HOA Foreclosures in Las Vegas - Part 2

There are four primary scenarios encountered as we pursue clear title on a property:

1. Our attorney pursues quiet title on the home in an attempt to get a 100% free and clear title on the property that is marketable, can be insured, and allows us to resell the home at any time.  Although it is not the norm, there have been many cases when this method has worked and the buyer of the HOA delinquent receivables has walked away with a free and clear title from the quiet title procedure.  Since many investors are buying these HOA receivables at 5-10 cents on the dollar, when quiet title does occur, it generates a huge return on investment.
2. If a lending institution still holds a lien (1st or 2nd mortgage) on the home, a second strategy is to hold onto the home to generate cash flow for as long as possible while the bank tries to foreclose on the property.   If properties are bought at a low enough price, and the foreclosure is not completed quickly (as they usually are not,) there is a very good possibility that this will end up being a positive return situation for our investor client.  In addition to rents collected, the probability of receiving the majority of the investment back from the bank during negotiation is also very strong.  The bank may have to pay the investor the super priority lien amount plus the overage of what was paid at auction.  If this is the case, the investor receives all of their money back, less the rehab costs, plus any rental cash flow generated during the foreclosure process.   This seems to be what most investors are banking on and are now starting to bid properties up to 20% of the property’s value at these HOA auctions.
3. The third scenario is one that has generated personal success for my clients and I and one which I believe will become the most profitable and prevalent of all.  Once an investor has possession of the home, and has hired an attorney, it becomes very costly and time consuming for the bank to battle to get their home back.  If the bank were to foreclose on the home, their goal would be to eventually list and sell the home anyway.  So why not sell the home to the investor that currently has possession of it?   We have successfully negotiated with the bank through our attorney to buy a home at 70% of BPO.  On this particular home, the client had only put a little over $4000 into the purchase.  This $4000 includes the cost of the lien at auction, rehab, maintenance, management for a year, and attorney's fees less the rental proceeds from the months the home was rented.  The bank agreed to sell the home to our investor for $84,000 and the home is worth about $145,000 in today’s market. 

Another example of the benefits of having a good attorney can be seen in a recent transaction where our client purchased liens for two condos and after negotiation the bank simply wrote off and completely released their liens on the properties.  In that case it appeared that the bank understood that it wouldn't be economically beneficial for them to fight and spend upwards of $30,000 in legal fees for a $50,000 condo. 
As you may have gathered from trying to understand this new form of investing, there is a tremendous upside to it and very little downside based on current legislation, court cases, and history that we have seen so far.  I have personally been involved in approximately 30 of these transactions and have sold around 50 others to my client base of investors. 
If you are interested in learning more about the HOA foreclosure process and how you can use it to generate returns, please give me a call directly and I can answer any and all questions you might have.  I can also describe in detail how we are able to partner with investors to buy these homes, townhomes, and condos at 5-20 cents on the dollar and manage them effectively while getting the maximum return out of each home that we obtain, manage, or sell. 

HOA Foreclosures in Las Vegas - Part 1

 

As many of you know, there has been very little bank foreclosure activity lately in the Las Vegas marketplace (an average of 270 homes per month over the last 3months-May, June, and July 2013.)   However, a new development in the Las Vegas real estate scene is HOA foreclosures. Home Owners Associations (HOA’s) are now foreclosing on homes within their jurisdiction for unpaid HOA fees.

We have been working hard to secure many of these foreclosures for our investor clients using two  paths:

1. Buy the HOA delinquent receivables for homes, townhomes, and condos at auction (Trustees sales, collection company auctions and/or private attorney auctions.
2. Approach HOAs directly and buy their receivables for these delinquent accounts, foreclose on the homes ourselves, and gain title to the homes through this method.

When we buy at one of the auctions, we usually end up paying between 10-15% of the property’s value for the home.  We get a foreclosure deed, we record it, and this gives us legal possession of the property.

If the home is vacant, we rehab it and rent it out for cash flow.  While we are collecting rent on the property, our attorney negotiates with the bank to obtain "quiet title" for free and clear ownership of the home, or our attorney negotiates with the bank to buy the property at a discount from current market value.

If the home is currently occupied with a renter, we place the home in our property management division and rent comes directly to us.  If rent is not paid, we treat the property as a normal rental and evict the current tenant.

If the house is occupied by the former owner, we give them three options. 

1. They stay, sign a lease, and pay rent as any other tenant would do. 
2. They stay unlawfully and we have them evicted (unlawful detainer.)This process takes approximately two months.
3. They move out voluntarily and we are able to rehab the home and get it rented. 

When we approach the HOAs directly and negotiate the purchase of their delinquent receivables, we pay off the collections costs, foreclose on the homes (with their assistance), and are able to acquire the homes by paying approximately 5% of their current market value.  We are able to acquire more homes at a cheaper price through this method, but the time frame is much longer.

Gaining possession of the home is very important. It allows us to control the rental and management of the home.  This control does not grant us free and clear title which is what we are ultimately seeking, but it does allow us to generate cash flow on the property while we pursue title. 
 

How To Determine The Value of Your Las Vegas Property Part 1

Today, I continue with part 2 of my series discussing how to value your potential investment properties using the method I use for Broker Price Opinions.

Adjustments

Once you have obtained your comparables, adjustments are then made to the comparable properties to reflect their features that are superior or inferior to the subject property.  IMPORTANT: The adjustments are calculated on the price of the comparable properties, not the subject.   For example, if a comp sold for $180,000, then you will add or subtract adjustments to that $180,000 in order to account for positive or negative relative features of the subject property. After the necessary adjustments are made, we are left with a reasonably accurate picture of the worth of the subject property. It can be confusing at first, determining whether an adjustment to the price of the comp should be positive or negative, but it gets easier with practice. The basic idea is to use a negative adjustment on the comparable property, if the comp has superior features to the subject property and positive adjustments on the comparable property if the comp has inferior features to subject property.  A BPO looks much like an appraisal, and the adjustments work the same way. Below is an example of a typical BPO/appraisal adjustment spreadsheet.



Based on the above comparables and adjustments, the subject property is worth between $439K and $509K.

How to Calculate Adjustments

Calculating adjustments is a judgment call based on an individual market.  When adjusting for square footage, one should take into account the average price per square foot at which comparable properties are selling in the specific neighborhood being evaluated. As a general rule of thumb, extra bedrooms are worth around $8,000. It is often surprising to people to learn that upgrades like pools and exceptional finishes don't necessarily add much to a property in terms of appraised value. They do, however, make the property easier to rent and easier to sell.

How To Determine The Value of Your Las Vegas Property Part 1

As Las Vegas home prices continue to rise, many homeowners are finding themselves in a position to sell their homes.  Investors, also, may be looking to cash-in for a profit on properties they purchased at the bottom of the market.  Clients often approach me asking for guidance on their list price.  They want to know what their property is worth.  Certainly, there is no substitute for a Realtor that really knows their city and can help you understand the intricacies of pricing within certain neighborhoods, price points, and subdivisions. But even an out of town investor, with little familiarity for the Las Vegas market, can calculate a reasonable value for their property by knowing how to adjust local comps.

Over the years, I have completed numerous broker price opinions (BPOs) for banks.  Broker price opinions help lending institutions determine values on properties.  Using the BPO pricing format can help you to generate your own reasonable evaluation of what your property is worth. When completing a BPO, you are required to reference three sold and three active comparables. Those comps should be as similar to the subject property as possible. But, since comparable properties can vary tremendously between those that are very similar to the subject property (such as model matches) and those that are quite different (areas with limited inventory) the key to an accurate BPO is making accurate adjustments. Every home is different and making accurate monetary adjustments to account for those differences is the key to producing an accurate BPO.
Let's begin by examining the typical bank guidelines for selecting comps to use in valuing a property.

BPO Guidelines

• Distance:  All comps must be within 1 mile of the subject property if it is in an urban or suburban neighborhood.

• Age:  All comps must be within 10 years of subject property, unless the home is over 50 years old.  At that point the age brackets can be widened as necessary.

• Size/square Footage:  Square footage for possible comps must be within 20% of the subject property.  Basement square footage and finish are evaluated separately from above ground square footage and is valued at a different rate.

• Property type:  Comparable properties must be the same type as subject.  Single family detached homes must be compared to single family detached homes, duplexes to duplexes, condos to condos, etc..

• Bedroom/bathroom count: Comparable properties must have a bedroom and bathroom count within one unit of the subject property.

• Style:  Although not required, it is advisable to compare similar styles of home.  Two story homes should be compared to two story homes, split level to split level, ranch to ranch.

• Sale date:  Sold comps should have a close date within the last six months. Many banks prefer three months.

Exceptions to Guidelines

Not every property has three perfect sold and active comparables in the same neighborhood.  If you have to break the guidelines, make sure that you are breaking them because you legitimately have to, not because you are using comps that provide you with a higher (or lower) price target. When preparing a BPO for a bank or other lending institution, brokers are required to thoroughly document any exceptions they have made to the guidelines.  This is a good practice for private investors as well.

In my next article, I will discuss the adjustments that must be made to comparables to arrive at an accurate BPO.

Hot Weather Cools Home Sales in Las Vegas

Temperatures in Las Vegas in June soared above average bench marks, but the hot weather seemed to be one factor contributing to slightly cooling sales trends in the local real estate market. The GLVAR reported declines in both new home sales and resales of existing homes last month. During June of this year, there were 3,642 closings of existing single-family homes compared to 3,884 closings in May (down 6.2%) and 3,945 closings in June of 2012 (down 7.7%.) This mark is also down from the high volume of sales Las Vegas recorded shortly after the market collapse.  Vegas properties closed at a rate of 4,702 resales in June of 2009, mostly due to the huge number of cheap foreclosures flooding the market and being snapped up by investors at that time.

New home sales were also down in the Las Vegas valley. Builders unloaded just 637 new properties in June, down 8.5% from May.  This number is still significantly higher than the previous June though, when very little new construction was available on the market. Dennis Smith, president and CEO of Home Builders Research, blames hotter than average weather and the sharp rise in interest rates for the decline.

It is interesting to note, however, that 60% of Las Vegas deals are still being completed as cash transactions, most of these sales to investors.  It seems unlikely to think that investors who are paying cash would have much regard for either rising interest rates or rising temperatures.  Rather, it seems to me, that the slow down in sales rates has more to do with the decrease in foreclosures on the market and the subsequent difficulties investors are facing in finding properties that cash flow as profitable investments.

I have been pursuing HOA foreclosures over the last year as an excellent way to obtain Las Vegas investment properties for my clients at 2010 and 2011 prices. These properties can not only generate positive cash flow, but they have instant equity and still benefit from the rising home prices we expect to continue to see in Las Vegas as the housing market recovers further from its catastrophic lows. If you are interested in learning more about this unique way to purchase discount Las Vegas real estate, call Glenn directly for more information.

Bubble Much? Is a Second Real Estate Bubble Upon Us?

Here's the short answer to that question: Maybe.

Home prices in the United States spiked a remarkable 12.2% in the year long period ending May, 2013.  That gain is the largest one-year post since 2006. In fact, for the first time since the housing collapse, two cities posted new record high median home prices: Dallas and Denver. In Las Vegas, the gains were even more incredible. Las Vegas home prices rose 23.3% in twelve months, although prices still remain well below the highs of 2006.

So what does all this mean for the average home buyer or the real estate investor? Are prices going to continue to sky rocket? Are we creating another real estate bubble here in Las Vegas? Are we watching the beginnings of "Bubble 2014"?

Maybe. But I don't think we've reached the "danger zone" just yet. Many economists believe that rising mortgage rates (likely to continue to rise as the Fed begins to taper off quantitative easing) and rising supply levels will hold back the meteoric rise of real estate values and start to restore balance to the Las Vegas real estate market in the next year. I think that this is a definite possibility. IF these things occur, then I believe prices will stabilize in the Las Vegas market and we will likely avoid another real estate crash. IF, however, supply levels in Las Vegas do not rise quickly enough to keep up with demand, or if mortgage rates rise only marginally and do not serve as a deterrent, then it is likely that we will see prices continue to rise sharply in the Las Vegas real estate market. If that happens, we may very well find ourselves facing another bubble. Bubble 2014 perhaps.

Only time will tell.



 

Land Grab Is On In Las Vegas!

DR Horton and Pardee Homes gobbled up most of the recent land offering from the government here in Las Vegas.  The Bureau of Land Management auctioned off some 109 acres, raising around $21.4 million.  This purchase is almost universally being heralded as a great sign for the Las Vegas housing market.  Since the housing crash in 2008, the government has only sold around 30 acres of Las Vegas land.  It's not that the government didn't want to sell, the developers simply had no interest in buying. With the massive amounts of foreclosures on the market from 2008-2011, partially developed communities sat vacant across the valley as home builders essentially closed up shop. Now, with inventories of existing homes at all time lows, builders are once again in the buying mood.

It also seems that they are willing to pay a premium for the land they are purchasing. According to BLM officials, the $21.4 million paid for the auction's nine parcels exceeded the appraised value of the land by more than $7 million. The sale price worked out to be around $181,000 per acre. Values during the recession had sunk as low as $5K - $25K per acre. The rebounded price, however, is still much lower than the bubble prices of 2006/2007, when acres of land in Las Vegas sold for upwards of $650,000 per acre.

Robert Deville, president of Harmony Homes in Las Vegas, reiterated that land is becoming increasingly difficult to come by in the now booming Las Vegas real estate market. “We came to a grinding halt with the problems we had," he explained, "and now the demand is there but the plots and land supply is not. Right now it is very difficult to find parcels. I’m always looking for land.”

Flipping Slows in Las Vegas - We Could Have Told You That!

A new report from California based real estate information group RealtyTrac was cited recently in the Las Vegas Review Journal.  The report shows that home flipping activity has slowed dramatically in Las Vegas in the first half of 2013. The average gain per home is also down significantly. The Review Journal explains:

"Investors in Nevada flipped 2,932 homes from January to June, a 34 percent decline compared with the first six months of 2012. The average purchase price for a flipped property, defined as a home bought and resold in the same six-month period, was $162,472. That included an average gross profit of $15,205, or 9 percent.

Nationally, investors flipped 136,184 homes, for a gain of 19 percent. The average purchase price was $200,942, with a profit of $18,391, also a 9 percent margin. Buyers typically purchased at a 5 percent discount on market value, and sold at a 1 percent premium."

Well...yeah.  We could have told you that was coming almost a year ago.  Oh wait...we did tell you. Ever since the passage of AB289, the inventory of foreclosures in Las Vegas has been dwindling.  Without this traditional source of undervalued homes, investors have struggled to find homes to flip.  Lately, they've struggled to find even homes to keep as buy and hold investments.

We've been investigating a new source of undervalued properties for our investor clients in the last year: HOA foreclosures. This new buying strategy has been working very well and we are once again able to secure property for our investors at prices we thought we might never see again.  If you are looking to purchase investment property in Las Vegas and have been unsuccessful, give me a call directly. I can explain the HOA foreclosure process to you in more detail and let you know how it can help grow your portfolio of investment properties.

U.S. Home Builder Confidence Reaches 7-Year High

It has been almost eight years since homebuilders could be described as "optimistic" about the future of new home sales. But, in the builder sentiment index released by The National Association of Home Builders and Wells Fargo from May of this year...they were. The survey measures customer traffic at new home sites, sales conditions, and projections for the future. For the first time since before the market collapsed, more builders rated these conditions as good rather than poor. With interest rates remaining reasonably low, to spite recent advances, and current inventory continuing to be light, builders are beginning to feel good about the future of new home sales.

Just another domino it seams in the housing market's break neck race towards new highs...especially in Las Vegas. Nat Hodgson, executive director of the Southern Nevada Home Builders Association, recognizes that the current boom in new housing in Sin City traces back to the passage of AB-284. Recognizing that this bill would slow foreclosures, and with buyers struggling to find any available inventory, builders rushed to apply for permits. "We're very encouraged by the local economy," Hodgson said, "We're no longer looking down at the bottom. We're looking up to get out of the hole we dug ourselves into."

Yeah. Maybe.

Or maybe we are setting ourselves up for another hole. Many economists have noted that the rapid rise in Las Vegas home prices seems to have very little to do with an improving economy. They have wondered aloud at the feasibility of these gains continuing.

The bottom line is that real estate continues to be very volatile in Las Vegas.  I'd love to tell you that you can come to our town, purchase any piece of real estate, put a renter in it, sit back and make money.  And three years ago you could do pretty much just that. But times have changed.  There are still deals to be had in Las Vegas real estate.  But you have to know where to look, and you have to be careful. I understand this market because I have invested in it, and sold profitable properties to my investor clients, through all the ups as well as the downs. If you are interested in investing in Las Vegas real estate, call me.  We should talk.

North Las Vegas Approves Proposal to Seize Underwater Homes Using Eminent Domain

 

 

On the surface it looks like a win-win proposal.  The City of North Las Vegas has seen revenues plummet over the last several years as a result of the huge rate of foreclosures in the city resulting in lost property tax revenues.  In fact, North Las Vegas very narrowly avoided bankruptcy last year. At the same time, North Las Vegas homeowners are suffering under the highest rate of upside down mortgages in Clark County, and one of the highest in the nation. An unconventional plan appears to propose a solution to both problems. How does it work? Under the controversial plan proposed by San Francisco based consulting firm Mortgage Resolution Partners, the City of North Las Vegas would seize thousands of underwater homes using eminent domain provisions (the same provisions used to seize property that lies in the way of interstate expansion, etc.) The city would then pay the banks (or private investors as MRP likes to call them) a fraction of the amount owed on the property and would restructure the debt and resell it to another “private investor” at a lower principle balance.  For this service, both MRP and the City of North Las Vegas would take a fee as a percentage of the loan amount for each and every home seized in this manner. The idea is that homeowners end up with a home loan with a principal balance closer to the actual current market value of the home, the city makes money, MRP makes money, and the only loser is those pesky banks we all love to hate.

What could possibly go wrong?  A lot actually.

First, there is the issue of litigation. Examiners of the bill testified before city council yesterday and noted that the possibility of litigation from the private investors who currently own the mortgages in question is very high.  Ward 4 councilman Wade Wagner, the only council member to vote against the bill, noted “There’s a lot of unanswered questions. But I think the only thing it (the bill) guarantees is a lot of litigation for a lot of years.” Second, there’s a small problem with the potential legality of the plan. Nevada Bankers Association President Bill Uffelman noted that there are legal limits on the amount of property the state can seize through eminent domain and then transfer between private parties. There’s also the matter of selling these restructured mortgages at the end of the deal. I have to personally wonder how many banks and other “private investors” will be lining up to buy mortgage backed securities for mortgages that were non-performing to begin with and which were seized in a manner that resulted in a huge loss for the investors who held them originally.

Of course the final issue that no one seems to want to address is the issue of morality. I am as much for saving people’s homes as anyone. In fact, when I first read about this plan my initial reaction was very positive.  I thought, “Great! These people will be able to stay in their homes.  The government hasn’t been able to help them, the banks won’t modify their loans, this is great for them.” And it is. But at whose expense? Our society has become so comfortable with vilifying “big corporations” and banks as the bad guys that we sometimes neglect to see the forest for the trees.  Banks are what drive our economy.  Without banks lending money we wouldn’t be able to buy homes, or cars, or pay for college. Without banks lending money the housing industry will very quickly grind to a halt.  And yet, we seem perfectly willing to hand over millions of dollars to MRP to help us stick it to the banks whose major crime seems to be that they loaned money to us to begin with.  Silly them.

The Las Vegas Housing Market Isn't All Good News? What?

I've sort of started to feel like a stick in the mud.  Median home prices are rising meteorically in Las Vegas, inventory remains ridiculously low, and foreclosures seem to have simply faded into the sunset.  New home starts are moving back to pre-bubble levels and everything seems to be coming up roses for the Las Vegas real estate market.  So why do I keep raining on the parade?  Well, lots of reasons really, you can read my previous blog posts/press releases for all of them, but I was happy today to see a report from the Nevada Department of Business & Industry that makes me feel a little more justified in my cautionary outlook.  It's not that I'm saying that Las Vegas real estate isn't improving, it's just that I'm encouraging my clients to proceed with caution, because the market has not fully recovered.

The new index released by the Department of Business & Industry seems to agree with me. The Nevada Housing Stability Index was just unveiled.  It is a report designed to use multiple markers to evaluate the true strength or weakness of the real estate market.  It is interesting to note that even with all the positivity circulating lately, Las Vegas earned a D+.  Yep, you heard it right...a D+.  Coincidentally, had the measure been available at this same time last year, we would have earned a D.  That's not a huge improvement.

So what's dragging us down? A few things actually...nine to be exact. Nevada lags behind average in the following categories: percentage of homes under water, share of investors, foreclosure volume, delinquency rate, housing affordability and availability and four others. Nevada received middle of the road marks for distressed home sales, and our only two high marks were for balance between supply and demand and demand for new construction.

So where now? You can look at the report two ways.  First, it ought to remind us all to proceed with caution.  It remains a great time to invest in Las Vegas foreclosures and other real estate, but you need to work with a professional who can help you evaluate cash flow on your potential investment and make sure that you are in a solid position to endure market fluctuations.  The second way to view the report is that there is lots of room for improvement.  This bodes well for investors who are afraid they've "missed the boat" so to speak.  It would appear that we have a lot of upside ahead of us still in the Las Vegas market.

If you are interested in learning more about Las Vegas foreclosures or other real estate investments, contact Glenn directly.

Catherine Cortez Masto Vows to Ensure Punishment of Banks Continues

OK, well maybe that's not exactly how she put it.  But I'm pretty sure that's what she means.

Nevada Attorney General Catherine Cortez Masto summarized a report released earlier this month saying that the report shows that the largest mortgage servicers in the U.S. are not complying with "several key aspects" of the settlement imposed on them by the court. These key aspects include regulations designed to streamline the loan modification process, improve customer service, create single points of contact for consumers within the bank, and eliminate billing and statement inaccuracies. Several of the large banks including Citi, JP Morgan Chase, Bank of America, and Wells Fargo were cited for compliance issues. If the banks do not adequately address these issues they can be hit with more fines. More fines in addition to what you might ask?

In addition to the fines issues to the major banks designed to "recompense" Nevada homeowners. It is estimated that mortgage providers have refunded an amount in excess of $1.8 billion to Nevadans in the last several months as a result of this directive. I've seen this in action. One of my colleagues walked into the office a few weeks ago with a check for almost $1500. She was a little puzzled.  "Why am I getting this?" she asked me.  "All I did was not pay my mortgage and let the bank foreclose on my property. I don't really feel like I deserve to get money back. (pause) Of course I'm going to take it." Well sure. I would take it too. But I agree with her. We wouldn't deserve it.

I continue to find Ms. Cortez Masto's insistence that the banks should be treated as whipping boys to be a little bit puzzling. I recognize that the banks engaged in bundling of securities and re-selling that were, let's say, less than transparent. But let's be realistic here for a minute.  Why did my colleague with the $1500 check lose her home?  Was it because the banks did something awful to her? No. It was because home prices plummeted and she was laid off from her job. Not really Citibank's fault.
Regardless, it appears that Nevada homeowners may benefit from these regulations in some way if more loan modifications can be initiated on the huge percentage of homes that are still underwater in Las Vegas. Another option this year is the short sale. If you are still underwater on your home, and looking for a way out, you need to consider short selling immediately. It is very unlikely that the tax forgiveness program currently in place for mortgage debt will be extended for another year. That means that the time to sell your property is NOW...so you aren't hit with Federal income taxes on the difference between what your home is worth and the amount you still owe on your mortgage.  If you don't know what I'm talking about, call me and I will explain to you why the window for short sales is closing in Las Vegas.

Slowing Down?

Maybe just a touch.

Data from April showed that pending home sales slowed from their feverish gains and rose less than expected.  Many experts believe that this is because of limited inventory. The buyers are still there for the homes, but there simply aren't enough homes to be sold. This is especially true for real estate markets like Las Vegas. Since Las Vegas still leads the nation in the percentage of homeowners who are underwater on their mortgage, there are large numbers of homes that simply can't be sold...more than 50% actually.  As a result, home buyers are being driven to new construction.  The sale of new construction homes continued to grow in April with gains of 2.3%. This represents an annualized pace of 454,000 homes and is the second fastest pace since July of 2008 according to the Commerce Department. 

“The housing market continues to squeak out gains from already very positive conditions,” said the NAR’s chief economist Lawrence Yun in a recent statement. “Because of inventory shortages, higher home sales will push up home values to the highest level in five years.”

Meanwhile, mortgage rates continue to creep up. According to Freddie Mac figures, the average rate for a 30-year fixed mortgage climbed to 3.81 percent last week, up from 3.59 percent the week before. Last November (2012), the rate had reached an all-time low of 3.31 percent.

Las Vegas Still Leads the Nation in Underwater Homes

A recent report reprinted in the Las Vegas Review Journal shows that Las Vegas, even after years of record setting foreclosures, still leads the nation in underwater homes.  Zillow's Negative Equity Report tracks homeowners' outstanding mortgage balances versus the value of their homes. Zillow's report confirms data released by real estate analysis firm CoreLogic which found that 52.4% of Las Vegas households currently owe more on their mortgages than their homes are worth.

The passage of Assembly Bill 284 may be partially to blame for this backlog of underwater homes. AB284 brought the Las Vegas foreclosure market to a screeching halt last year. Foreclosures dropped from more than 4000 per month to less than 100.  Banks have since found ways to re-initiate foreclosures, but still at nowhere near the pace they were before the passage of the controversial bill.  This has many analysts wondering what will flush out the supply of underwater properties if foreclosures remain sluggish.

The proclivity of negative equity is not equal throughout the Las Vegas valley. Pockets of exceptionally high rates of underwater homes exist along the 15 corridor from downtown up through North Las Vegas to the Nellis Air Force base as well as the northernmost portions of Centennial Hills.  As many as 74% of all homes are underwater in those areas. Rates are significantly better in other parts of the valley, most notably Anthem, Henderson, Green Valley and areas near Summerlin, with rates as low as 29% in Summerlin proper.

With an uncertain real estate market ahead of us in the short term, the best advice for many homeowners is to either refinance or list their home as a short sale.  Refinancing is extremely attractive for many homeowners with home prices climbing sharply over the last six months and interest rates dropping to record lows. It is also the perfect time to take advantage of a short sale opportunity if your home is still underwater.  The government has extended the Mortgage Debt Relief Tax Forgiveness Act through 2013 and most experts agree it is unlikely that it will be extended further.

If you are interested in either refinancing or listing your home as a short sale, contact me for more information.

Up, Up, And Away...Las Vegas Home Prices Show No Signs Of Slowing Down

The Las Vegas housing market continued its white hot rise as the sales volume of new construction rose in April to the second highest levels since the summer of 2008, which was in the midst of the housing bubble boom.  Meanwhile, the median home price for new construction hit a record high. Both January and April had the fastest sales rate (lowest days on market) since July of 2008. The median home price for houses sold in April was up to $271,600...this is the highest mark since the government began keeping these records in 1993.

This is a whole lot of positive data, and many people are taking these indicators to be signs that the housing market is recovering aggressively in Las Vegas.  This certainly appears to be the case.  But, at the risk of being the only downer in the room, I'd like to remind everyone that the recent highs in Las Vegas real estate isn't based on particularly wonderful economic growth, either locally or nationally.  Unemployment is still way too high.  The Fed is hinting that quantitative easing might be ending soon, but it hasn't ended yet.  Cities like North Las Vegas are still teetering on the brink of bankruptcy.  And, of course, let's not forget the elephant in the room...AB 284. The Nevada Assembly drastically altered the Las Vegas housing market when they passed a bill that virtually ended foreclosures in the Las Vegas valley. The assembly members might be looking like heroes right about now.  But it has been my experience that anything that alters the natural flow of the economy eventually has its consequences and they are rarely pleasant.  I am seriously concerned as to whether or not the growth in the Las Vegas housing market can be sustained.  I would caution potential investors to focus on cash flow, cash flow, cash flow.  If you make sure that you purchase a property with positive cash flow right out of the gate, you will be insulated against the further twists and turns of a potentially fickle Las Vegas housing market.

VIP Realty Expands Property Management Division

Sometimes I get so caught up discussing current market conditions and trends in the Las Vegas real estate market, or analyzing the economy as a whole and it's effect on home prices, that I forget to notify my readers about new developments within my business.  Many of you probably already know that several months ago I formed my own brokerage headquartered in a beautiful new office space in Northwest Las Vegas. VIP Realty, which stands for Vegas International Properties, was formed to cater specifically to the needs of our investor clients.  Although we do offer services to traditional home buyers and sellers, 90% of our business is from investors. Most of our investors are from out of town with many from out of the country.  In the last year we have been privileged to help broker deals for clients from Canada, China, Europe and Central America. Because I am an investor myself, I understand what investors need and how to find a property best suited to their goals.

One of the major components that we have found appeals to our out of town clients is our in house property management division. We have worked hard and expanding this division over the last year and we now manage over 100 properties for our clients. By performing our property management with our own hand picked team, we are able to insure quality and keep costs down. We realize that investors want to be able to trust that their properties are being maintained at a high standard.  They also need a property management service that constantly looks out for their best interests by making sure that rents are paid on time and that vacancies and delinquencies are dealt with quickly, efficiently, and effectively.

Our property management division is able to provide this superior service at a reasonable price.  Our investors are able to come to us for the whole package when it comes to investing in Las Vegas real estate.  We will help them find the best investment property, analyze cash flow, find and place a tenant, maintain the property, and deal with any vacancies. One of the major reasons I decided to step out and start my own brokerage is because I wanted to offer this complete service package to my clients according the vision I have had for several years.  I would love to tell you more about our services.  Please don't hesitate to call me if you are considering investing in Las Vegas real estate.

VIP Realty Offers Top Notch Support Services for a Fraction of the Price

Sometimes I get so busy talking about the state of the Las Vegas real estate market and discussing the ins and outs of successful real estate investing, that I forget to update my readers on more mundane matters...like our new brand name and Northwest Office. As many of you know, several months ago I established by own brokerage in Northwest Las Vegas...VIP Realty.  VIP stands for Vegas International Properties.  The name fits our business model to a "T." We continue to cater mostly to investors, many of whom are from out of town or even out of the country.  We have helped investors from Canada, China, Europe, and other locales purchase investment properties in Las Vegas.

We also have a full service property management division in house that is able to create truly turn key investment opportunities for our clients. We currently manage over 100 properties for our clients, and by doing so we are able to insure quality and keep costs to a minimum.  Because I am an active real estate investor myself, I know what real estate investors need in a property management service.  They want to know that there properties will be well cared for and maintained to a high standard, they want help attracting and keeping high quality tenants, and they want to know that their rents are collected efficiently, promptly, and accurately. We take care of all these items with top notch customer service.  We also make sure that when vacancies or delinquencies do occur, they are handled effectively and quickly.

If you are looking for a property management company focused on the specific needs of investors in Las Vegas real estate, give me a call directly.  I will put you in touch with one of our experienced property managers.

Real Estate Investors Search for New Opportunities

Have you tried to purchase a foreclosure or REO in Las Vegas lately?  If you have, you have most likely experienced a multiple offer situation with a final selling price much higher than original list price.  Many investors have come to me terribly frustrated with the situation.  It can seem nearly impossible to buy investment property in Las Vegas these days at a reasonable price.  Nearly impossible maybe...but not completely impossible.

I have worked as a realtor in Las Vegas for almost 10 years.  I came before the boom days, and I stayed through the bubble burst. My clients have always been investors.  In fact, investors account for 95% of my sales volume for the last 5 years. I have helped my clients find solid, cash flowing investment properties throughout all the chaos of the Las Vegas real estate market. I've found plenty of deals when the market was hot, when it was cold, and everywhere in between.

The secret is adaptation.  I like to draw the analogy of the chameleon.  In order to succeed in investment real estate, like most business opportunities, you have to be a chameleon of sorts.  You adopt one strategy for as long as it works, and then when it doesn't you find another.  If you aren't willing or able to adapt, you fail.  Especially in Las Vegas...especially with real estate.

So if you are looking for someone to help you invest in the Las Vegas real estate market, I'd love to help.  I'm willing to put in the effort, and I have a huge track record of success.  Plus I won't lead you down the wrong path. I'll tell it to you straight.  That's what I'm famous for.  People don't always like my outlook on the market, because I don't sugar coat it.  Check out my blog posts and press releases for the last five years and you'll see what I mean.  Las Vegas real estate is tricky...but it is extremely profitable.  I'd love to show you how.

New Construction May Provide Insight for the Future of Las Vegas Real Estate

 

 

Many of my articles in the past months have been devoted to discussing the abnormal and unpredictable market conditions prevailing in Las Vegas real estate today. From the collapse of the real estate bubble in 2007, to the passage of AB284 in 2012, real estate in Las Vegas has been anything but a smooth ride.  Recently, experts have wondered whether the sharp gains in median home price over the past year will hold, will continue, or will be lost.  There are several uncertain factors overshadowing these possibilities and these factors have made predicting the near term moves of the Las Vegas real estate market an even more difficult task than normal.

One indicator that might be fairly solid, however, is the data surrounding new construction.  New construction ground to a virtual halt after the real estate bubble burst in Las Vegas in 2007-2008.

Shortly thereafter, a huge glut of foreclosures flooded the market driving home prices down well below builders’ replacement costs.  This made it impossible for builders to turn a profit on new construction.  In 2012, foreclosures ground to a halt of their own with the passage of AB284, and home builders scrambled to pull permits to help fill the demand for homes to buy.  Currently, banks have resumed foreclosing in Las Vegas, but are still only filing less than half the NODs they were before AB284 passed.  Several possible amendments to AB284 is in the works and it is uncertain how those amendments might affect inventory and pricing.

One potential key indicator in all of this confusion can be found in the sales data from new construction.  The number of new construction units sold is on pace to be up for the third straight year and demand continues to be very strong.  What is interesting to note, however, is that builders are largely not replacing the inventory that they are selling.  According to the Las Vegas Review Journal, “Fifteen percent of the market’s 131 subdivisions have fewer than 100 lots left, and another 44 percent have fewer than 50. Sure, builders are buying raw land, but those parcels are a year or more away from construction.”  This means that if changes are not forthcoming to AB284 allowing more foreclosures to fill the gap in demand, prices could escalate even more dramatically in the next couple of years.  As I’ve outlined before, this isn’t necessarily good news.

If you are considering buying or selling in this volatile Las Vegas housing market, contact me for unbiased advice or visit my website to learn more: www.teamplantone.com

3 Steps of Certainty in an Uncertain Real Estate Market

The age old saying is that the only two things you can be sure of in life are death and taxes.  Perhaps in Las Vegas we could add, “the house always wins.”  Well if death, taxes, and the casino edge are 10s on the list of Las Vegas certainties, the real estate market right now is somewhere between a one and a two.  AB284 has slowed foreclosure inventory to a trickle, new construction is hot but running out of available inventory, and the economic recovery remains tenuous at best.  These factors make it extremely difficult to predict whether the market will go up or down in the short to mid-term.  So what is the savvy real estate investor to do?

I recommend three solid steps for success in these uncertain times:

1. Refinance

Mortgage interest rates are at all time historic lows.  Remember two years ago when everyone said that interest rates couldn’t possibly get any lower?  They did. With home prices up 30% in only one year in the Las Vegas valley, now is the perfect time to refinance your investment properties (or your residence for that matter) and free up cash for more investment acquisitions.  Interest rates are unlikely to get any better (really) and it is very uncertain whether home prices will continue to rise.  There really is no downside to refinancing.  If home prices fall or interest rates rise, you will be thankful that you locked in your refinance now.  On the other hand, if rates fall further or prices skyrocket over the next two years, you can always refinance again.

2. List Your Short Sale

The mortgage debt forgiveness act has been extended for one more year (through the end of 2013) and most experts agree that it is very unlikely that it will be extended again.  This act forgives homeowners of the tax obligations associated with debt forgiven through the short sale of their primary residence.  Without the provisions of this act, homeowners who sell their property through a short sale and receive a waiver of deficiency are obligated to pay Federal income tax on the amount of that waiver as if it were regular income.  This tax requirement makes it very difficult for the average homeowner, upside down on their property, to be able to afford a short sale.  If you are considering short selling your home, or if you are still upside down on your property but hoping that gains in the market will erase that deficiency, you should strongly consider short selling your home now rather than waiting.

3. Consider Cash Flow

When market conditions are uncertain, as they are presently, investors should rely heavily on cash flow data when making decisions to purchase an investment property. If you purchase a property with strong cash flow, you can withstand market fluctuations.  We specialize in locating and helping our clients find investment properties with strong cash flow and appreciation potential, even in strong sellers’ markets like we are currently experiencing in Las Vegas.  If you are interested in learning more about investing in Las Vegas real estate or if you would like a referral for your refinance to a company we have used with great success, please contact me directly.

Federal Assistance for Henderson Home Buyers

 

 

If you are someone you know have been looking for a home in Henderson, NV, and need assistance with your down payment, there are two government programs that are worth exploring.  Both are funded by the Federal government but administered by the City of Henderson.

The first option is the First Time Homeowners Program funded by the U.S. Department of Housing and Urban Development.  This program provides up to $10,000 in down payment assistance for low income, first time homebuyers in the form of an interest deferred loan. To qualify, applicants must earn 80% or less of the average annual income for their area and have less than $25,000 in assets.  Once approved, participants must put $1500 towards the purchase of the home and then must complete an 8 hour home education class covering such topics as savings, budgeting, debt resolution, insurance and escrow.  The City of Henderson receives $100,000 annually for this program and unused funds are rolled to the next year.  As of 2012, the city reported that they only receive, on average, 8-12 applicants per year.  So there is a very reasonable chance of being accepted into the program if you are qualified.

The second program was established by the American Recovery and Reinvestment Act (or the infamous stimulus package) and is called the Neighborhood Stabilization Program.  Henderson received $3.9 million through the Round 3 funding of this project. Applicants to this program are restricted to purchasing properties in certain areas of the city, mostly those hit hardest by foreclosures.

If you are interested in either of these programs, you can contact the City of Henderson directly at cityofhenderson.com.

Buying at the Auction Becomes More Difficult

 

 

In recent months, REO sales have continued to plummet in Las Vegas.  REOs are properties that have been foreclosed upon, have been sent to the Trustees’ auction, and then have returned to the bank.  These bank-owned real estate assets, or REOs, are then placed on the market for traditional buyers or investors to purchase through a standard MLS listing.  Because foreclosures have slowed to a mere fraction of their pace from a year ago, the number of properties at the auction has dropped dramatically and competition for these properties has increased to a frenzy level.  Many properties are bid up higher than they are worth and banks have no need to buy them back.  Hence the decline in REOs.

This increased competition for bargain properties has affected investors and their ability to snatch up potential rental properties at the Trustees’ sale auction.  I recently interviewed Richard Weiss on my radio show, “The Las Vegas Real Estate Reality Hour,” about just this topic.  Richard has been a professional buyer at the Las Vegas trustees’ sale for several years.  If you are interested in learning more about how the Trustees’ auction has changed and how to purchase properties through the foreclosure auction, visit my website and listen to the recording of Richard’s show.  All of my back episodes are available for listening at www.teamplantone.com.  On the left side of the home page is a radio icon.  Click on Playlist and then click on Buying at the Trustees’ Sale.

Traditional Home Sales Return to Dominance in Las Vegas

 

 

Las Vegas real estate professionals have watched and waited for the last year to see how the passage of Nevada Assembly Bill 284 would impact the local real estate market.  The initial effects were obvious.  Virtually overnight, foreclosures halted in the greater Las Vegas area.  Banks went from filing over 4000 new notices of foreclosure each month, to filing less than 100. Although banks have since found ways to resume the foreclosure process, foreclosures rates are still less than half of what they were prior to AB284. Many investment specialists, such as myself, cautioned that this lack of foreclosure inventory could very likely create dramatic and somewhat “artificial” price increases as demand temporarily outpaced supply.  This is, in fact, exactly what has happened.

As the foreclosure process continues to be slowed and stopped by this legislation, median sales prices have skyrocketed, rising over 30% in the last year in Las Vegas, while the number of units sold has dropped by a large margin.  This means that the rise in home prices is not being brought on by soaring demand, but by extremely low supply.  What most buyers and sellers in Las Vegas may be unaware of, is that the Nevada Assembly is considering several modifications to AB284 that may be real game changers for the Las Vegas real estate market.  I recently interviewed Las Vegas attorney and co-author of AB284 Tish Black on my radio show “The Las Vegas Real Estate Reality Hour.”  (If you would like more information on the laws that are being proposed in the Nevada Assembly, you can listen to a rebroadcast of the show on my website at www.teamplantone.com.  The radio player is located on the left hand side of the home page.  Simply click on Playlist and then scroll down to the episode titled Possible Changes to AB284.)

The bottom line is that the real estate market is very unstable in Las Vegas at the moment.  Several possible changes to the law could push inventory up and prices down again.  On the other hand, strong gains in the broader economic picture could facilitate another year or more of double digit gains.  The end of the current Assembly session should provide some indications of what the near future might bring.  I will keep you updated as things progress.

Lack of Inventory Drives Down Sales Numbers

Yet more evidence that Las Vegas home prices are being driven up not by above average demand, but by below average supply.  Nationwide, home sales rose in March to a seasonally adjusted annual rate of 417,000 units.  While this is seen as a sign that the broader housing market is starting to shows signs of a sustained recovery, it is well below the 700,000 unit mark, which is what most economists point to as a “healthy” sales rate.  Those 417,000 units though do represent a 1.5% increase nationally from the previous month and a 18.5% increase from the same month last year.

Las Vegas, however, is not leading the way.  In fact, Las Vegas sales data is dragging the rest of the nation down.  Although data was not available in the report I read for only Clark County, data for the Western United States showed sales falling 20.9%.  In the report, this was attributed to problems of supply.  These figures and more like them lead us to again speculate on whether or not the run up of home prices in the Las Vegas valley is a sustainable phenomenon.

Las Vegas Land Prices Fuel Surging Housing Market

 

 

But is it a second bubble?

The price for residential land in Las Vegas has risen 90% in only a year as
new construction continues to feverishly attempt to capitalize on the
demand for housing created by the slow down in foreclosures.  According
to an article in the Las Vegas Review Journal, Sunbelt Development and
Realty Partners reported an average price of $202,983 an acre for
medium-density (six to 14 units an acre) residential land in the fourth
quarter of 2012, compared with $170,450 in the third quarter and
$104,000 at the beginning of the year.  This rise in land prices comes
as the last of the “dinosaurs” haunting the Las Vegas valley are sold
off.  These dinosaurs are projects that were abandoned in various stages
of incompletion after the real estate bubble burst in 2008.  For
several years, home builders who wanted to, could purchase these
partially finished lots for fabulously low prices...but not many wanted
to.  New home construction ground almost completely to a halt in 2009.
 Over the last year, however, demand for new homes has skyrocketed and
developers who could have purchased land cheaply three years ago are now
entering bidding wars for residential lots.

Land is becoming a precious commodity in Las Vegas.  This is partially due
to the geography of the valley itself.  There is only a limited amount
of land remaining in the Las Vegas valley and much of it is owned by the
United States government as BLM land.  This is an issue that Las Vegas
developers have always known they will have to face sometime in the
future.  In the near term, there are still plenty of residential lots to
be had, but prices are escalating rapidly.  Home Builders Research
President Dennis Smith has described the increase land prices over the
last year as “downright scary.”  Robb Beville, president of Las
Vegas-based Harmony Homes, elaborated, “Low inventory is what is driving
up the demand, not job growth or employment growth.”  

This “artificial” increase in real estate prices is something we’ve been
talking about for the last year.  It is creating a lot of uncertainty in
the Las Vegas real estate market and makes it difficult to know if the
recovery we are currently experiencing in home prices will continue, or
lead to another bubble bursting.  As always, in this time of
uncertainty, we strive to bring you the best real estate investment
bargains available, as well as the best information and advice on the
market.  We recently offered one of these “dinosaur” unfinished
condominium developments to our investors for pennies on the dollar.  If
you are interested in finding deals, like this one, that still exist in
Las Vegas, call and speak to Glenn personally.

Real Estate Backed Investments on the Rise Again

 

 

For several decades, owning real estate was considered one of the safest income plays available to investors.  Investors appreciated the tangibility of owning an actual home on an actual piece of property.  They appreciated that the variables associated with a real estate investment were much easier to understand than the myriad of factors that affect investments in the stock market.  For many investors, this all changed when the real estate bubble burst in 2008.  For several years after the bubble burst, even as real estate prices hovered at historic lows and potential returns soared, Americans returned to the stock market in droves and it became difficult to convince investors to give real estate another chance.  But recent statistics seem to indicate that this period of concern has come and gone, and investors are now competing in a sellers’ market to buy the same properties that they could have snatched up for pennies on the dollar only two years ago.

But some investors still shy away from the stability, long-term appreciation, and cash flow that real estate investments bring for the simple reason that they don’t feel equipped to manage such an investment.  We address this potential problem in two ways.  First, we offer full service property management for all of our investors’ properties.  We have been doing this for several years and we currently have over 100 Las Vegas properties in our management portfolio. Because we cater to investors, we know what investors need from a property management team and we strive to make investing in Las Vegas real estate easy and hands off as much as possible.

We also offer investment positions in the flips that we complete.  We have completed over 200 flips in the last three years, with an excellent track record for profitability.  (Records available upon request.)  For our clients that want to enjoy high rates of return with no involvement in transaction details or property management this works perfectly.  With a minimum investment of $100,000 we provide a guaranteed 10% return.  One year terms are standard, but we will consider different lengths for special circumstances.

If you’ve been considering investing in Las Vegas real estate, but aren’t quite sure where to begin, give us a call.  I will help you consider all your options and find an investment plan that works best for you individual needs.

Possible Revision to AB284 Could Re-Open Floodgates of Foreclosures in Las Vegas

 

Assembly Bill 300, introduced by Assemblyman Jason Frierson, D-Las Vegas, was introduced in March and seeks to change a pivotal definition that is part of Nevada Assembly Bill 284.  AB284, which passed the legislature last year, was supposed to help protect homeowners from illegal foreclosures.  What it has done, however, is to slow foreclosures to a trickle, artificially raise prices throughout Las Vegas, and allow some homeowners to remain in their home for years without paying on their mortgages.  

The new bill seeks to replace the language of AB284, which requires anyone signing documents on behalf of a lender to have “personal knowledge” of who owns the promissory note on the loan with a phrase requiring those signing foreclosure documents to have knowledge that could be “obtained from reviewing business records of the beneficiary of the deed of trust and information from the county recorder or title insurance issued by an agent authorized to do business in the state,” according to the Las Vegas Review Journal’s coverage of the issue.  Assemblyman Frierson describes the proposed revisions to AB284 as a compromise that “realtors, title companies, bankers and legal aid all came together and said this would satisfy their concerns about personal knowledge.”

It will be interesting to see what the effects of the passage of AB300 could be for the housing market in Las Vegas.  It is possible that a loosening of the restrictions imposed on banks by AB284 could result in a new wave of foreclosures that drive prices back down in the valley.  Many people, including myself, have cautioned that the rapid rise in home prices we’ve seen in Las Vegas in the last year and a half could be the beginning of another real estate bubble.  Only time will tell, but if I had a house to sell in Las Vegas, I would definitely be selling it now.

Real Recovery for Las Vegas Real Estate?

 

 

The sales numbers for Las Vegas real estate have been extremely promising over the last year and a half.  But does this mean that a real recovery is underway?  It might be too soon to tell.  One thing we can be sure of, however, is that Las Vegas, previously known as the foreclosure capital of the nation, has now become one of the hottest housing markets in the U.S.

As I discussed with my co-host Brad Henderson on the Las Vegas Real Estate Realty Hour show of February 9th, Las Vegas real estate appreciated between 15% and 24% last year alone.  This leads all other major metropolitan markets other than Phoenix.  

My personal experience in the Las Vegas marketplace bears out this trend.  Two years ago, it was relatively easy for me to find investment properties for my clients at $50/sq. ft. or even less.  Now it is difficult to find properties listed under $100/sq. ft.  This recovery seems to be extending to new construction as well.  New construction ground almost to a halt in the Las Vegas valley for over four years after the real estate bubble burst, but now new builds are back in full swing and selling at a brisk pace.

If you are looking for timely updates on the Las Vegas real estate market along with different viewpoints from fascinating guest speakers, tune into my weekly radio show or visit teamplantone.com to listen to all the back episodes.