As a licensed Realtor here in Las Vegas, over the last three years I have followed the sales trends at the MGM Signature Hotel Condo very closely. (I have also sold 15 units over that time period.) I have also written and published several articles geared primarily towards investors looking to purchase MGM units at today’s new, low prices. This article is directed more towards the original owners who purchased properties at the height of the market and are now finding themselves upside down in their units. In this article, I will offer information on current market statistics and what options may be available to MGM Signature owners going forward.
As you are probably aware, since the MGM property auction of April, 2009, prices have been dropping dramatically. In the first quarter of 2010 (Jan 1st to March 31st), we saw 18 one bedroom units at the MGM Signature sold through the multiple listing service. Unit 125-714 established a new, low price for one bedrooms at $165,000. This same unit had sold new in 2007 for $705,000. That means the new sales price was roughly 24 cents on the dollar. During the first quarter, the highest sale price for a one bedroom was $271,000. These sales statistics do not include cash deals at the trustee sale.
Studios at the MGM Signature in the first quarter of this year sold for prices ranging from $114,000 to $218,000. Unit 125-205 is a low floor, strip side studio unit with a patio that sold new for $485,000. It sold this quarter for $114,000. (Also approximately 24 cents on the dollar.) The good news for new investors is that studios can actually cash flow at these lows. One bedrooms are still not cash flowing, even at the new lows, because of their higher HOA dues. This is the reason why we are seeing the studios in the MGM towers selling for a higher price per square foot than the one bedroom units.
Since the beginning of 2009, when we began to see foreclosures mounting at the MGM Signature, there have been a total of 168 studios and 67 one bedroom units foreclosed upon and resold within the 1728 unit complex. This represents about 14% of the total complex. I believe that we will continue to see distressed sales on MGM Signature properties since virtually every original investor is upside down and very few paid cash for their entire investment. However, I do believe that the nature of those distressed sales is changing in a very significant way.
As of this writing, there is only one bank owned REO foreclosure unit in the entire project. This is because foreclosures are slowing dramatically and being replaced by short sales. There are a total of 41 units currently listed for short sale. Because of the government’s push to get short sales approved and accepted, they have picked up dramatically in the Las Vegas market. Last year short sales amounted to 8% of all sales while REOs accounted for about 75%. Already this year, short sales have risen to 25% of all sales while REOs have dropped to 50%. At this rate, I project that we will see a total switch of REOs and short sales by the end of the year.
There is a huge advantage to having your unit go through a short sale vs. a foreclosure. Credit experts tell me that a foreclosure will generate a 200 point hit to your credit report as opposed to an average of near 50 points with a short sale. Also, if you work with a seasoned Realtor and they are able to successfully negotiate a short sale that eliminates a deficiency judgment, you do not have to worry about the bank coming after you for the difference between what you owe and what the property fetches at the foreclosure auction.
Most analysts feel that we are in for a long ride before property values are anywhere close to the levels of 2007. At the April meeting of the Real Estate Insiders Club here in Las Vegas, Mary Riddel, Associate Professor of Economics at UNLV, made it clear that she believes we are in for about 8-12 years before we see any substantial appreciation in real estate values in the Las Vegas Market.
So, if you are an upside down MGM Signature owner, what are your options?
Keep in mind that I am not an Attorney, CPA, or Investment Advisor and I do suggest that you seek legal, professional counsel before deciding how to proceed. My goal here is to give you some general outlines and to summarize your present options.
Hang On: If you can, this will preserve your credit. In considering this option though, you need to determine if you can afford negative cash flow from your unit over the next 10 years or longer until values rise to more than the amount that you owe and/or cash flow becomes greater than your costs of ownership.
Foreclosure: Most likely your worst option of the bunch. If you stop making payments on your unit, the bank will eventually auction off the property and take it away. This will hurt your credit tremendously and stay on your credit report for up to 7 years. You will also be vulnerable to a deficiency judgment.
Deed in Lieu of Foreclosure: Just turn the keys into the bank and be done with it. This will immediately release you from most of your personal indebtedness associated with the defaulted loan, however you will still be vulnerable to a deficiency judgment. A deed in lieu will hurt your credit a little less than an actual foreclosure but far more than a short sale.
Short Sale: More and more property owners are now looking at this option. With an experienced Realtor, you have a good chance of being able to successfully navigate the short sale process and sell your property to the new investors now coming in. However, if you inadvertently hire an inexperienced representative, you may very well find your unit foreclosed upon before you are able to get a short sale approved by the bank and sold to a buyer.
If you are considering short selling your MGM Signature unit, I would love to discuss your options with you. I specialize in both the MGM Towers and short sales. I am currently successfully negotiating 5-7 short sales per month and we are seeing bank approvals coming in at a much faster clip in the last few months.
Please feel free to contact me should you have any questions at all about the market, and/or the process for properly handling your unit.
Glenn Plantone
(702) 769-9872 or gsplantone@gmail.com
