Summer 2008

Mortgage Securities: The Buying Begins
When it comes to restarting the market for mortgage securities, the famous quote by Winston Churchill is appropriate. As World War II began to turn in the favor of the Allies, Churchill said, "This is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning." In the case of financial markets, the end of the beginning comes as banks are finding buyers for their underwater mortgages. Read more...

Distressed Property: Chronology of a Defaulted Loan
As uncertainty about the economy continues, lenders and investors are well-advised to review the warning signals of a distressed property so that preventive action can be taken. These warning signals frequently appear in some variation of the following pattern: deferred maintenance, over-financing, rising vacancies and declining rent receipts, tax delinquencies and default in debt service payments. Read more...

Purchase and Sale: Contingent  Installment Sales
Installment sales of real estate--whereby a seller takes back a purchase money mortgage for all or part of the sales price--become more important in markets such as now when bid-offer spreads widen. Sellers seek to benefit from reportedly low cap rates (high prices) while buyers' offers often are based on more normalized valuations. One way to bridge the gap between the different expectations is the contingent installment sale--an "earnout" arrangement that will increase the ultimate sales price if the seller's expectations are realized. Read more...

Leases: Tenant Strategy for Excess Space
A weakening economy means many business tenants may seek to cut costs, including rental expense. Since landlords are very reluctant to reduce rent, tenants must consider other alternatives. Two possibilities are a sublease or assignment of unneeded space and a giveback of space to the landlord. Read more...

Are Brokers Independent Contractors?
The National Association of Mortgage Brokers, the primary trade group for brokers, takes the position that a broker works neither for the borrower nor the lender. Imposing a fiduciary duty on the broker would increase the risk that brokers might be sued whenever a loan went bad. Read more...

Somerset CPAs Real Estate Team News
On Thursday, August 7, Somerset associates will be attending the BOMA Indianapolis golf outing at Highland Country Club. Please stop by our tent that will be at one of the holes for snacks and prizes.

Michael Fritton will be presenting "Value Chain Analysis & Competitive Analysis" at the Somerset Practical MBA Program on Wednesday, August 27. For more information and registration, please visit the Seminars page of our web site.

Somerset is a proud sponsor of the Penrod Arts Fair again this year. Indiana's nicest day in 2008 will be Saturday, September 6 when the 42nd Annual Penrod Arts Fair is held on the beautiful grounds of the Indianapolis Museum of Art. Please visit their site for additional information.

Cynthia Bay will be co-presenting "Cash Flow and Budgeting for Women" on Wednesday, October 1 as part of Somerset's Financial Literacy for Women series. Please view our video about the series and visit our web site for additional information.

Real Estate Focus is provided by Somerset’s Real Estate Team for our clients and other interested persons upon request. For additional information on the issues discussed, please contact Michael Fritton, CPA. Since technical information is presented in generalized fashion, no final conclusion on these topics should be made without further review. 

These articles were written by and published herein with the permission from professionals of BDO Seidman, LLP.  Somerset is a member of the BDO Seidman Alliance, a nationwide association of independently owned accounting and consulting firms.