There has been a lot of public discussion whether the new Homeowners Bill of Rights (Nevada Law SB 321) will open up short sale transactions that are not considered “arms-length transactions”. The term “arm’s length” means that a sale does not occur between principals who are close relatives, those with existing business relationships, straw-buyers etc. The theory is that the buyer and seller do not have other incentives influencing the transaction. An example would be sellers in a Las Vegas short sale selling to their parents in order to buy the home at a later time. Under this scenario, the parents would be incentive to get the lowest price for the children to buy back later. It is easy to see how a bank taking a loss on the mortgage would see that as not in the bank’s best interest.

The banks who hold the mortgages on upside down properties generally have the principals in a sale (buyer and seller) sign agreements stipulating the sale is an arm’s length transaction between essentially unrelated parties. Once these agreements are signed, the principals are bound by the terms and subject to breaking federal bank fraud laws if they are found to have violated the terms of the arm’s length transaction agreement. One of the most eagerly monitored items was the expectation that SB 321 was going to prohibit banks from imposing arm’s length transactions in Nevada. The following statute in the bill addresses this issue:

Sec. 16.5.

1. No provision of the laws of this State may be construed to require a sale in lieu of a foreclosure sale to be an arm’s length transaction or to prohibit a sale in lieu of a foreclosure sale that is not an arm’s length transaction.

What is missing is there is no language barring arm’s length transactions. I am not an attorney and I am not offering a legal opinion. This is simply my opinion as a real estate professional after consulting with attorneys as well as reading the bill myself. It appears the State is communicating legislative intent that a “sale in lieu of foreclosure” (short sale) that is not an arm’s length transaction is essentially welcome.

This falls considerably short saying banks cannot require the “arm’s length agreements” in Nevada.

There have been plenty of local attorneys and real estate agents putting out a narrative that under SB 321 banks cannot require an arm’s length transaction agreement to be signed. While not really true,  this tactic gets their phones ringing from potential clients, and that is always the goal when trying to get new business.

My consultation with attorneys indicated that the State of Nevada does not prohibit short sales which are not arm’s length transaction. The bottom line is that nothing has changed; signing an arm’s length transaction agreement while trying to do a short sale remains voluntary between all parties. The seller isn’t required to sign and the bank doesn’t have to require one, though they usually do. If the bank agrees to the sale without a signed “arm’s length”, and a seller has provided honest personal and financial documentation, there is nothing illegal about doing a short sale that is not an arm’s length transaction.

Here is the rub, if you want to attempt to do a Las Vegas short sale that is not an arm’s length transaction you’ll have to be up front about what you want to do and try to get your short sale approved without ever signing an arm’s length transaction agreement.  If I have a seller inquiring about what their options are, they should consult an attorney and if they need an attorney recommendation, I can recommend attorneys I have worked with in the past they can consult for free.

Disclaimer: This article is not meant to construed as legal advice and all sellers considering a short sale should consult with an attorney and seek professional tax advice as well.

There are many different reasons why people downsize – they retire, get divorced, become empty nesters or are just tired of paying for (and maintaining) a larger home. But before you move from your 5,000 square foot Las Vegas home to a bungalow, you should…

…remember location, location, location.  Even though your kids don’t live at home anymore, the proximity of your local school (and how well it’s ranked) will influence your property value. Remember, schools (with good test scores), taxes, public transportation, highways and shopping all impact the value of your home.

…keep all costs in mind.  Costs to remember when buying either a home, condo or town home (besides the down payment, closing costs and mortgage) are HOA fees, building and maintenance fees (pool, tennis courts or fitness rooms) or assessment fees (for common area renovations, for example). Try to get an idea (either through association meeting minutes or from copies of HOA invoices) to how much fees have gone up in the past and if there are any planned for the future.

…picture yourself in the future.  Visualize yourself living in your smaller home when possible health conditions may surface. You don’t want to buy a multi-level home (with many stairs) if you have hip or knee problems. You also want to think about where (and how high) you kitchen cabinets are. Is grabbing your morning coffee mug going to be a problem because you can’t reach it without using a stool? Remember, downsizing is supposed to make your life easier – not more complicated.

…size up your stuff.  Oversized furniture fits and looks great in your 5,000 square foot home, but may look cramped and stuffy in your new smaller place. See if you can sell your larger pieces of furniture, then take the sale money and buy separate pieces that fit (and can be moved around) in your new home. This is also a good time to de-clutter and streamline your possessions. There’s no point moving things that you don’t want or have room for.

There are many homes on the market in Las Vegas that are perfect for downsizing homeowners. Give one of our agents a call at (702) 376-7379.

Top Five Short Sale Deal Killers

Whether you’re a buyer, seller, agent, broker, lender, title officer, if you have an interest in a short sale transaction, you’ll want to know what the biggest threats are.

A great agent can overcome many of these obstacles, but in order to do so, one must identify where the problems are. Too many homes are foreclosed that shouldn’t and in fact could have be sold to a willing buyer who could actually afford the home.

#1 – Listing agents

Nobody has a more influence in a short sale from a seller’s perspective. They run the show. Short sales only close nationally at a little over 20% of those listed! Many agents have been forced into taking short sales because they are now common in many markets; however, most agents can’t stand doing them and are vastly unprepared both from an education/experience standpoint as well as not possessing the passion needed to properly represent their sellers. Listing agents control nearly all the information. The agent can deflect from their failures very easily by blaming others: the banks wouldn’t agree, the buyers wouldn’t cooperate, blah, blah, blah. Short sales take some very creative thinking as an agent because roadblocks from very unforgiving institutions are constantly being thrown in their faces.

Listing agents also take many files they shouldn’t: uncooperative sellers, sellers who can afford the mortgage payment and have significant assets, not screening their sellers who may file a bankruptcy because of excessive debt and abandon the short sale midstream. Many of these short sales are dead on arrival and never have a chance to successfully close.

Can the agent get the right buyer and are they able to keep the buyer interested for the extended waiting period necessary while the listing agent tries to get the short sale approved? Is the agent able to stand up to the tricks the banks will pull on them without making the bank personnel angry and risk having their client’s files “flagged” or delayed?

Does the agent do their own negotiating or do they farm out the work to third party processors to handle the bulk of the work such as lawyers and title companies? Didn’t you hire the agent to represent you and not someone else? How can the agent even know what’s going on with the file if they are not doing the work? Truth is they generally don’t want to know. How could they? Anybody can take a listing and pass it off to someone else. That is an expert?

Sellers, banks don’t put up a blue-print on their website how Johnny or Sally agent can beat them in a short sale negotiation. Believe me, they will use every nasty stunt possible to get the best possible deal ($$$) out of both the agent and seller. Most real estate training is woefully inadequate. Take an 8 hour course and they’re now a short sale “expert” with a fancy sounding designation to slap on to their email signature.

#2 – Buyers

Oh, poor, innocent buyers and their agents, just trying to get their clients a home. Buyers will frequently misrepresent themselves on offers they submit as well as misleading their agents about their ability to perform on an offer. They shroud their financial abilities and too many times, buyer agents are too timid to press them for information related to the buyer’s credit.

Buyers will make multiple offers on homes without disclosing that they are doing that. Well, generally you can’t buy more than one home at a time and an offer is an “agreement to purchase”. That would be a piece of information a seller just might want to know. After all, the seller is taking the home off the market for THEM and only them in a short sale, forgoing the ability to accept other offers that can be placed in front of the bank for approval. We get many bank approvals for our short sales and then the buyers cancel. It is a significant problem.

#3 – Mortgage Insurance Companies

What is mortgage insurance? Generally, it is used for mortgages in which the borrower did not put down at least 20% of the purchase price. In case of default, the bank could then file a claim to cover anywhere up to around 60% of the actual loss. This was the purpose of most of those purchase-money 2nd loans a few years back. Buyers could put down 100% and thus avoid the added cost of mortgage insurance to their monthly payment.

Fast forward to today when now we are now trying to negotiate a short sale. The mortgage insurer (MI) is now a player because as a payer of the claim, they have a say in the terms the bank accepts on the short sale. The bank, who most people think they have to negotiate with, may not care because they are going to get a claim payout from the MI company either way!

Although, MI companies will sometimes negotiate, they are generally quite inflexible and many times the seller won’t want to accept their terms and too often the home forecloses. Other times, the MI company will deal, but the listing agent has no idea how to negotiate with the MI company or that they are even allowed to do so…sad, but true.

#4 – Homeowner Associations

Homeowner associations (HOA’s), those lovely and virtuous institutions, set up to “protect” homeowners actually drive many a home needlessly into foreclosure. Can someone please explain how that benefits members of that association?

Here in Nevada, HOA’s are able to file liens for unpaid assessments and fines. What gives them so much power is they are able to file as a “Super-Priority” lien. Essentially, it holds the same status as a 1st mortgage lien. In a normal market they could foreclose and get their money plus any equity; however, since homes have no equity here in the Las Vegas real estate market, they don’t want the home so they just bide their time until they get paid.

This doesn’t sound too unfair, right; after all they are owed money. Here is the problem. HOA’s can hire out their collections to 3rd parties such as collection companies and attorneys who, due to Nevada’s vague collection laws, can essentially charge whatever they want, and they do. HOA delinquencies can increase from the hundreds of dollars originally owed, into five-figure numbers. The collection agencies are brutal because they know they will probably get paid and do not negotiate at all. Their business model actually depends on the collection bill increasing because the longer they wait the more money they will recover.

How does this affect short sales? Having a huge, extra lien that must be paid by someone presents a large problem. The seller themselves might well either not have the money or be unwilling to pay it out of principle since they will be losing their home. The HOA lien might conflict with the minimum net proceeds the seller’s lender would be willing to accept in approving the short sale. Once again, the HOA doesn’t care because they’ll get paid at foreclosure too.

#5 – Seller’s Mortgage Lien Holders (AKA: the bank)

One thing you’ll notice right away is why are the banks only listed as only #5? That is the big myth vs. reality about short sales. I list and sell short sales for a living. Everyone is concerned with the bank, the bank, the bank. Will they approve or won’t they? Will they release deficiency rights?… and on and on.

Here is the reality; banks in most cases here in Nevada actually prefer the short sale because it will usually net more money than a foreclosure. Once I understood this principle, the job became much easier. I just keep beating them over the head with their own criteria, make more money!

Ok, here is why they can be a deal-killer. A short sale is a voluntary agreement between a borrower who is upside down on their mortgage and a lender. Neither side is compelled to do a deal. Sometimes, depending on the situation an agreement cannot be reached that is compatible for both sides. There may actually be a good deal on the table but one side won’t budge to make it work.

The main reason banks can kill deals is simply their own lack of clear mandates on short sales that filter down to incompetent personnel. The telephone tough guys we talk to in customer service and short sale departments rarely have approval authority, despite official sounding titles like negotiators. Most agents fight with them, but it is fruitless. Short sales are simply being able to get the right information to the right person quickly enough to take advantage of the current offer on the home. That’s it. It is that simple.

Nevada Law AB373 Aimed at Homeowners Who Damage Homes Prior to Foreclosure/Short Sale

The Nevada Legislature has taken steps against homeowners who deliberately damage their home prior to vacating the property during the period when the property is in default by criminalizing such behavior. After October 1, 2011 it will be a misdemeanor according to AB373. Persons can be subject to arrest and subsequent prosecution.

Owners may think they are getting back at the banks by taking this action but all they really do is hurt others. The banks are doing just fine. Who is really affected are the neighbors who see their properties decline even further when the home sells for less than it should. The next homeowner, who had nothing to do with the situation, can be affected for years if the damage inflicted by the previous homeowner leads to unnecessary maintenance breakdowns. Also, insurance premiums and mortgage rates can  also rise as the risk to loan in our area increases.

For any questions related to foreclosure and short sales, please contact Shelter Realty at 702-376-7379. You may also email us at info @ shelterrealty.com.

A VA loan is often a better option than a convention mortgage for veteran and active duty military home buyers who are interested in purchasing a Las Vegas home.

With Nellis Air Force Base located near North Las Vegas, we have several VA eligible first-time homebuyers contacting Shelter Realty about taking advantage of the historically low housing prices in the valley.

Unfortunately, the national media has many buyers convinced that the only way they can qualify for a home loan is if they have perfect credit and a huge downpayment.

Over the next several weeks, I’ll be tearing apart the common myths and misunderstandings about mortgage financing in order to help shed some light on the truth about getting approved for Las Vegas mortgage.

Even though each qualifying scenario is unique and requires a full loan approval from a mortgage professional who has experience with VA financing, the following list highlights the main benefits VA loans have over conventional mortgage programs:

1.  100% Financing –

A typical convention mortgage requires an initial down payment that can range from 5% – 20% of the appraised value on a purchase.

I say “appraised value” vs “purchase price” because there are instances when a property does not appraise for the full value of a homeowner’s asking price.  At that point, the borrower would have to pay the difference between the asking price and appraised value, as well as the standard 5% – 20% down payment.

Either way, VA loans generally do not require that initial large down payment based on the standard Loan-to-Value lending guidelines that come with a conventional mortgage program.

2.  Lower Interest Rates –

Another major benefit is that VA loans have comparatively better interest rates.  In some cases, a VA loan mortgage rate can be as much as .50% lower than on a similar conventional program.

Over the course of several years, a $35 – $75 a month payment will definitely add up to a significant savings.

The process of shopping mortgage rates is the same with any program, so it’s a good idea to have a basic understanding of how the markets work if you’re concerned with comparing quotes between a few lenders.

3.  No Mortgage Insurance –

Private mortgage insurance (PMI) is generally required on conventional loans when the loan amount being borrowed is greater than 80% of the value of the property.

The Department of Veterans Affairs does have a funding fee requirement for VA loans. This funding fee can be anywhere between 0.5% to 3.3% of the loan total. However, veterans who were classified as disabled during at least 10% of their time in active duty do not have to pay the fee.

Mortgage insurance is basically in place to protect the lender in the case of payment default or foreclosure.

4.  Qualifying Guidelines –

It is also typically easier to qualify for a VA mortgage loan than a conventional mortgage, especially if you have a recent bankruptcy or foreclosure within the past four years.

There isn’t a hit to the interest rate for lower credit scores, and VA underwriters tend to give special circumstances more consideration if there is a good letter of explanation.

In addition to the benefits mentioned above, VA loans have two payment term options – Fixed or Adjustable Rate.

The difference between the two options is as follows:

• Fixed rate loans have one payment tied to the same interest rate for the entire term, which is typically 15 or 30 years.
• Adjustable rate loans start off with a set interest rate for a predetermined period of time, and then the rate may change based on the specific terms set forth on the note. Know you options, and make sure you understand which program you are choosing.

Refinancing with a VA loan also has many benefits over refinancing with a conventional loan.

Some of refinance benefits include:

• A higher refinance limit (up to 90% and some 100%) than the majority of conventional loans.
• Easier credit requirements, which often make refinancing with a VA loan simpler and less stressful.
• Help from the Department of Veterans Affairs for borrowers currently in default because of financial hardship.
• No requirement of private mortgage insurance.
• The ability to include the VA funding fee with the total amount of the refinance.

Between the tremendous savings and streamlined qualifying guidelines, any veteran who is in the  process of purchasing or refinancing a home should strongly consider using their  VA benefits.

Shelter Realty works with several qualified and experienced mortgage professionals that specialize in helping Las Vegas Veterans qualify for a VA loan.

Please feel free to contact us if you have any questions about VA approved properties or speaking with one of our trusted lenders.

How long after a short sale before I can qualify for a new home loan?

This is the main question most of our Las Vegas underwater homeowners have that are weighing their options of loan modification, short sale or foreclosure.

And, not being able to plan for future home-ownership can add more anxiety to the equation.

It’s frustrating when you struggle to do the right thing and make your mortgage payments on time, and then feel penalized by the system by being denied for new mortgage financing due to a recent short sale that was out of your control.

Obviously, if we’re going to turn this slow market around, banks will eventually have to figure out a way of providing special circumstances for qualified borrowers that may have fallen victim to a financial crisis that was largely influenced by mortgage and real estate fraud.

Well, the good news is that according to recent changes in FHA Financing Guidelines as of March, 2011, Las Vegas home buyers who are as little as one day out of a short sale on a previous property may qualify for a new mortgage.

FHA Day Out Of Short Sale Overview:

You can read the official FHA Guidelines, but the following screenshot created by a friend Scott Schang highlights the main points.

So, what this is basically stating is that unless you did a short sale simply for financial gain, there is a chance you could be eligible for a new FHA mortgage right away.

Examples Of Possible Acceptable Reasons For Short Sale:

• Living in previously owned bachelor pad condo – got married, have kids – 1 bed 1 bath doesn’t accomodate 3+ person family
• Kids move out of home – parents no longer need 4 bed 3 bath home for 2 people
• Relocating because of job
• Death in the family
• Forced sale due to a divorce

Before writing this post, I did a considerable amount of research online, as well as speaking with one of our trusted local loan officers, Brian Maier, to ensure there weren’t any hidden challenges our buyers would face if they planned on purchasing a new home immediately after doing a short sale.

Brian said it is important that the borrowers have a clean mortgage payment history for the past 12 months.

This means that there are no 30-day late mortgage payments on your credit report in the past year.

He also stated that each lender has their own qualifying criteria based on standard eligibility guidelines, such as credit, loan-to-value and debt-to-income ratios.

I certainly understand that the words “May Qualify” probably create more uncertainty than hope, but Brian did mention that some lenders were more lenient than others on what they determined “Acceptable” reasons for a short sale.

Either way, the point is that we are moving in the right direction for making mortgage financing available for “make sense” scenarios.

Our Las Vegas Short Sale expert, Paul Rowe, definitely has the knowledge and track record to help answer any of your selling questions.

If you’re interested in digging deeper about how to qualify for a new home loan please contact us for more information.

Simply checking online for today’s posted rate may not lead to your expected outcome due to the many factors that can cause each individual rate and closing cost scenario to fluctuate.

We can preach communication, service and education all day long, but it’s our ultimate goal to earn your trust so that you can be confident in our ability to successfully lead you through this complex mortgage process.

Since mortgage rates can change several times a day, the following questions will help determine whether or not your lender truly knows what to look for so that they can provide you with the best rate once you’re in a position of locking in your loan:

Who determines mortgage rates, and what are they tied to?

Mortgage interest rates are determined by the pricing of Mortgage Backed Securities or Mortgage Bonds. The media often implies mortgage rates are based off the 10-year Treasury Note, which is incorrect.

While the 10-year Treasury Note has been known to trend in the same direction as Mortgage Bonds, it is not unusual to see them move in completely opposite directions.

How often do mortgage rates change?

Mortgage rates may change throughout the day, however they only change on days when the Bond markets are trading securities since mortgage rates are based on Mortgage Bond prices.

Think of a Mortgage Bond’s sales price similar to that of a Stock that trades up and down during the course of a day.

For example – let’s assume the FNMA 30-Year 4.50% coupon is selling for $100.50. The price is 50 basis points lower from the previous day’s closing price of $101.00.

In simple terms, the borrower would have to pay an additional .50% of their loan amount to have the same rate today that they could have locked in the previous day.

What causes mortgage rates to change?

Mortgage Bonds are largely affected by various market forces that influence the changing demand for bonds within the market.  Some of the key economic factors that have the greatest impact are unemployment percentages, inflationary fears, economic strength and the overall movement of money in and out of the markets.

Like stocks, most fluctuation is caused by consumer and investor emotions.

What do you use to monitor mortgage rates?

There are several great subscription based services available to monitor Mortgage Bond pricing.

The key is to make sure the lender is aware they should be monitoring Mortgage Bond pricing, such as the Fannie Mae 30-Year 4.50% coupon… and not the 10-Year Treasury Note or the news media.

When the Fed changes rates, why do mortgage rates move in the opposite direction?

It is a common misconception that when the Federal Reserve implements a rate cut it is immediately correlated to a reduction in mortgage rates.

The Federal Reserve policy influences short term rates known as the Fed Funds Rate (“FFR”). Lowering the FFR helps to stimulate the economy and increasing the FFR helps to slow the economy down. Effectively, cutting interest rates (FFR specifically) will cause the stock market to rally, driving money out of bonds and creating potential for inflation.

Mortgage Bond holders need to obtain a higher rate of return on their money if inflation is increasing, thus driving up mortgage rates. With the Federal Reserve Board meeting every six weeks, this is an important question to ask. If your lender does not have a firm understanding of this relationship, they may leave your rate unprotected costing you thousands of dollars over the life of your mortgage.

Do different programs have different interest rates?

Conventional, FHA and VA loans can all carry different rates on a 30-Year fixed mortgage. FHA and VA loans are insured by the Federal Government in the event of defaults.

Conventional mortgages are insured by private mortgage insurance companies, if insurance is required.

Typically, FHA and VA loans carry a lower rate because the investor views the government backing as less of a risk. While rates are usually different for each program, it may be more important to compare the monthly and overall cost during the life of the loan to determine which program best suits your needs.

Why is an Adjustable Rate Mortgage (ARM) rate lower than a fixed rate mortgage?

An Adjustable Rate Mortgage (ARM) is usually fixed for a specific period of time. The period is typically 6 months, 1 year, 3 years, 5 years or 7 years. The shorter time period the rate is fixed, the lower the interest rate tends to be initially.

This is due to the borrower taking the future risk of increasing interest rates. The only instance where this would not be true is when there is an inverted yield curve where short-term rates are higher than long-term rates.

Why are rates higher for different property residence types?

Mortgage interest rates are based on risk-based pricing. Risk-based pricing allows adjustments to par pricing for risk factors such as; FICO scores, Loan-to-Value percentages, property type (SFR, Condo, 2-4 Units), occupancy (Primary, Vacation or Investment) and mortgage type (Interest Only, Adjustable Rate etc).

This allows the investors who lend their money for mortgages to receive additional compensation for taking additional risk.

If the borrower encounters a financial hardship, are they more likely to make the payment on the home they live in or the one they rent out?

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Related Mortgage Rate Articles:

• Mortgage Rate Overview
• Top Five Market Factors That Influence Mortgage Rates
• What’s The Difference Between APR and Note Rate?
• How Are Mortgage Rates Determined?
• How Do Mortgage Rates Move When The Fed Lowers Rates?

Seller Strategies

When a Las Vegas listing agent and a client talk strategy, there is one question the agent does not have to ask his/her client: “what are your priorities?” And the reason the agent doesn’t have to ask is because the answer is already known: “Sell my house quickly and at the highest possible price!”

In today’s market that is a tall order, even if the house is exceptional and the pricing attractive, although a property such as just described would certainly sell quicker than most.

But the more houses on the market the more hesitation enters a buyer’s mind, like somebody in a singles bar who sees an attractive girl and strikes up a conversation, but always has one eye on the door, wondering if someone better might come in.

How then do you, the seller, overcome the hesitancy of the buyer, the neighborhood competition and the prevailing buyer’s attitude that even if the home looks good and is priced right, will prices continue to fall, and will I be able to buy this home at an even lower price in a few months or less?

There is no question that selling your home at the present time represents a real challenge for you and your agent. A challenge, yes! An impossibility, NO!

There are strategies to implement and things to be done that can turn the odds in your favor. Keeping a confident mind set and a belief in your strategy is the way to set about marketing your home with determination.

In boxing, a fighter with the determination and the will to win can often overcome superior skill, by causing the less determined fighter to lose confidence. Don’t lose confidence in yourself or your agent.

The first things to do are no-brainers to anyone, either buyer or agent who has done the research, and knows the basic procedures required prior to putting the property up for sale, and that is:

• Fix the place up! Clean, straighten, neaten, organize, that’s known as “staging.” An important part of staging is making the home spotlessly clean and eliminating ALL clutter everywhere, including the garage.
• “Curb appeal” means getting the lawn mowed, shrubbery trimmed, potted flowering plants strategically placed, clean, uncluttered driveway, etc.
• Make all necessary repairs recommended by the house inspector you should definitely hire.
• Your agent knows this, but you should be aware that equally important to the above steps to take is to price the home properly in accordance with current market conditions.
• In order to arrive at a figure that will lure buyers and leave you a decent profit, your agent must do a comparative market analysis, taking into consideration many factors that influence fair market values.

If you want to sell your home in Las Vegas quickly and at the best possible price, give us a call at 702-376-0088 as we have the expertise and negotiating skills that you need in an agent.

Property “flipping” earned a bad reputation is some areas such as Las Vegas, when speculators descended on the Valley a few short years ago, and bought houses at prevailing rates and immediately resold for much higher prices as the demand for housing remained strong. The practice soon resulted in the rapid escalation of residential housing market prices, sending them soaring sky-high.

However, there is nothing wrong or illegal about flipping, except in fraudulent cases, when an unethical flipper in collusion with an equally unethical appraiser conspires to artificially inflate the market value of a property.

When the flipping market was strong, due to the demand for housing, flippers were for the most part selling homes in ready to move in condition. These were homes that received multiple offers as soon as they were put up for sale.

In today’s market flipping has become a greater gamble, since homes in good condition are selling at market price, with not much-if any- profit margin left for the flipper due to housing prices continuing a slow but steady downward spiral.

In fact, because of the unpredictability of today’s housing market, the flipper may buy a house today that will have lost value by tomorrow.

Additionally, if the home is in need of repair, depending upon the extent of the repairs and the time and expense involved, the flipper might be better off holding and renting until the market trends become more favorable. If that strategy is followed the flipper will then be a long-term “investor” and landlord as well.

The flipper who converts to a long-term investor is aware that many properties on the market today are undervalued, and healthy profits will be had in the near – or possibly distant – future, when demand is greater than supply.

Certainly, the cost of buying and repairing a property, the time required to find a tenant, as well as overhead costs as compared to rental income must be considered by the careful flipper/investor before making a commitment to purchase.

Good timing is a very important factor in any real estate investment, but even more so for the investor who specializes in flipping. How much risk is the flipper willing to take? Is the flipper confident in his/her ability to read and forecast market trends? Is the flipper willing to become a temporary landlord?

Another factor to consider, is that a home that seems suitable for flipping may not be as suitable as a rental property for one reason or another.

Another most important consideration in any real estate investment is the exit factor. An exit strategy must be considered before purchasing any property. Since no one can predict the future, market trends can be evaluated intelligently, but it all still amounts to guesswork.

Investors need to have exit plans A, B and C in order to be able to adapt and adjust to any changes and variations in housing supply and demand, as well as the kind of properties that will be most in demand now and in the future.

Although the market value of a property is largely determined by the comparison between similar properties in a given area, the value of a home is, in the long run, determined only by what a buyer is willing to pay.

This means that, if a seller asks $300,000 for his/her home, but the best offer received is for less than that, then the value of the home is actually less then $300,000, regardless of the studies that were done to establish the home’s fair market value at $300,000.

There are a number of factors that can influence a buyer to pay fair market value, location being among the most important of influencing factors.

Good school districts are a powerful influence on market value, and are most likely of greatest importance in considering location relevance.

Convenience to the workplace, shopping, major thoroughfares, public transportation, entertainment districts and recreational facilities offer other location factors that can have an impact upon a property’s desirability, and as a result, market value.

Condition of the home and property is another strong influencing factor in establishing a selling price. Size of the home and lot, as well as upgrades and amenities are still more influencing factors.

Interest rates, time of the year, high or low inventories of available homes, number of distressed properties in a given area, specific neighborhood conditions, proximity to beaches or mountain areas, proximity to industrial areas, high or low crime areas; any or all of these factors will positively or negatively affect home values

Certainly, it is unlikely that any particular area or neighborhood will meet all of a homebuyer’s criteria, so it is important that the homebuyer look at needs versus wants in location and neighborhood amenities, and consider those options along with affordability; home prices, property taxes, etc.

Real estate agents rate a good location as one with high dollar value and an excellent prospect for substantial appreciation. Buyers have a more complex formula for deciding if a home’s price is suitable and its location is what they are searching for.

A buyer’s real estate agent can be a valuable resource in not only finding the kinds of homes that meet the buyer’s criteria, but can be additionally helpful in obtaining data relative to the neighborhood’s school district, shopping and commuting information, crime statistics, etc.

Since location is so important in so many ways, when the potential buyer finds a property of interest he/she should look over the neighborhood BEFORE making an offer.

Drive around during the daytime and at night, during the week and on a weekend to get a good indication of the noise factor, and overall condition of the neighborhood homes. Look for the number of occupied stores as compared to empty, and check with your real estate agent as to rising or declining neighborhood home values.

Under today’s marketplace conditions, with the availability of so many Las Vegas distressed properties, foreclosures, short sales and motivated sellers in abundance, offering properties that can be purchased at considerably under market prices, why would anyone consider making an offer on a home that is unquestioningly over priced?

The overpriced home is probably in excellent ready to move in condition, has desirable upgrades, and is most likely located in a stable and well-maintained neighborhood.

Certainly, the overpriced, but well maintained home looks very good compared to distressed properties that may be in variable states of disrepair. Many buyers might be inclined to pay a little bit more for a property that has passed inspection with high marks.

Comparisons may be made between the true cost of buying a property needing repairs and upgrades and a property that is ready and waiting for you and your furniture, with no additional fix-up expenses, and the answer to this comparison might well be surprising.

Of course, all is not so simple. In the first place, most buyers will not even bother to look at an overpriced home, much less make an offer for the property.

Additionally, the question to be asked is; why would the listing agent not advise the client that the home is overvalued? The listing agent cannot use inquiries about the home to divert buyers to less expensive properties since no one will be calling.

However, the overpriced home may be the dream home some buyer has been looking for, and the buyer’s agent can use some strategic negotiating tactics to try and work out a deal that would be agreeable to all parties.

First of all the buyer and his/her representing agent needs to find out why the home has been priced out of market.

Could be that as mentioned previously, the listing agent might be inexperienced, and neglected to do a comparative Market Analysis (CMA) to aid the seller in setting a realistic at or under market price for the home. As a result, the buyer might be unaware of how far out of line the asking price might be.

Could be that the seller has an inflated view of what the property is actually worth, and has refused to consider the advice of his agent.

A savvy buyer’s agent, knowing that his/her client really loves this property, would offer to provide the seller and listing agent with a CMA, and an estimate of what a fair price for the property would be, and would follow-up by making an offer that would be closely in line with the market analysis.

By pointing out market conditions to the seller, and affirming that the buyer has been pre-approved by a lender and is in a position to purchase, particularly if there are no contingencies to complicate the deal, the buyer may now be in a position to buy that dream home at a mutually agreeable price.

If you are interested in selling your Las Vegas Home and have any questions about the process or the need to do a short sale, feel free to give us a call at 702.376.0088 or fill out the form below or to the right.

Hey, I gave my real estate agent a $5000 Earnest Money Deposit check… Where does that money go?

A basic and very obvious question that most first-time home buyers ask once their purchase contract gets accepted. An Earnest Money Deposit (EMD) is simply held by a third-party escrow company according to the terms of the executed purchase contract. For example, there may be a contingency period for appraisal, loan approval, property inspection or approval of HOA documents. In most cases, the Earnest Money held by the escrow company is credited towards the home buyer’s down payment and/or closing costs.

*It’s important to keep in mind that the EMD may actually be cashed at the time escrow is opened, so make sure your funds are from the proper sources.

The Process:

1. Earnest Money is submitted to an escrow company with the accepted purchase contract
2. At the close of escrow, the EMD is credited towards the down payment and / or closing costs
3. If there are no closing costs or down payment, the the EMD is refunded back to the buyer

Who Doesn’t Get Your Earnest Money:

• Selling Real Estate Agent – A conflict of interest
• Sellers – Too risky
• Buying Agent – They shouldn’t have your money in their account