Real Estate

Short Sales and REO A-Plenty in Las Vegas

Short sales and REOs galore here in Las Vegas. In late 2004 and most of 2005, the largest and most recent loan package for the masses was called “2/28”, whereby the buyer has a 2-year fixed loan with an interest-only payment, usually with a prepayment of 2 years. also. At the end of which (obviously) the buyer is supposed to refinance into a better, more sold loan using the higher appreciation. So what happens if appreciation falls short of expectations, interest rates rise, and loan ratings harden? A hint of panic, a pound of worry and a lot of stress prevails, followed by the threat of foreclosure. Both investors and principal occupants accepted this package because it was quick, easy, and the ratings were so lax. The goal was to get in with the best rate and have the lowest payout possible. The idea was that the individual’s financial position and appreciation would skyrocket during that two-year period, and that everything would turn out just fine.

The second year rolled around, interest rates rose, appreciation fell short of high expectations, and the reality of a volatile and changing market kicked in, resulting in Las Vegas currently ranking third in the country for REOs. owned by banks). ) and foreclosures. Those who have not yet reached the point of foreclosure are desperately trying to sell their properties short (selling the property for the cost of the loan, plus broker fees and escrow). This would result in nothing more than breaking even. for the seller, allowing them to get out of the house with minimal outstanding debt).

If you’re a rehabber, or have always wanted to try, this would be the right time to do it. Just make sure you and the agent you work with look at all the numbers very carefully (i.e. comparative market analysis) to make sure the property compositions are well below market (at least 20% ). (I’ve noticed that some banks price their homes with the market, rather than below the market.) Once you’ve identified a home 20% below market, go see it in person (or have the agent do it for you). Pay specific attention to the details of the home, the community, the demographics, and the home’s overall potential appeal. In other words, DO YOUR HOMEWORK! This is an investment, and it deserves a little research. If you like what you see write an offer (I write my offers based on an inspection contingency. That is unless I am confident in your inspection skills and can verify with certainty the presence or absence of mold, a/c and HVAC unit , etc.).

If you intend to offer on more than one unit, it is a good idea to include the following sentence: “Seller is aware that Buyer is making multiple simultaneous offers on other properties. This Agreement is ONLY Valid if Buyer agrees to the acceptance in writing.” or counteroffer to this offer. This keeps the ball in the buyer’s court. If it really is a good deal (or even a decent one), chances are someone else will find it (if they haven’t already), so treat this with some urgency. This is not something you can normally sit and ponder for weeks on end. I found that giving the seller (in these cases, the banks) a response time of 24-48 hours is not realistic. Banks will take 3-5 days, up to a week and a half, to accept, counter or reject an offer. This is due to one of two things: either the bank is slow to respond due to the channels the offer has to go through, or the bank stops for a few more days to see if another offer arrives that might be more attractive. .

Another very useful tip to keep in mind before making an offer is to search for the property on Zillow. Although I have found your numbers to be a little off (and in some cases very off), there is the main advantage of finding out how much the bank paid for the property and when it was taken over. This can be very helpful in finding a realistic offer price that is acceptable to you and the bank. Also, before you bid, have some realistic numbers in mind for how much the repairs will cost for the property. This will get easier over time, but have someone available to help you the first few times.

Know what your bottom line is (ie purchase price, plus repairs, closing costs, holding costs, agent fees, and escrow fees); in case there is a counter offered by the bank. You need to know what your estimated profit margin is, so you know how much “wiggle room” you have. It’s also a good idea to overestimate repairs by 10-20%, just to have a pad there. Rehabs are not something you want to count down to the last penny, because that will be the time when something unforeseen comes along and it could cost you your earnings, or worse… That being said, rehabs are a great way to earn some money. money. money, especially if you’re willing to do some of the work yourself (which increases your profits much more, provided you have the time). If you don’t have time, look for an agent who regularly works with rehabbers, they should have some references for you from some general contractors, painters, carpet men, tile men, etc. If all of this is done correctly and you prepare for worst-case scenarios, you can easily make anywhere from $10,000 to $25,000 per home, after all expenses are paid.

A word of caution, for those of you who love HGTV and are taking firm notes on all “Flip This House” and “Flip That House” (yes, they’re two different shows), there is such a thing as over-upgrading a house. , and the mistake will cost you! Do your homework and find a smart agent who will do yours too. Improve for the area. Quality work is great, and yes, you want the house to be attractive to buyers, but there’s a big difference between having the nicest house on the block and getting too much better. Having the best house on the block can be as simple as new flooring, new appliances, a little landscaping, and a fresh coat of paint inside and out.

Improving too much will get you so far up the debt ladder that you’ll end up having to sacrifice and lose money just to sell the thing. You have to make a budget (one that brings the house to market value, or just a little more), and stick to that budget. One problem is that rehabbers get too involved with the property and start improving the house the way they would like it, not the way the surrounding community needs it. Just be careful with that, you can burn it and ruin your rehab experience.

So, to recap, the steps are as follows:

1. Find a good agent (preferably one who does this regularly).

2. Identify a few potential properties (you’ll most likely review a couple before finding one you really want to do).

3. Go to see the properties (try and “estimate” how much the repairs will cost you).

4. Search the property to see what the bank paid.

5. Write an offer subject to inspection (unless you feel daring).

6. Get an inspector and get estimates right away!

7. Improve the house for the neighborhood (be careful with this). You should already have a GC/repairmen on hand.

8. List and sell with your new favorite agent.

9. Collect your money and do it again.

**For more information about the Las Vegas market or investment questions, please feel free to contact me and I’ll be happy to go over investment strategies or answer questions.

Jerome Sutton

Re/Max Professionals

702-595-5274

[email protected]

http://www.jeromith.com

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