ever

Speaking on behalf of the average college student, most of us loath to hear when a guest speaker is coming to talk.  Most of us would try to find an excuse to not attend class that day if it were not for the inevitable test questions that will show up on the next exam.  Save from Joe Stallard from Sewell Automotive Companies (a company I chose to work for after hearing Mr. Stallard speak), and former CIA member Joe Olsen, I have never enjoyed a guest speaker in class.  Our recent guest speakers in FINC 371, Mike Gentry and Dr. Samuel Harrison, are the new exceptions to my previous disdain for guest speakers.  Both Mr. Gentry and Dr. Harrison managed to grab my attention, which is not necessarily an easy task.

Both men came to speak to our class about a land development project they began to work on 18 months ago.  Dr. Harrison is the owner and developer of the land; Mr. Gentry is Dr. Harrison's real estate attorney on the deal.  Most of the two men's presentation detailed the project, specifically many of the legal hoops that need to be jumped through to complete a project.

Dr. Harrison's family inherited the land through a poker match that one of his great grandfather's won.  The land is a large plot that is located near Highway 6 and Briarcrest Drive, where the former town of Booneville, Texas was located.  Dr. Harrison and his family finally decided to develop the land when several suitors came to him with an offer price he simply could not refuse.  Future businesses that will be located on the land is a hotel that is currently being constructed and a mega gas station that is a direct competitor to Aggie owned and operated Buc-ees.  

Several steps have been taken in an effort to develop the land for commercial use.  The land used to house an oil pipeline that was used for transport into the Houston area.  Upon its removal, some oil was spilt.  This small oil spill was a concern, as it could cause foundation issues.  The two men decided the land that was affected by the oil needed to be replaced with clean soil to remedy the situation.  This setback cost $250,000, and precious development time.  The project also required a search for historical artifacts on the land.  Because the land is located near the historic former town of Booneville, the project would have been stalled further if any historical artifacts from the old town were found on the land.  Thankfully for the projects sake, there were no artifacts found on the grounds.

The two men also discussed real estate contracts with us.  Typically, a suitor looking to build on land will put money into an escrow account with the developer.  This is different from a down payment.  The escrow account reserves the land for a purchaser while feasibility tests are being conducted on the land.  The purchaser can choose to go through, or not to go through with the contract after all of the testing is completed.  The two also told us that it is customary to not go through with the zoning process until you have buyers reserved.  By waiting to lock in buyers before deciding what to zone land for, you can open your land up to a wider variety of businesses willing to purchase your land.  It also makes the buyer responsible for acquiring zoning rights during feasibility testing.  Other things the men discussed with us were Tirz maps, the platting process, the begging and pleading associated with TxDOT, and the trend of moving away from "big box development."

There were several features of this guest lecture that made it particularly interesting to me.  I enjoyed how candidly the two men were discussing their real development project.  It is rare to hear about real examples in class, aside from case studies.  What separated this from most case studies, is that it is not finished.  Both Mr. Gentry and Dr. Harrison are still very much in the thick of the development process.  I also enjoyed the legal aspect of this lecture.  I personally will be attending law school next fall after graduating later this spring.  I have not made a decision as to which variety of law I plan on studying, but I know I would like to stay in a field that allows me to utilize my finance degree.  This lecture made me realize that I have an interest in real estate, and that a career in real estate law is feasible.  I hope that any other guest speakers I hear in this class, or any other class, for the rest of my last semester can clear the high bar Mr. Gentry and Dr. Harrison have personally set for me.

Public Restrictions on Real Estate

There are public restrictions on real estate in addition to the private restrictions that I have listed and explained in my previous blog post.  Public restrictions include taxation, eminent domain, police power, and escheat.

1. Property Tax:  The government has the right to levy taxes on the owner of any property.  Property tax is one of the two biggest forms of government revenue production.  This tax is an ad valorem tax in that it is levied as a percentage of value.  These percentages are expressed in milage rates.  The government first must assess the value of your property as a taxation reference point.  The assessment is an estimate of the property's market value.  The government then moves on to developing a budget and tax rate.  Finally, the government must bill property owners and collect taxes from them.
2. Power of Eminent Domain:  Under eminent domain, the government has the right to acquire a piece of land for public use, even if the owner does not want to sell.  The property owner is allowed just compensation for the seizure of their land.  The condemnation process is where the government explains what the property will be used for, and determines a monetary value to use as just compensation for the land to the owner.  Both the definition of public use and just compensation are quite vague, and can vary severely.  Click this link to read a real life story about property seizure.   
3. Police Power:  Police Power gives the government the power of regulation, which gives them the ability to protect the public health, safety, morals, and general welfare.  This basically allows the government to implement land use restrictions that are put in place to benefit the public as a whole.  The interdependence of properties surrounding a given piece of property and their uses greatly affects decisions made under police power.  The comprehensive general plan is put in place by a city as guideline for community development.  The following pieces are typically included: an analysis of projected economic development and population change, a transportation plan to provide for necessary circulation, a public-facilities plan that identifies such needed facilities as schools, parks, civic centers, and water and sewage-disposal plants, a land-use plan, and an official map.  Zoning is one of the biggest key pieces of the plan.  This police power is the process of dividing a community's land into districts in which only certain uses of the land are allowed.  Zones are typically classified as residential, commercial, or industrial.  Mandatory dedications, impact fees, and takings are enforcement tools used by cities.  
4. Escheat:  This government restriction prevents real estate from becoming unowned in the unlikely event a landowner dies without a valid will or living relatives.  The government takes over the property in the event this happens.  

Although the government has the power of many of the private land restrictions I have described in my previous blog post, the powers I have listed and described above are additional powers the government has regarding real estate regulation.  

Private Restrictions on Real Estate Explained

There are certain restrictions built into each real estate contract that prevent property owners from doing specific activities.  These restrictions are written into both private and public property.  First, I will discuss private restrictions.

Restrictions fall under the category of encumbrances.  Encumbrances are the bundle of binding restrictions each property owner is subject to.  Each different encumbrance is listed and explained below.  

1. Covenants, Conditions, and Restrictions: Often abbreviated to CC&R, these are basic restrictions built into each real estate contract that the property owner must follow.  They are often located in the property deed or plat.  Many CC&R may be agreed upon by a home owner's association.  Home owners associations are put in place to ensure property values within neighborhoods do not decline.  Many CC&Rs are put in place to ensure property values do not decrease.  My family personally learned about CC&Rs the hard way several years ago.  My family decided to build an arbor equipped with an outdoor chimney in our backyard.  Our contractor failed to realize he had constructed said chimney in what was deemed a restricted area on our property, as it made the chimney visible from the front of our house.  We were forced to deconstruct the chimney and move it to a side of the arbor that was not visible from the street.
2. Liens:  A lien is a claim on a property as either a security for a debt or fulfillment of some monetary charge or obligation.  A very common example would be a mortgage, in which a property owner will put their house up as collateral when borrowing money to pay for it.  Liens can be voluntary or involuntary, and specific or general.  Voluntary liens are placed on the property by the owner.  Involuntary liens protect the interest of persons who have claims against the property.  Specific liens include mortgages and mechanics liens, and are created to protect creditors using a particular parcel of real estate for repayment.  General liens are placed on the entire property.  
3. Easements:  An easement is a right given to one party by a landowner to use the land in a specific manner.  This is where a land owner retains possession of its land, while coexisting with the holder of the easement.  There are different types of easements, and ways to create them.  An easement appurtenant is an easement that is legal connected to property that touches.  Land that is benefitting from the easement is known as the dominant estate, while land that is burdened by the easement is known as the servient estate.  An easement in gross exists when only a servient estate exists.  Examples of an easement in gross would be when a utility company acquires access to lay its infrastructure across someone's property.  There are several ways to create easements.  Express grant or reservation is the most common way to form an easement, and is when one property owner expresses the right for another property owner to use their property as an easement.  Implication is where an easement is not expressly granted, but it is implied by factual circumstance.  Prescription is where an easement is created when another user uses the lang openly, hostilely, and continuously for a statutory period.  This basically means the user has come onto the property and used it for their own use without the owner preventing them from using it.  To view a real life example of an easement, click the link to this USA Today article.
4. Profit A Prendre:  A profit a prendre, or a profit, is a right to remove part of the soil or produce of the land.  It is nonpossessory.  
5. Encroachments:  An encroachment is an unauthorized invasion or intrusion of a fixture, a building, or other improvement onto another person's property.  Property owners have the legal right to remove another person's encroachment.  Those encroaching also can legally obtain an easement to continue to use the property in the manner they already had been.  
6. Adverse Possession:  This allows individuals to acquire title to land they do not own because they have openly possessed it for a time usually between 7 and 20 years.  Open possession is described as a combination of actual and exclusive, open and notorious, hostile, and continuous.  

This has been a description of what private restrictions on real estate are, and the different types of restrictions that it includes.  

Task 2: The Day I Saw "The Death Star"

An outside view of Cowboys Stadium

When I think about pieces of real estate that fascinate me, I instantly think about "The Death Star."  No, I am not referring to the same Death Star Luke Skywalker destroyed in Starwars Episode IV: A New Hope.  I am referring to one of the many nicknames given to Cowboys Stadium in Arlington, Texas.  This mammoth structure is where the NFL's Dallas Cowboys call home.  In addition to hosting Dallas Cowboys' games, Cowboys Stadium has hosted events such as The Super Bowl, The Cotton Bowl, NBA All-Star Weekend, The Southwest Classic (featuring the Texas A&M Aggies and Arkansas Razorbacks), and numerous concerts.

NBA All Star Weekend at Cowboys Stadium

A picture of the east entrance designed for Super Bowl XLV

Johnny Football dominating the inferior Oklahoma defense at the AT&T Cotton Bowl Classic

Cowboys Stadium was inspired by Cowboys Owner and General Manager Jerry Jones.  It was Mr. Jones' desire to build one of the biggest state-of-the-art stadiums in the world.  Mr. Jones hoped to construct a universal venue with the flexibility and capacity to host famous international events.  Jerry Jones' hands on approach to building the stadium is why it is also known as "Jerryworld."  Cowboys Stadium is one of the newest stadiums in the NFL, and has many unique features.

Jerry Jones looking over his crowd like Big Brother

The signature, and most fascinating, feature of Cowboys Stadium is the high definition video board hung above the playing field.  The video board stretches from one 20 yard line to the other, and was once the world's largest high definition video board until Charlotte Motor Speedway constructed a larger one.  The stadium features a retractable roof in the center, and glass walls behind the endzones that also retract.  The hard steel and glass exterior gives the stadium an intimidating look, similar to that of "The Death Star" featured in the Star Wars movie franchise.

An angled view capturing two of the four screens that make up the world famous Cowboys Stadium high definition video board

Some have criticized the venue, calling it a distraction.  Although many of the features in the stadium are over the top, no other venue in the NFL can rival how luxurious and extravagant the stadium truly is.  If the stadium was not as ornate and fascinating as it is, many international sporting events and concerts would not ever consider coming to the north Texas area.  The Dallas/Fort Worth Metroplex has benefited economically from hosting many of the high profile events Cowboys Stadium has attracted since its inception.

Cowboys Stadium is one of the most expensive pieces of real estate on Earth.  Cowboys Stadium's $1.4 billion cost to build makes it the most expensive stadium construction in NFL history.  This facility has a lot to do with The Dallas Cowboys being named the most valuable franchise in sports by Forbes Magazine.  Mr. Jones bought the franchise in 1989 for $140 million.  Since then, the Cowboys have skyrocketed in value to an estimated value of $2.1 billion.

I have personally attended several events held at the stadium since its inception in the year 2009.  I can personally say I have never been to a stadium in any sport remotely like Cowboys Stadium.  It has become my favorite venue to watch an event in.  Although a project like this is once in a lifetime, it has become a goal of mine to help broker a transaction of this magnitude if I decide to become a real estate transaction lawyer.  Deals like this are one in a million, so to work on one of this size would be a great privilege and honor.

For more information about the stadium, and a small tour, click this link.


 

Task 1 Information About Me

Information About Me

Welcome to the first official post for my FINC 371 blog spanning the entirety of the Spring 2013 semester!  Below I have listed information about myself to satisfy the requirements of our first official task.  I hope you enjoy reading about me and getting to know me more. 

Basic Information

My name is Kristopher Kearney Jr., and I am a fourth year finance major from Frisco, Texas.  I am excited to be graduating this May.  It is hard to believe that my years at A&M will soon be coming to an end after making lifetime friends and unforgettable memories.  With that being said, I look forward to the challenges ahead of me.

Hobbies and Interests

There are several interests that I pursue in my spare time.  Football has been a passion of mine since I began playing in middle school.  My playing days are limited to flag football now, but I still make a point to hit the field with my friends every weekend.  Other intramural sports that I participate in are basketball and softball.  

I am also involved in my fraternity.  I am a proud member of Sigma Phi Epsilon.  I currently live at our fraternity house, and I have held several elected positions in the past.  I am a former Rush Chairman and Finance Chairman for the fraternity. 

I am also interested in pursuing a career in law.  I plan on attending law school as soon as I graduate from A&M.  Hopefully, I will be receiving good news later this semester regarding which school I will be attending.

What I Hope to Get Out of This Class

I am looking forward to learning more about the real estate business.  Hopefully FINC 371 will allow me to improve my knowledge on the subject.  FINC 371 will broaden my horizons in the field of finance, as this is the first real estate class I will have taken at A&M.  

I was inspired to sign up for this class after working for a transactional lawyer over the winter break and this upcoming summer.  As a transactional lawyer, my boss uses his knowledge of the real estate business to ensure deals go through daily.  If I choose to follow this career path, FINC 371 can help me learn how to do my job better.  

Career Goals

As I have mentioned in the previous paragraphs, I plan on graduating in May and attending law school in the state of Texas for the next three years.  My goal is to work for a big firm upon graduating from law school.  I have not quite pinpointed what type of law I plan on practicing.  Although I know I want to practice some variety of business law, I have not deciphered whether I want to focus on securities law or real estate transactions.  Long term, I would like to become partner at a big firm or begin my own law firm.  

Unique Fact

The most unique thing about me is I was born in Manchester, England.  My father used to play professional basketball in England for the Manchester Giants.  My father and mother moved to England after getting married and graduating from Florida Southern College.  My mother became pregnant with me during my father's final season playing basketball.  I was their first born child.  My family decided to return to the United States a few months after my birth, which is why I lack a distinct British accent.  I was born with duel citizenship, but now I am solely an American citizen.  

Bucket List

There are several things I would like to do in my life before I pass away.  It has always been my dream to attend the Super Bowl.  Any fan of the NFL will tell you that there is no bigger rush than seeing your favorite team hoist the Lombardi Trophy upon winning a Super Bowl.  Luckily, I have seen one of my favorite teams, the Tampa Bay Buccaneers, win the Super Bowl in my lifetime already.  The experience would be that much better if I could see them win the Super Bowl in person.

I would also like to see The Aggies win a National Championship in football some day.  This goal is certainly out of my hands, but nothing would make me happier nonetheless.  

The one thing I truly wish I could participate in is an episode of Saturday Night Live.  SNL has been my favorite TV show since Adam Sandler and Chris Farley were cast members.  I have always dreamed of issuing the iconic phrase "Live from New York, it's Saturday night!"  I have no idea how a finance student from Texas A&M would ever come across the opportunity to say those magical words, but it would be a lifelong dream to be able to.

Favorite Websites

Below are the links to several of my favorite websites:

Facebook
Where I get my social media fix, and connect with current and former classmates.

Wall Street Journal
Where I stay up to date in the world of finance.

Sporcle
My favorite quiz website, where I enjoy wasting time.

Hulu
Where I catch up on my favorite TV Shows.

ESPN
Where I stay up to date in the world of sports.

Aggie Yell
Where I stay up to date with Aggie athletics.

A picture of my father and me