I'd like to take a few minutes in this article, and discuss what is happening in the Las Vegas real estate market in general and with units at the Regent in North Las Vegas specifically. I’d also like to briefly discuss some of the options that are available to any current owners or investors in the Regent Las Vegas.
We all know that the last few years have been very difficult for all of us who own real estate in Las Vegas. The market has fallen as much at 80% in some areas of the Las Vegas valley. Here at the Regent, prices have dropped to around 27 cents on the dollar from original pricing and as low as 19 cents on the dollar from the highs of 2007.
I have been involved with the Regent since 2003 and have seen both the highs and the lows. My wife and I own three units here, I was on the board from 2007-2010, and served as its president for most of 2009. I have been on site since 2007 and currently work in the Re/max office in the front of the complex. As a licensed real estate agent and an investor myself, my clients are primarily other real estate investors. Last year I sold over 30 of the 67 units that closed here at the Regent…so nearly half of all the sales in the entire development. I am well versed in understanding the complex as a whole.
Over the last year we have seen rental rates drop about $200 per unit. This is having an effect on the quality of the tenants, the vacancy rates, and, of course, the bottom line cash flow on Regent investment units.
The news is not all bad as this northwest area of Las Vegas is continuing to develop nicely. A new Lowes home improvement store and Walgreens are due to open within a couple of months, a new bus station opened at the end of March and the Community College of Southern Nevada has announced they will be building a campus about 1/4 mile north of the Regent.
In 2009, foreclosure properties dominated the Las Vegas real estate market, and the Regent was no exception. 75% of all sales in Las Vegas in 2009 were foreclosures, and the percentage was even higher here in our complex. 67 units changed hands at the Regent in 2009, and almost all of them were foreclosures. With 274 total residential units in the complex, this means that 1 in 4 property owners lost their unit to foreclosure last year alone. Of the 22 one bedroom units sold through foreclosure, the lowest price was $29,900. There were 36 two bedroom units sold, and the lowest was at $44,000 (2 of them). Of the 9 three bedroom units sold last year the lowest priced unit was $55,000.
I believe that foreclosures will slow down this year, but only because of a dramatic increase in short sales. This is a trend that is occurring throughout the Las Vegas valley. 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.
As of this writing, there are only two bank owned REO foreclosures listed for sale in the entire project, but there are a total of 21 units listed for short sale. Of these 21 units, only two are actually available… the other 19 are already under contract in a pending or contingent status.
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 what are your options at this time?
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 Regent unit, I would love to discuss your options with you. I specialize in both the Regent 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
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