Las Vegas Short Sale Update: Should I Pay My HOA Fees?

As a busy short sale listing agent here in Las Vegas, I am asked this question all the time by prospective sellers. Legitimate sellers in a short sale are usually in a serious financial bind, but I do recommend that they keep their home owner association (HOA) dues current whenever possible.

One key to getting a short sale to close successfully is to limit the number of liens that will be recorded against the property.

Sellers already have at least one mortgage to clear, many have two. Having to extra liens is time consuming and can endanger the viability of a short sale.

Remember the order of priority when it comes to liens on a property; HOA’s, Taxes, 1st mortgage, 2nd mortgage holder, and any judgments for additional debt placed against the property. While this is the pecking order, remember that ALL must be cleared in order to transfer the property to a buyer. The 1st mortgage will get the lion’s share of the proceeds, but even their portion is a negotiated settlement. Junior liens further down the chain generally receive even worse settlements, but an HOA and the government will get exactly what is owed to them.

If a lien is placed on the property for HOA dues and fines unpaid, the listing agent will be forced to try and clear yet another lien, and usually has to deal with collection agencies to do it. I am sure all of you are aware of what it is like to deal with that lot. For most people the HOA is a relatively small cost and letting it spiral out of control into a large debt is often unnecessary and can threaten your short sale’s ability to close.

If you have a condo or something similar with very high fees, then you’ll just have to make the call whether or not you feel it is worth it to keep them current, but the majority of sellers should not let them lapse, considering their cost is usually modest.

When I’m driving with Buyers showing them properties in Las Vegas they inevitably ask me a question I can’t answer. I am not trying to be evasive I just can’t answer them without the risk of being sued, fined and/or having my license revoked. What I am writing about here is mostly in response to Fair Housing laws and the governments attempt to eliminate discrimination in Real Estate/Lending.

The first important definition to understand is a practice called steering. Steering is “the illegal funneling of home buyers to particular areas based on a desire to keep the make up of a neighborhood the same or intentionally change it” (definition provided by ask.com). The second important definition to understand is the practice of Redlining. This term was coined when lenders actually drew a redline on a map and refused to lend money to people buying in that area.  The lenders argued that they were unacceptably risky areas to lend in. The lenders lost that argument on the grounds that they were discriminating against people based on racial and income profiles.

So please don’t ask me (or your Realtor) if there are a large percentage of one type of people (read: Race) or another in a particular neighborhood. Even if I knew (which I usually don’t) I won’t tell you anyway. There are decent demographic statistics at the US Census bureau’s website if you are interested in such things (and the new census starts in 2010). The same goes for me offering specific information about various religious buildings in the area (I can’t do it, look on the Internet). Ditto in regards to school ratings, environmental issues and crime statistics. Two good ways to get a feel for a neighborhood is to drive the area and talk to the neighbors.

A Realtor is also prohibited from disclosing confidential information about their clients to anyone other then their broker (for a certain period of time). The exceptions being unless they are ordered by a court of law or given written permission by the client. The reason why I mention this is sometimes the Realtor can be representing both the buyer and the seller. In this case, the Realtor has to walk a fine line as to what he or she can reveal to whom.

Fortunately, we live in an age of abundant information. If you know where to look you can find almost anything on the Internet. Want to know how much the seller paid for the house, look at your county recorders website for their property tax records. Want to know how many sex offenders live in the area, you can go to Family Watchdog website. School information can be had at the National Center for Education Statistics website. I often tell my mother, “don’t be afraid to try things on your computer, it will stop you before you do something stupid”. I suggest a similar thing to you, if you want to know something about a neighborhood (and I can’t tell you), ask a search engine.

My name is Greg Hoffman and I have lived in Las Vegas since 1990. I have been a Realtor here since 1999. I welcome your comments good, bad  or indifferent.

Real estate in Las Vegas can be quite lucrative for those seeking to acquire rental income. Whether the landlord is providing residential homes, condos or office space, a steady stream of monthly income can yield a reliable revenue source that carries through the entire year. Of course, this process can be completely undermined if the renter turns out to be less than desirable. That is why it is critical to perform tenant screening long in advance of accepting the renter.

The purpose of tenant screening is to acquire a clear picture of the renter’s background. Specifically, landlords can explore the tenant’s rental history, credit report, and financial situation. This then allows the landlord to make an appropriate decision as to whether or not the tenant will make a proper fit. Again, this is no minor point. Signing a lease agreement with a “bad renter” comes with many serious problems best avoided. For example, a potential renter that has an extensive history of not paying his bills clearly would not be a safe bet to make his rent obligations on time. Such a renter can turn an lucrative real estate venture into an unstable one within a few months.

Then, there are those tenants that could be labeled even worse renters. Renters that allow their dwellings to fall into complete disarray can create a number of repair costs and other expenses. However, a quick call to their previous landlords could reveal such problem renters with a single phone call.

If there was a moral to this story it would be this: perform a tenant screening prior to renting your Las Vegas Investment property. It will eliminate many hassles and problems long before they even start.

With the economy and land values plummeting it can be an opportunity for resourceful people. One of the biggest areas that investors are looking for help in is property management. Las Vegas has some of the highest value investment property in the world. Many of these investors are looking for quality property management to protect their investment.

Las Vegas property management is a growing and changing field in an economy and market that currently is taking a strong beating. If you are looking for a way to make an honest living and have unlimited income potential a career in Las Vegas property management may be exactly what you are looking for. There are many high quality firms in the area that are always looking for help. Qualifications for getting into Las Vegas property management are not difficult to meet. As long as you have a clean criminal record, high school diploma, and a strong desire to work hard and honestly finding a career in Las Vegas investment property management will be a breeze.

If you are a land owner in Las Vegas now is the time to look for property management to help you protect your investment. By using an outside firm to guarantee your investment you can have the free time to follow other more profitable pursuits. In this economy it is going to be the investors that can aggressively move forward that will survive. Those spending time worried about their current investments and wasting time managing them will be left behind.

As a landlord, you may be contemplating hiring a Las Vegas property management company. While many landlord’s often handle the duties themselves, if you have many rental properties, you may find it difficult to handle everything. An experienced Las Vegas property manager will be able to carry out many different tasks. Their main tasks should include the following:

Marketing: This will include all of the advertising of your properties, as well as following up with any leads that are generated from the advertisements. They can also schedule all of the property showings, as well as show the properties themselves.

Tenant Affairs: The property manager can also take care of all of the tenant affairs for you, including rental agreements, background checks, resolving any complaints from the tenants, and handling all evictions. They can handle all issues as they arise to make certain they are all handled in a timely manner.

Maintenance: As the manager, they can also take care of all inspections, repairs, and general maintenance of your buildings. All emergencies can be directed to your property manager, as well and you can relax, knowing that your sleep will not be disturbed by an issue as small as a blown out light bulb.

Finances: If you desire, your Las Vegas property manager can also handle all aspects of the financial management of your properties, from collecting rent to paying the utilities. If someone is behind in their rent, your property manager will have the time it takes to track them down. All of these financial tasks, however, can be decided at the discretion of you and your property manager.

The fact is an experienced property manager can handle all aspects of your rental business, but you will have the choice on which tasks they will take over for you. If you find that you want to purchase properties in another state, a property manager can make it feasible for you to do so. They can be there in a moments notice and make sure your rental properties are well taken care of, as well as your tenants.

If you are the owner of a property or are currently a landlord, you may find yourself sometimes overwhelmed with the many tasks involved with the management of your properties. When you hire a Las Vegas property management firm, you will find there are many benefits.

The main benefit is property managers are experienced in both renting and selling properties. They will understand all of the details required to successfully keep your investment properties rented, as well as highlighting all the advantages when trying to sell your properties. This will include doing background checks on all potential renters, as well as collecting the rent.

You will also find the property management firm will help you to take care of all aspects of your property maintenance, including scheduling inspections, repairs, routine maintenance, and cleaning. If something goes wrong in the middle of the night, such as the heat goes out, you will no longer receive a phone call to handle the issue. They will handle all emergency calls and take care of these items in a timely manner.

The main benefit of hiring a property management firm to manage your real estate is it will allow you the time you need to take care of more important details in your business. This may include purchasing more properties to expand your business or investing the earnings you make in another venture.

When it comes to owning investment real estate in Las Vegas, Nevada it is easy to learn that there are a lot of responsibilities that come along with the job. The more properties you own, whether you are fixing them up to sell them or you are renting them out, you have to have a lot of organization going in order to keep everything in line. With so many laws to watch out for, so many expenses to pay for, and so many people to please, it can be hard to take care of such a job by yourself. This is why developing a relationship with a good Las Vegas Property Manager is a great idea.

By taking advantage of what a property manager can do for you, you will be able to run your real estate investment business in a much smoother manner. When you are looking into such an avenue though, you will want to make sure that you are being honest with yourself in what you are expecting from the person handling your investment properties. The person you hire to work on your team must have experience under his or her belt. Hiring someone with little or no experience is only going to cause you a headache in the end.

There are many people out there offering their services as Las Vegas Property Management professional. Such advertisement can be found in the classifieds, both the online and print versions. Start looking through those and do not forget to write up your own ad in regards to the position you are trying to fill. The sooner you find someone to help you keep everything in line, the more secure your investment will be.

You will also be perceived to be a true professional, which is something that is highly sought after by many people who work for themselves. One word of advice though, you will want to make sure that you scan your applicants very well. This is because the person you hire will have access to your properties and to a lot of your money if they handle such things as rent payments and evictions.

Anyone that has been involved in a short sale in Las Vegas knows it can take a very long time to close and even then, there is no guarantee it will.  From the time we enter into a short transaction, whether it is with a buyer or seller, we explain the process so they know what to expect.  Even though we thoroughly explain the short sale process to our clients, we still get asked 30-60 days into the transaction, “Why does it take so long to close a short sale?”  I can understand their frustration and disbelief that it can actually take a bank over 60-120 days to respond to an offer.

So why does it take so long for a bank to approve a short sale?  Well, it really depends on the Bank that is holding the mortgage.  Some banks can get a short sale approved within 45-60 days but for the most part most get approved within 60-90 days.  One of the reason it takes so long is the bank requires copies of all bank statements, tax returns, w-2s, and other supporting documents to verify that the homeowners cannot afford to keep making their payment and have a financial hardship.  Once this paperwork is received, it is reviewed by a loss mitigation specialist.  After they review the paperwork and BPO (broker priced opinion), a fair market value of the home, and it’s approved, it just moves to the next step.

The next step is having the investors sign off.  This may include a long list of investors who own pieces of this mortgage loan.  If this is the case, each investor must sign off on the short sale.  You can imagine these investors aren’t very happy about taking a loss on their investment, so don’t expect them to go out of their way to approve the short sale.  If and when the investors sign off, you just may have your approval.

Once we have the approval, the seller could still be held responsible for the balance but this is another topic we will discuss in our next series, Las Vegas Short Sales: Consequences to the Seller.

If you are a homeowner in Las Vegas and have questions about selling your home as a short sale, feel free to give us a call for a free consultation at 702.376.0088.

Because there may be serious tax and/or legal consequences to the seller in a short sale transaction, we recommend you contact an Attorney and/or a CPA for legal and tax advice.  We do not provide legal or tax advice!

Your credit reports are a key factor in determining whether or not you can get a mortgage. There are three different bureaus that collect and report information regarding your overall credit situation. They are Equifax, Experian and Transunion. They all rate you by using a scoring system called F.I.C.O, which stands for Fair Issac Credit Organization. Your F.I.C.O score can range anywhere from 400 to 850 (a higher score is more desirable). Only F.I.C.O employees know exactly how they calculate their scoring system, but recent external pressure has forced them to reveal some of their secrets. I will pass what information I have learned on to you latter in this Blog.

When you are ready to buy a house, you need to shop for a mortgage first. After you have found a lender, they will pull your credit reports. They are looking for three basic things. First, they will look at your F.I.C.O scores from each of the three bureaus (if you are applying for a conventional mortgage). They usually take an average of the three scores or your mid F.I.C.O score. Most conventional mortgages have a F.I.C.O score minimum requirement, if you don’t make it up to that number, you don’t get that particular mortgage. There is generally no room for negotiation on this point. Second, they are looking for any derogatory credit. Derogatory credit are things like late payments, car repos, foreclosures, bankruptcies, tax liens, back child support, bounced checks, collection accounts, etc. Any one of these can be a deal breaker or the lender might accept a letter of explanation as to what caused the derogatory credit to occur. Third, they are looking at all your debt (as reported on your credit reports) and calculating your debt to income ratio. The amount of money you spend on bills vs. the amount of money to take in as income. They have various percentages (based on different loan products) that they deem to be acceptable. If you exceed these ratios, they may be willing to negotiate a little if you are strong in other areas (ie. if you have been at your job for a long time or if your F.I.C.O scores are high).

If you find information on your credit reports that is inaccurate, you can request that it be corrected. You need to send a letter to each credit bureau (that has incorrect information reported) and ask that it be corrected. Write one letter identifying yourself and the information you think needs to be corrected. Make sure you send any evidence you have that supports you request. Photo copy the letter/evidence and sign your original signature to each copy. The bureaus usually have 30 days to investigate your claim. If they can’t verify the information they have reported, they have to delete it from your file. This process also works well if you want something added to your credit. If you have limited credit, send in information that shows you pay your bills on time. For example, if you have a department store charge card and it doesn’t show on your credit reports (ask that it be added to your file).

Here are three other tips that may improve your F.I.C.O scores. One, don’t close open credit card accounts/liens of credit just because you paid off the balance. The fact that you have access to (but are not using) credit/money shows you have some reserves if you need them in a pinch. Two, if you do carry balances on your credit cards/liens, try to pay them down below 50% of your available credit line. There is no set reason as to why this works, it is just one of F.I.C.O’s quirky methodologies. Third, avoid allowing to many companies to pull your credit. In general, each time you have your credit pulled your F.I.C.O score drops. The logic being that a company that pulls your credit MAY extend credit to you and you could run up your debt (before it actually shows on your credit report). The exception to this rule is having companies that are designated mortgage companies pulling your credit. In a 30 day period, mortgage designated companies can pull your credit and your F.I.C.O hit will only be from the first mortgage company.

My name is Greg Hoffman. I have live in Las Vegas since 1990 and I have been a Realtor here since 1999. I also have worked in forward and Reverse Mortgages with major national banks.

I have received many emails and phone calls lately with this question. “In your opinion, should I sell my Las Vegas Home or rent it out?” As much as I want to help and give my opinion, my opinion really doesn’t matter.  What matters is that I provide you with all the facts and information that will help you make a decision for what’s best for you and your family. Only you know your true financial situation.

What we do with our clients that have questions like this is break down the Las Vegas Rental Market and the Las Vegas Real Estate Market.

Las Vegas Rental Market:

• Increase supply of properties for rent
• Rental Prices have fallen
• More Tenants have credit issues due to foreclosures
• If you purchased your home between 2004 – 2007 with 80% to 100% financing, the rent you collect will not cover your mortgage payment.

We are seeing an increased amount of rental inventory which has caused rental prices to drop a bit.  We are also seeing an increased amount of potential tenants with foreclosures on their credit history.  With Las Vegas being an epicenter in the foreclosure market, you can expect many of these previous homeowners entering the rental market.

Las Vegas Real Estate Market

• Buyer’s Market
• Most homes on the market for sale are either a REO (Bank owned home) or a short sale.
• Chances are you owe more on your Las Vegas Home than it is worth if you purchased your Las Vegas home between 2004 – 2007.

Las Vegas Home prices have fallen significantly over the last year and a half due to the amount of foreclosures.  Banks and Lenders have placed these foreclosed homes back on the market and priced them well below market value which has driven down home prices.

Chances are you owe more on your home than it is worth, but you can still sell your Las Vegas Home.  This is called a short sale. A short sale is where the Lender/Bank agrees to take less than you what you owe.

If you would like to keep your Las Vegas Home but can’t afford to keep making the payment, you can always try to get a Loan Modification.  A loan modification is where the Lender agrees to modify your existing terms of your mortgage agreement.  However, before you go and contact your Lender/Bank to look into this option, remember the person you are speaking with is an employee of the Lender/Bank.   Their job is to get the best deal possible for the Lender/Bank, not you.  That’s why we recommend having an Attorney represent you on a Las Vegas Loan Modification.

If you have any questions, please call us at 702.376.7379 or fill out our contact form.

This is part two of a two part blog on buying Las Vegas residential property. By now it is assumed you have a lender and I am your Realtor (if your in Southern Nevada), so it is time to start deciding your priorities. What are the most important things you want in a house?

The old joke is, what are the three most important factors in buying a house are——–location, location, location! Do you want to be close to certain schools? Do you want to be close to your work? Do you want to be far away from freeways, airports, fire stations (noise), 24 hr stores (lights), etc. How did the neighborhood look as you drove to the property? Are there cars on blocks in some drive ways nearby? Is there graffiti on the walls everywhere you look? What about having to many two story house around yours (privacy)? Do the neighbors dogs bark uncontrollably every time you go near your potential house? These are all important factors when deciding if a houses location is right for you.

What kind of amenities do you want in a house? Most people can quickly decide how many bedrooms, bathrooms and garage spaces they want. They can also determine story preference and minimum square footage they are looking for. What about minimum square footage for your yard? What direction you want the house to face (important in this climate)? Pool or no Pool? Grass or desert landscaping? Maximum age of the house? The more of an idea of what you want before you start looking, the better the Realtor can filter the choices presented to you.

The next step is to search for properties via the Multiple Listing Service (MLS). The MLS is a Realtor produced database of all properties (for sale by Realtors) in a given area. Take the time to sit down and review the pictures of prospective properties before you start driving all over town. Many times properties can be eliminated from consideration just by looking at the pictures on the computer. This is a huge time saver for everyone involved.

Now it is time to go physically look at properties. Pay attention to the condition of the neighborhood, especially everything directly around your potential house. If the neighbors are around, ask them what they think of living there. Look at the house for obvious problems like water stains, major cracks in the frame or foundation, unpermitted additions, etc. Are the problems you find structural or cosmetic? Do you want to take the time and expense to fix said problems? If the answer is no, move on, there are plenty of houses to choose from.

After you find a house you want to make an offer on, you have to go back to the computer to see what a reasonable estimation of it’s value is. Your Realtor should be able to SHOW you  (on the MLS) similar houses that have sold recently in the neighborhood. Remember to look at SOLD prices and to have your Realtor factor in Seller’s contribution to Buyer closing costs (if any) for a more accurate estimation of value.

Now that you have an estimation of value for your potential future home, it is time to write the offer. How bad do you want this house? You can start with a low offer and go up from there (but there are risks to doing so). How upset would you be if you lost the house to a higher offer? If the answer is VERY, start with a stronger offer. If you have looked at many houses and this is your dream house, is it worth losing for a few thousand dollars? Expect a counter offer and be prepared to negotiate (remember the seller wants to get as much as they can when they sell). Always make sure your offer is contingent on a professional inspection. This probably is the most expensive purchase of your life, don’t skimp on an inspection that might cost a few hundred dollars.

Now you have an accepted transaction, but the work isn’t over yet. Make sure you get every scrap of paperwork the lender asks for (in a timely manner). If you delay the closing because your lender didn’t have everything  he/she needed, it could cost you a lot of money. You could even lose your earnest money deposit and the house to another buyer. Don’t let anyone else (except your second opinion lender) pull your credit until close of escrow (COE). Your loan could be credit score driven and (most) times when your credit is pulled your score drops. Don’t buy any big ticket items on credit prior to COE  because it could effect you ability to get your mortgage (by changing your debt to income ratio). Most lenders will pull your credit right before COE to make sure nothing has changed to make you a credit risk. Don’t quit your job or change careers prior to COE, it may disqualify you for your mortgage. When in doubt, ask your lender for guidance before you do ANYTHING that may jeopardize your loan.

There is a bankruptcy bill that is being pushed by Democrats that would give Judges the power to dictate mortgage terms.

If this bill were to pass, a homeowner could file bankruptcy and the Judge could change the terms of his primary residence mortgage to make it more affordable for the homeowner so one they can afford their monthly mortgage payment and two to bring the mortgage down to market value.

The Mortgage Bankers Association, American Bankers Association and the U.S. Chamber of Commerce oppose this bill and have spent millions to try and prevent it from being passed.  According to the chief lobbyist for the Mortgage Bankers Association, Steve O’Connor, said “new homebuyers would end up paying higher interest and bigger down payments if lenders are saddled with the risk that a judge could change mortgage terms.”  Why would homebuyers end up paying a higher down payment and interest rate?  The lending guidelines are very stringent now and you can’t buy a home anymore without at least 3.5% down so I would imagine that the default rate on these new home loans would be very small?  So the risk for Lenders and Banks have dropped considerably compared to loans they gave out back in 2003-2006.

I can see why the Mortgage Bankers Association and American Bankers Association would want to prevent this bill from passing because it certainly would harm the bottom line for lenders and investors holding mortgages or would it?  How much harm would it really cause Lenders and Banks with the Government bailout?  Bank of America just received a 2nd bailout of $20 billion dollars!  Banks appear to be using their bailout money to acquire other banks so I am not too concerned with them complaining that they would lose money if this bill passes.  What I am concerned with is Lenders and Banks requiring homebuyers to come in with a higher down payment and increases in interest rates.

We need a solution to the foreclosure mess since Banks and Lenders can’t get short sales or loan modifications approved in a timely manner.  The passing of this bill would help streamline the process and allow homeowners to keep their homes by bring their mortgage down to market value and giving them a payment they can afford.  This will prevent more homes from going into foreclosure which helps keep inventory levels from increasing and should help prices begin to level out.  When there is confidence again in the real estate market, it will begin to spill over to other industries which will help lead us out of the recession our Country is facing.