Las Vegas Short Sales

A LAS VEGAS SHORT SALE REAL ESTATE AGENT
IS STANDING BY FOR YOUR CALL!

Las Vegas Short Sales

As Las Vegas has developed into a modern city and one of the world’s premier entertainment destinations, it has attracted numerous people from around the globe. Many of those people have decided that Las Vegas is a great place to live and/or invest. Starting in 2003 and continuing into 2006, the Las Vegas Real Estate Market seemed to have no end in sight. Population was growing by as many as 6000 people per month. Those who couldn’t live here but wanted to be part of “Sin City” were buying investment properties and second homes.

By the end of 2006, the cycle began to cool down. Las Vegas Foreclosures began to increase in 2007, and reached a fever pitch by the end of 2008 and into 2009. Many of the earlier foreclosures were due to subprime mortgages. Others were the speculative investors who had purchased with little or no money down, hoping to make a quick profit only to walk away when they were faced with holding onto the property longer than expected or selling at a loss. And, as the stock market fizzled and the economy began to fade, many realized they could not afford that second home.

As we enter into 2010, the high unemployment has combined with the risky lending practices of the past to provide a steady stream of homeowners who are struggling to make their mortgage payments. Once believed to be restricted to sub-prime loans, Las Vegas real estate industry experts and economists are now seeing that prime loans are going into foreclosure. The government and the major lending institutions have come to the conclusion that avoiding foreclosure through either a loan modification if possible, or a short sale rather than foreclosure help preserve the values of other homes in the neighborhood and normally help the mortgage holder net a higher amount than they would through a foreclosure. While we have been in the years of the foreclosures, it is widely predicted that 2010 will be the year of the Short Sales in Las Vegas.

What is a Las Vegas short sale?

In the simplest terms, a “short sale” is a type of transaction where the homeowner sells their property for a price that is lower than the amount that the homeowner owes on the property. For example, if you can no longer afford your mortgage payments and the home is not worth what you owe on it, the lender may agree to a short sale at the current market value. The lender avoids the legal and other fees involved in a full blown foreclosure. The seller is allowed to live in the home until the property is sold and can move out with dignity. The short sale will still reflect on the seller’s credit, but not as badly nor for as long as a foreclosure.

What do homeowners need to know about Las Vegas Short Sales?

The first thing any homeowner who is struggling to make their payments should know is they are not alone. There is no stigma to the position you are in and the best advice we can give is that rather than ignoring the letters and phone calls from the lender, you should become pro-active in trying to work something out. There are professionals with integrity and experience who are willing to help you find a solution to the situation.

The first step should be seeing if you qualify for a loan modification. In today’s world there are lots of businesses out there offering to help you get a loan modification for a fee. Be skeptical of them. Some of them are legit, some are not. In Nevada, a business that is offering loan modification assistance now has to be licensed.

There are government agencies that can assist with a loan modification that don’t charge exorbitant fees. For the best advice, go to www.MakingHomeAffordable.gov or call (888)995-HOPE (4673). The counselors there are experienced and they can help you put together what you need to deal with your lender. The other resource we recommend is www.MoneyManagement.org or (888)845-5669. And, we are now hearing more frequently that homeowners have been able to call their loan servicer directly and get the loan modified without the help of an outside party.

When trying to get a loan modification, you will need to pull together much of the same paperwork that the lender will need for a short sale. You should write a “hardship” letter detailing what has happened to your financial situation and why you cannot afford your current payments. For the other items necessary, refer to the short sale checklist or ask your loan servicer.

In the event you do not have the income to qualify for the loan modification program, you should seek out a Realtor who has experience with Las Vegas short sales. One of the most respected designations is the Certified Distressed Property Expert Designation. A Realtor who is experienced with Las Vegas short sales will be able to help you work with the bank. They will know the current market values and be able to price the home to get it sold at the best possible price in the shortest amount of time.

Short sales will affect your credit, but not as bad and for a shorter amount of time than a foreclosure. We have heard varying estimates as to how much the short sale will lower your score. The Distressed Property Institute says a “foreclosure may lower your credit score from 250 to more than 300 points. Typically will affect a credit score for over 3 years”, and with a short sale “Only late payments on mortgage will show, and after sale, mortgage is normally reported as ‘paid as agreed’, ‘paid as negotiated’ or ‘settled’. This can lower the score as little as 50 points if all other payments are being made. A short sale’s effect can be as brief as 12 to 18 months”.*

In addition, a homeowner who has a foreclosure on their record will be ineligible for a Fannie Mae mortgage for five years, but will qualify after a short sale in only 2 years. For an investment property it is seven years for foreclosure and two years for a short sale.

Other complications may also arise from a foreclosure. Government employees should be aware that security clearances will be at risk. Civilian employers are running credit checks more frequently and a foreclosure may damage your future employment.

Finally, Nevada is a recourse state. In the event of a foreclosure the bank has the right to pursue a deficiency judgment. With some successful short sales, the lender has agreed to waive the right to pursue the deficiency judgment against the homeowner.

What do homebuyers need to know about a Las Vegas short sale?

The number of homes that are listed as short sales is on the rise and is expected to continue to increase into 2010. Currently approximately 45% of the homes listed for sale are short sales and about 20% are homes that have already been foreclosed. If you want to buy a home at the best price in Las Vegas, you have no choice but to consider short sales.

The biggest problem with short sales has been the lack of co-operation from the banks. We believe this is beginning to change with the new legislation that encourages banks, especially those lending institutions which received TARP funds, to work with homeowners to either modify the loan or to do a short sale rather than foreclose.

The lending institutions have also realized that a short sale results in property that is in better condition, and therefore can be sold at a better price. The seller is required to maintain the property while it is listed as a short sale which includes keeping up the HOA fees which normally accumulate fines and interest during the foreclosure process.

Many of the lending institutions are beginning to streamline their short sale process. In the recent past, we have seen short sales that took as much as six to nine months to close, if they closed. The new goal seems to be to get them closed within 45 to 60 days after an offer is accepted. One loss mitigator who spoke at the Center for Asset Preservation’s Short Sale Summit has a goal of getting an answer back within 48 hours.

How do short sales compare to foreclosures as bargains? In general, banks expect to get slightly more for a short sale than they do for an equivalent foreclosed home. However, we have seen some short sales which were comparable to foreclosures, including a recent high rise condo that had marble floors, crystal chandeliers, silk drapes and expensive wallpaper. The price our client paid was less than the same floorplan had recently sold for as a foreclosure and the short sale had more upgrades.

The most important thing a buyer should know about short sales is you MUST HAVE PATIENCE. While the process is being streamlined and things are beginning to move quicker in many cases, there is no guarantee that the lender will accept the short sale in a timely manner. If you really do need to move into that home by a certain date, you should probably avoid short sales. At the very least, you should continue looking at other listings while the lender is reviewing the offer. And, your agent should make it clear in the original offer that you, the buyer, are entitled to cancel the offer and receive a full refund of your Earnest Money Deposit if the lender hasn’t accepted the offer within a specified time frame.

Finally, as a buyer you should be aware that while the seller who owns the home has agreed to your offer, the bank will not only be reviewing whether your offer is a fair one, they will be reviewing the seller’s financials to see if they really are in a position where they can no longer afford the home or to pay the difference between the current value and what is owed. There are any number of things that can and do go wrong during this process. While short sales can be terrific values, they can also tie up your Earnest Money Deposit and keep your hopes up only to have the lending institution counter your offer at a higher price, decline the short sale entirely or proceed with the foreclosure. If you have the patience and are in a position to start looking all over again if the deal falls apart, you should consider short sales when looking for your home.

*Distressed Property Institute, www.cdpe.com

Click HERE for a detailed Short Sale information gathering form and helpful Short Sale checklist.

This document was provided courtesy of The Center for Asset Preservation.

A LAS VEGAS SHORT SALE REALTOR
IS STANDING BY FOR YOUR CALL!