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 the “2/28”, whereby the buyer has a 2-year fixed loan with one 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 selling loan using the higher appreciation. So what happens if appreciation fell short of expectations, interest rates rose, and loan scores tightened? A dash of panic prevails, a pound of worry and a lot of stress, followed by the threat of foreclosure. Both investors and principal occupiers accepted this package because it was quick, easy, and the ratings were very 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 work out for the best.
Year two 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 short their properties (selling the property for the cost of the loan, plus broker fees and escrow. This would result in nothing more than breakeven for the seller, allowing them to walk out of the house with minimal outstanding debt).
If you are a rehabber, or have always wanted to try it, this would be the right time to do it. Just make sure that you and the agent you work with go through all the numbers very carefully (ie a comparative market analysis) to make sure that the property comps are well below market (at least 20% ). (I’ve noticed that some banks price their homes at market, rather than below market.) Once you’ve identified a home that’s 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 overall potential appeal of the home. 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 you are confident in your inspection skills and can verify for sure 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 verb: “The seller knows that the Buyer is making multiple simultaneous offers on other properties. This contract is ONLY Valid if the Buyer agrees in writing to the acceptances or counter offer to this offer. This keeps the ball in the buyer’s court. If it’s really a good deal (or even a decent one), someone else is likely to find it (if they haven’t already), so you need to 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 unrealistic. Banks will take anywhere from 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: the bank is slow to respond due to the channels the offer has to go through, or the bank pauses 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 bit off (and in some cases seriously 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 offer, have some realistic numbers in mind about how much 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, retainer 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 “leeway” 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 on for every penny, because that will be the time when something unforeseen comes along and could cost you your profits, or worse… That being said, rehabs are a great way to earn some of your money. money. money, especially if you’re willing to do some of the work yourself (which adds a lot more to your profit, as long as you have the time). If you don’t have the time, find an agent who works regularly with rehabbers, they should have some references for you from some general contractors, painters, carpet keepers, tile keepers, etc. If all of this is done correctly and you prepare for the worst case scenarios, you can easily earn between $10,000 and $25,000 per home, after paying all expenses.
A word of caution, for those of you who love HGTV and are firmly taking notes on all the “Flip This House” and “Flip That House” (yes, they are two different shows), there is such a thing as over-improving a house. , and the error 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 home to be attractive to buyers, but there’s a big difference between having the nicest home 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 gardening, and a fresh coat of paint on the inside and outside of your home.
Improving too much will get you so far up the debt ladder that you’ll end up having to sacrifice yourself and lose money just to sell the thing. You have to make a budget (one that will bring 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 begin to improve the home the way they would like, not the way the surrounding community needs. Just be careful with it, 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 some potential properties (you’ll most likely check out a couple before you find one you really want to do).
3. Go look at the properties (try and “figure out” how much the repairs will cost you).
4. Search for 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 it with your new favorite agent.
9. Pick up your money and do it again.
**For more information on the Las Vegas market or investment questions, please feel free to contact me and I’d be happy to go over investment strategies or answer questions.
Jerome Sutton
Re/Max Professionals
702-595-5274
http://www.jeromith.com