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. 

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.

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.”

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.

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.

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.

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.

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.

Second Bubble Far From Bursting

 

 

Las Vegas home prices continue to rise, outpacing all other metro areas nationwide.  In fact, residential home prices gained an unbelievable 2% in February alone, the largest single month gain since May of 2006.  Economists attribute the gains to continued low inventory in the valley, historically low mortgage interest rates, and improving employment numbers.

In an odd twist of fate, improving home prices might actually help add to housing inventory as homeowners who have wanted to sell, but have been underwater on their homes, find price points at which it makes sense to finally put their homes on the market. It remains to be seen if this potential increase in inventory will slake demand and push prices down again in the ultra-hot Las Vegas housing market. Many homeowners are also expressing confusion as to whether current market conditions are right for listing their home. Many are just beginning to reach the absolute minimum price levels at which they could list their home and not take a significant loss on the transaction.  Many have been waiting years for this moment.  But then they pause to wonder if prices are going to continue to escalate at their current rate.  If so, why not wait a few months before listing their property?  Perhaps they could actually make money on the transaction?

It is very difficult to spot absolute market peaks, perhaps even more difficult than spotting bottoms. While I have said for months that I don’t believe that the oft-mentioned “shadow inventory” will ever make an appearance here in Las Vegas, I do believe that current market conditions are unstable, unpredictable, and being driven by more than just hard economic data. That being said, I can’t tell you if this is the perfect time to sell your Las Vegas home or not.  What I can tell you is that this may be the perfect time to refinance.  Home prices are attractive, and refinance rates are at all-time lows.  There really seems to be no better time to initiate either a rate and term refinance or a cash out refi...especially if you are going to use that cash to re-invest in Las Vegas properties.  It might seem hard to believe in this extremely hot market, but we are still finding great investment deals for our clients.  If you are interested either in Las Vegas real estate investing, or in a great referral for your refinance deals (I have a wonderful broker I’ve used for years), give me a call.  I’d be happy to chat.

Las Vegas Retains One Negative Housing Title

Las Vegas reigned as the foreclosure capital of the nation for four years in a row after the real estate bubble burst in 2007, but that title no longer belongs to the desert town.  Las Vegas was able to shake the dubious moniker of “Foreclosure Capital USA”, but it still retains an equally troubling title: “Underwater Epicenter.”  At the close of 2012, Zillow released a survey showing that 59% of Las Vegas homeowners are still upside down in their mortgages.  This number is enough to place Las Vegas firmly ahead of runner-up Atlanta, which reports just under 48% of its homes underwater as of the end of last year.

Dismal as this statistic is for Las Vegas, it is a vast improvement from one year ago.  In fact, underwater homes in Las Vegas are actually down 70% from 2011.  This improvement is projected to continue through 2013, but at a much slower pace.  And, regardless of next year’s gains, analysts project that Las Vegas will retain the title of “Underwater Epicenter” for the foreseeable future.

Nationally, just under 28% of homeowners report that they owe more than their home is worth.  This is down from 31% at the close of 2011.  Zillow attributed much of this gain to the 5.9% average increase in U.S. home values last year.  Las Vegas’ rise in median home value far outpaced the national average last year, coming in at 14%.

Wet N' Wild Returns to Las Vegas

After an absence of several years, Wet N’ Wild is now returning to Las Vegas.  Unlike the original water park, which was located on the north end of the Strip, the new location is on the south side of the city by the 215 beltway and Fort Apache.  The largest water park in Nevada will feature 25 attractions including water slides, tube rides, a wave pool, a lazy river, and a children’s area.  

Although the scorching summers would appear to make Las Vegas the perfect location for a water park, the city has not had a full-scale public water attraction since the first Wet N’ Wild closed its door in 2004 after 20 years in business.  The delay in developing a new park to take its place appears to lie mainly with the difficulty in obtaining water rights in the Las Vegas valley.  In the harsh Las Vegas desert, water rights are one of the most coveted, and expensive, commodities.

Ultimately, a joint venture featuring funding from notable sources like Andre Agassi and Steffi Graf, Dr. Steven and Karen Thomas of the Thomas and Mack family, and Australian entertainment conglomerate Village Roadshow Ltd. were able to raise the more than $50 million needed to develop the park.  The Howard Hughes Corporation will provide the lease for the land on which the park is strategically placed.

We certainly view this new major development as another sign that business as usual is returning to normal in  the Las Vegas area.  Las Vegas has historically boasted a high growth rate because of its diverse employment opportunities generated by the ever-increasing numbers of tourists visiting the town each year.  Rental housing continues to be a great investment in Las Vegas with historically high cash flow spreads.

Wet N’ Wild is scheduled to open Memorial Weekend 2013.

Chinese New Year Brings Prosperity for Real Estate Investing

This Sunday, February 10th marked the beginning of the Chinese New Year. This Year of the Snake is looking to be a BIG year for real estate, as the water fire element brings prosperity to earth and metal industries like property and hotel.

The yin to last year's Dragon yang, snakes are wise, dynamic, alert to new opportunities and potential for adventure. With water on top and fire below, this year is one of positive changes, movement and progress.

At Vegas International Properties, we cater to overseas investors and have had the privilege of working with many Chinese buyers over the last three years. One of the greatest concerns of international investors is how to manage their investment properties in the U.S. We offer a full service property management division and we know what it takes to keep renters happy and landlords care free. Because we work directly with investor buyers to find and purchase their investment properties, we know what investors are looking for and we know how important property management is to the process. That’s why we keep our property management division in house. We are able to directly supervise all aspects of the management process, from rent collection to maintenance, and make sure that everything flows smoothly for our investor clients.

The Year of the Snake will be a busy travelling year for many wealthy Chinese and an auspicious time to move and relocate. If you are looking for a second home or vacation home in Las Vegas, we would love to provide you with a suite at the MGM Signature Hotel and Condos while you tour the city with one of our knowledgeable agents. We extend the same offer to our international guests who are coming to Las Vegas to search for potential real estate investments.

Contact Glenn Plantone directly at Team Plantone - VIP Realty if you are interested in learning more.

Sellers' Market Persists in Las Vegas

The sellers’ market that prevails in Las Vegas real estate at the moment
shows no signs of slowing down.  The median home price in Las Vegas
continues to rise and, although foreclosures have crept back up from
their low point last year, the oft rumored glut of foreclosures, known
as shadow inventory, has yet to make an appearance.  Las Vegas home
buyers even persevered through the holidays and cold temperatures
trouncing last year’s marks for home sales during the usually quiet
holiday period.

The median price of a resale home in Las Vegas for November, 2012 was
$133,000.  This betters the mark for November of last year ($114,000) by
almost 17%.  New home sales also fared well.  The median price of a new
home in Las Vegas was $219,285 in November, 2012, up 7.4% from a year
earlier ($204,064.)  Las Vegas also plowed right through the dormant
period that normally cuts home sales in the months of November and
December by approximately 50%.  Instead, Las Vegas home sales were up
39% from the holiday period last year with an average of 600 homes being
sold each month.

All-in-all, the Las Vegas real estate market is continuing to enjoy steady growth
as the pressures of demand exceed the supply.  Zillow recently ranked
Las Vegas as the #4 Sellers’ Market in the country.  This represents a
large departure from the title of “Foreclosure Capital of the Nation”,
which Las Vegas held for four consecutive years.

Build It And They Will Come...Tony Hsieh's Downtown Las Vegas Dream

Tony Hsieh, CEO of Zappos, has been making waves in Las Vegas lately by going on a mini real estate buying spree in a concentrated area of Downtown Las Vegas.  Hsieh founded and has provided the bulk of funding for the Downtown Project, a $350 million vision aimed at attracting business and growth to Downtown Las Vegas and creating thriving, lively neighborhoods.  Unlike many other urban renewal efforts that focus on either residential development or large municipal structures, such as arenas, Hsieh notes that, “we are focused on office space for entrepreneurs, retail, small businesses, and in general helping make Fremont East a place of entrepreneurial energy and a safe, walkable neighborhood.”

Andrew Donner of Resort Gaming Group is Hsieh’s chief real estate deal-maker and has recently purchased 14 downtown parcels totaling around $45 million.  These properties include the former City Hall at 300 Stewart Ave. as well as several residential hotels.  Hsieh notes that it is still too early to speculate on exactly what will be done with these properties, but the overall vision is to create “pods” of activity that increase foot traffic as well as spending and prompt other property owners in the area to make improvements to their assets as well.

To spite the noble quality of Tony Hsieh’s vision, his plan is not without its detractors.  Some in the real estate community have complained that the high profile buying of the Downtown Project was driving up real estate values in a depressed area that otherwise does not command top dollar.  Terry Murphy, a downtown property owner and lobbyist, feels that any impact caused by Hsieh’s buying is likely to be short lived and subordinate to the overall benefits of The Downtown Project.  Murphy said, “There certainly has been an impact on prices, but the upward impact on actual value will more likely occur over time as the Downtown Project developments and others get under way.”

Foreclosure Frenzy Moves from Las Vegas to Atlanta

As Las Vegas foreclosures ground to a near halt after the passage of AB 284, Sin City passed its long-held foreclosure capital crown to Atlanta.  It seems Las Vegas may have sent its corporate buyers to the Georgia capital as well.  Atlanta now leads the country in foreclosures and private equity firms have definitely noticed.  Investment groups like Blackstone Group LP and Colony Capital are sending armies of representatives to Atlanta to purchase properties.  These groups specialize in purchasing single family homes, renovating them, and placing renters in the properties.  This is the same formula Team Plantone has been using in Las Vegas for the last three years.  The major difference lies in the return generated for investors.  We have been able to return double digits consistently for our investors in most cases, where these large capital groups are satisfied with returns of 6% on their investment capital.  As a result, the equity firms that are descending on cities like Atlanta are willing to pay much more for foreclosure properties than their private money competitors.  Peter Horbulewicz, a house flipper in Georgia, commented, “If you go head to head with them, they always win, because they always overbid.”

This drama that is now unfolding in Atlanta has already been played out in Las Vegas and Phoenix where the upward buying pressure exerted from institutional money has raised home prices by 20-30% in these cities.  Private equity groups are able to pay retail for home and still make their desired 6% returns because the gap between the cost to own and the cost to rent is near the highest it’s been in decades in cities like Phoenix, Atlanta, and Las Vegas.  In Phoenix, renting a house was 49% more expensive than owning in August according to Trulia.  In Atlanta, renting was 57% more expensive.  The numbers were slightly lower for Las Vegas, but along the same lines.  The large premium paid for rentals is being caused by a huge increase in demand for rental properties as displaced homeowners, who can no longer purchase a home after credit issues, seek rental properties.

It remains to be seen how this saga will play out across the country.  Some experts believe that the rise in home prices brought about by institutional investing will be temporary if the broader economy does not improve significantly over the next year or two.  Regardless, one thing is certain, rental housing will be in considerable demand for the foreseeable future.  Now is the time to buy in Las Vegas, but the purchase must be prudent, and the buy price must generate cash flow.  If you are interested in investing in Las Vegas real estate or foreclosures and would like guidance to make sure your purchase is financially sound, contact the experts at Team Plantone.  We’ve been guiding Las Vegas investors successfully for years and we are eager to help.

Now's The Time To Sell In Las Vegas!

If you are a homeowner in Las Vegas looking to sell your home, this current market may be the best opportunity you see for quite some time.  Over the last year, home prices in Las Vegas have risen steadily as the lack of foreclosure inventory has continued to put upward pressure on home values.  But this lack of supply may soon come to a close, and many experts believe this will send prices falling again in the Las Vegas valley.

In September of 2011, there were 4,684 notices of default issued in Las Vegas.  In October, Nevada Assembly Bill 284 went into effect and the number of NOD’s dropped to 80.  New regulations aimed at holding banks accountable for the transfer of paperwork and ownership throughout the loan process effectively handcuffed the lending institutions with the threat of stiff fines and criminal culpability if foreclosure agents did not have “personal” knowledge of a property’s document history.   Banks have slowly found ways to resume foreclosures in some cases, but foreclosure filings still measure only a fraction of what they should be based on the number of homeowners in default.  Last month, November 2012, there were 1,417 notices of default issued in Las Vegas, up considerably from last year, but still well below the 4-5,000 foreclosures per month that were being initiated prior to AB284.

Most analysts believe that AB284 is stalling legitimate foreclosures and creating an artificial boost in housing prices that is likely to collapse once banks begin to foreclose again in earnest.  The end to this boom may be drawing very near.  Banks are currently in talks with Attorney General Catherine Cortez Masto discussing possible amendments to AB284 that would allow foreclosures to continue in Nevada.  Cortez Masto has expressed concern at the results of AB284, stating that the bill was meant to uphold the integrity of the legal process and protect homeowners from wrongful foreclosures, but that it was never meant to prevent legitimate foreclosures.  (It is interesting to note that several real estate professionals, including the author, warned Cortez Masto that this is exactly what would occur if AB284 was passed.)

Regardless of how this matter is ultimately resolved, one thing is certain.  It may be the best opportunity to sell your home in Las Vegas that is likely to exist for quite some time.  It is almost certain that this “shadow inventory” of foreclosures will be released onto the Las Vegas housing market at some point in the next year.  It seems logical to assume that once the artificial imbalance of supply vs. demand has been corrected, home prices will drop again in Las Vegas.  My recommendation to any homeowner considering selling is to move quickly.  Contact Team Plantone if you would like more information on current market conditions or to enlist our help in selling your home quickly.

In Real Estate Good Things Come to Those Who Don't Wait

They say that good things come to those who wait, but lately good things come to those who pounce quickly.  Real estate has become a hot commodity once again, and houses that once languished months, or even years, on the Las Vegas MLS are now being snatched up in days or even hours.  We have certainly observed this phenomena first hand, especially in the last six months, as we watch foreclosures and REOs being bid up and short sales being submitted with multiple back-up offers.  

The following graphic is constructed off of data from the latest Realtor’s Confidence Index.  As you can see, nearly ⅓ of all homes on the market are selling within one month.  This is a huge departure from sales data one and two years ago.

Why are homes selling so quickly here in Las Vegas?  Affordable housing and attractive interest rates.  Interest rates remain the lowest they’ve been in years, and housing is extremely affordable even after the 20% gain in median home price we’ve witnessed in the last year.  What is interesting to note in all of this, is just how strong the rental market in Las Vegas continues to be, even with low home prices and even lower interest rates.  

Traditionally, as home prices drop, if interest rates are low, it becomes cheaper to buy than to rent.  This is definitely true here in Las Vegas.  The average home-owner can save between 50-100% monthly on their mortgage versus rent on the same property.  When this occurs, typically rents will fall as landlords are forced to make their product more competitive.  For the most part, this has not happened in Las Vegas.  Rents have dropped very slightly, but nothing compared to the plummet in home prices, and even as interest rates remain low, rents have remained strong.  This is due, no doubt, to the large percentage of the Las Vegas population who are currently ineligible to purchase a home because of recent foreclosure, bankruptcy, or other negative credit activity.  

As a result, it continues to be an excellent time for investors to enter the Las Vegas real estate market, although it is much more difficult to find affordable properties than it was one or two years ago.  Gone are the days when investors had multiple Las Vegas foreclosures to cherry pick.  For those who are interested in Las Vegas investment real estate, I recommend “alternative acquisition strategies.”  We have had to get very creative in order to find properties for our clients in this market.  Give me a call if you’d like to hear more.

Las Vegas Real Estate - Four Years Later

On the eve of this election day 2012, I thought it fitting to look back on the last four years of activity in the Las Vegas Real Estate market.  Romney fears that we are in worse shape and heading down the wrong path.  In the interest of full disclosure, I should note that I agree with him.  Obama says that his incentives are working.  I would argue that the rise in prices we have observed in the Las Vegas real estate market are a “false recovery” that has more to do with artificially low inventory brought on by a decrease in foreclosures than a strengthening of the local or national economy.

2008 marked the first year where it was safe to start dipping a toe back into the Las Vegas real estate market.  Prices careened downward for 18 straight months from Jan 2007 through late 2008 sending the average home price in Las Vegas plummeting from over $300K to around $120K.  As the free fall began to slow, I started advising my investor clients that Las Vegas was becoming the perfect location for property investors.  Over the next four years, Las Vegas consistently led the nation in foreclosures with over 100,000 foreclosures being completed in those 48 months.

What is interesting to note is what has happened in Las Vegas in the last year.  Although over 150,000 homeowners are still upside down on their mortgagees, foreclosure proceedings have ground to almost a halt.  In 2008, foreclosures accounted for 75% of all sales.  This year (2012) they account for only 15%.  Part of this is due to the difficulty banks are facing carrying out the foreclosure process in the wake of AB284, but some of it is also due to an increased willingness on the part of the banks to negotiate short sales or loan modifications rather than foreclosing.  Unfortunately, this slow down in foreclosures has caused home prices to artificially inflate in the Las Vegas valley with median prices up almost 20% just this year.

Another interesting statistic shows that even as foreclosures ease, the majority of homes are still being purchased by investors.  80% of all closings in Las Vegas this year were sales to investors and 60% were cash deals.  This graphically illustrates how difficult it is currently for homeowners to obtain financing to purchase a home.  I have personally observed this trend within my own business model.  Over the last four years, I have sold over 450 homes, more than 300 were foreclosures, over 100 were short sales, and 150 were flips.  I have also brokered two bulk deals; one a 9 home package at near $1M and the other a 15 home package at around $5M.  Of these, only about 10% were sold to owner occupied buyers.  The rest were sold to investors, and approximately 85% were cash deals.

As this election plays out, it will be interesting to see how things change in Las Vegas over the next four years.  One thing, however, is certain: the opportunities right now, at election day 2012, are tremendous for real estate investors in Las Vegas and even better for those owner occupants that can buy in this market.  Things are a little rockier for the 150,000 homeowners who are still hoping for relief from their upside down mortgages.  Only time will tell if the next president can help these folks and whether or not a full recovery is in Las Vegas’ immediate future.

Expiring Bush Tax Cuts Include Mortgage Debt Relief

Regardless of which box you are checking in the upcoming election, you should be aware that the expiring Bush tax cuts, made famous by the recent presidential debates, include a provision that excludes mortgage debt relief from taxation up to a maximum of $2 million.  If the Bush tax cuts are allowed to expire, the Mortgage Debt Relief Act will expire with them.  This means that homeowners who have received reductions in their mortgage debt either via short sales or loan modifications will be required to pay income tax on the amount of principal that was forgiven.  According to a recent article in The Chicago Tribune, this would amount to around $19,000 in taxes owed for the average middle class relief settlement.

There appears to be bi-partisan support in both houses for extending the mortgage debt relief portion of the Bush tax cuts for another several years, but without extending the rest of the cuts it seems unlikely that a bill supporting the extension of just the mortgage debt relief portion will even reach a vote prior to the November elections.  

This is especially bad timing when you consider that the nation’s five largest banks (Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., Citigroup Inc. and Ally Financial Inc.) have recently increased their offerings of principal reductions and other relief to homeowners as part of a $25 billion settlement with federal and state officials over foreclosure abuse allegations.  If the Bush tax cuts, including the mortgage debt relief act, do expire then these principal reductions will be reported to the IRS and will appear on homeowners’ tax returns as income.

Experts agree that while the housing market shows signs of stabilization, extending these tax cuts is vitally important to keeping the housing recovery on track.  "Extending this tax relief is critically important," said Lynda Gledhill, a spokeswoman for California Attorney General Kamala Harris. Harris was a key player in the national mortgage settlement.  "It is difficult to imagine strapped homeowners able to take advantage of these and other market-restoring programs if they have to pay federal income tax on the principal reduction or short sale as 'income,'" Gledhill said.

My personal opinion is that we will probably see Congress find a way to extend these tax cuts for another 6 months to a year, much as they extended the first time home buyer credit in 2010-2011.  Regardless, one thing is certain.  If you are even remotely considering selling your home via a short sale, now is the time to do it.  If you are able to close before the end of the year, you know that you will be able to take advantage of the tax credit.