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. 

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.

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.

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.

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.

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.

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.

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.

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.

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.

Extending the Mortgage Debt Relief Act Far From Certain

 

Last month I reported on the looming expiration of the Bush tax cuts at the end of this year.  Included in these expiring cuts is the Mortgage Debt Relief act.  This provision, passed into law in 2007, allows an exemption from taxes for people who have lost their home through foreclosure or short sale and have received forgiveness from the banks for the portion of their debt that was not covered by the foreclosure auction or short sale.  If the tax cuts are allowed to expire without modification or extension, then the Mortgage Debt Relief act would also expire.  This expiration would mean that any homeowner receiving forgiveness for a portion of the amount owed on their mortgage, whether through short sale, foreclosure, loan modification would be required to pay taxes to the Federal Government on this amount as if it were regular income.

Although there is widespread bi-partisan support in both houses for an extension of the Mortgage Debt Relief act, it is still not certain that this act will, in fact, be extended.  The reason for this can be found in the figures behind the law.  Although we do not have data available to show exactly how much total debt homeowners have been forgiven in the last five years, we do know that the Congressional Budget Office has estimated that allowing the exclusion to expire would generate around $1.3 billion in taxes from affected homeowners.  According to Brian Bernardoni, senior director of government and public policy at the Chicago Association of Realtors, this juxtaposition between what is best for homeowners and what is best for a government struggling to combat a huge deficit is what keeps the extension of the Mortgage Debt Relief act in doubt.  Bernardoni notes, “This could be one of the unintended consequences of a deal to avoid the fiscal cliff.  Singling out any one group for tax relief is going to be difficult.”

There is a bit of the chicken and the egg paradigm at work here.  Some lawmakers believe that the health of the overall economy must be considered over the interests of a particular group of citizens or a particular sector of the economy.  Others believe that the health of the housing market is so directly tied to the recovery of the economy at large that failure to extend this measure could prove debilitating to the entire recovery effort.  Mesirow Financial’s Diane Swonk puts it this way, “Housing is finally showing signs of healing after a prolonged illness...We still have a long way to go, but it has reached a critical shift in momentum, if allowed to continue; the choice is in the hands of our elected officials, and the clock is ticking.”

I will continue to update my readers on the status of all negotiations in Congress, and their potential impact on the housing markets, as those details become available.

Prices Continue to Rise in Las Vegas as Foreclosure Freeze Drags On

For several years, Las Vegas made headlines nationwide as the foreclosure capital of the United States.  Now the big news coming out of Las Vegas is the complete lack of foreclosures.  In September of 2012 less than 300 homes were foreclosed upon in the Las Vegas valley.  There are only 375 foreclosures listed for sale on the MLS as of November 15, 2012.  There are 876 short sales listed.  A year ago today, there were approximately 12,000 short sales listed on the MLS!  Great news for homeowners right?  Not really.

At the moment, real estate in Las Vegas is very clearly divided into two groups.  In group #1 are the few foreclosures that are available, short sales, new construction, and certain other properties that can be priced, for one reason or another, at current market value.  These properties are selling...and selling quickly.  United Press recently quoted real estate agent Keith Lynam who said that the problem in Las Vegas is, "There is just zero inventory."  But why?

The answer to this question lies in group #2.  Group #2 is composed of all the homes in Las Vegas that are still “under water.”  With all of the talk of a recovery in the Las Vegas real estate market, it is interesting to note that according to the Las Vegas Sun, 70% of Las Vegas homeowners are still underwater.  In fact, 36% owe more than double what their homes are worth.  These are homes that cannot be sold.  But, because the median sale price of homes in the Las Vegas area has risen almost 20% in the last year, many of these homeowners are holding on...hoping that this small recovery will blossom into a return to the prices of 2007.  Unfortunately, this is extremely unlikely.

During the real estate boom in Las Vegas in the early 2000’s, prices soared to highs well above the steady 3-4% annual growth that real estate typically generates.  As far as prices have fallen since then, surveys show that they’ve really only just about returned to the trend line.  Prices aren’t supposed to be any higher than they are right now.  This point is illustrated by the return of new construction to the Las Vegas housing market.  For several years, new housing starts were virtually non-existent in Las Vegas because foreclosures were selling for less than their replacement value...that is, less than what it would cost to build the same house from scratch.  As prices have risen, new home starts have rebounded because it is now possible for home builders to compete with foreclosures.

The combination of these factors have created a very odd dichotomy in the Las Vegas real estate market.  We have homeowners that are months (or even years) behind in payments but are not being foreclosed upon because of the halt in foreclosures brought on by AB 284 and other factors.  We have homeowners who are buried in debt holding out a desperate hope that the market will once again soar and their homes will no longer be upside down.  We have new homes being built and sold to fill the vacuum of demand created by the fact that 70% of potential Las Vegas real estate is essentially frozen.   It is an interesting paralysis.  

In the midst of this mess, Las Vegas remains very attractive as an investment destination.  For those investors who can secure affordable properties in Las Vegas, these properties are generating great returns and very strong cash flow.  If you are interested in purchasing Las Vegas investment real estate, contact me.  There are ways to beat the crowd using non-traditional buying methods and we specialize in those methods.

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.

Nevada Court Paves the Way for More Foreclosures

And I don’t say that as if it is a bad thing.

The Nevada Supreme Court voted 7-0 to uphold the role of MERS (Mortgage Electronic Registration System Inc.) in the foreclosure process.  MERS is an industry database that was designed, according to William Uffelman, president of the Nevada Bankers Association, to “bring loan recording into the 21st century.”

Consumer advocacy groups had argued that the involvement of MERS in the foreclosure process made it impossible for delinquent homeowners to face an actual lender.  Had the involvement of MERS been ruled unlawful, banks would have faced a much more difficult path through the foreclosure process.

Jacob Hafter, an attorney for a homeowner suing MERS, believes that the Nevada court "has cleared a path to begin foreclosing in a mass effort."  That might not be such a bad thing.  Foreclosures have dwindled to a mere trickle since AB 284 was passed late last year.  The result has been extremely light inventory and the creation of what some fear will be yet another artificial rise in home prices here in Las Vegas.

It remains to be seen how much effect this ruling will actually have on the number of foreclosures processed in Las Vegas.  It is also unclear whether banks would begin to liquidate foreclosures individually, on the open market, as they have in the past, or through larger, bulk packages of properties, as seems to be the current trend.  Either way, Team Plantone is poised to help our investors purchase these new foreclosures.  We are very familiar with the traditional trustees’ sale method of liquidation and we have also positioned ourselves to give our clients access to larger, bulk packages of REOs as they come available.