Las Vegas Real Estate Blog

You can find a number of myths about foreclosure. Some are based in fact however many are just nonsense.

With this post we hope to straighten out a few of these myths with some real foreclosure information that you can rely on. So read on to find out what is myth and what is fact.

The Myth: The bank wants to get my home.
The Facts: The bank rarely wants to foreclose on your house, what they want is to be paid back with interest. As a matter of fact, banks usually[/sin] [spin]despise initiating the foreclosure process and will bend over backwards to negotiate with borrowers in avoiding a foreclosure. Often the mortgage company’s flexibility still doesn’t go far enough in stopping the foreclosure. That is not to say that the mortgage company “wants” your home.

The Myth: I received a foreclosure notice; Now I have to move out.
The Facts: Just about all states have a very long foreclosure process. Even if you aren’t able to stop foreclosure you do not have to move right away. Following a foreclosure you are required to participate in an eviction hearing. If you didn’t move out, eventually you would be physically removed. You can use the time to make other plans for housing or to discover a way to protect your home from foreclosure.

The Myth: If I get a chapter 7 bankruptcy it will stop foreclosure and will save us from losing the home.
The Facts: When you are granted a chapter 7 bankruptcy it will stop the foreclosure temporarily. If you are facing foreclosure, in the long run you need to find a permanent solution to keep your house permanently.

The Myth: If I just present a creative plan to get current on my loan and present it to the mortgage company and they will work with me.
The Facts: Banking institutions, in most cases, involve complex bureaucracies and specific procedures. Often the most ingenious plans were destined for rejection when conceived. Stick to a plan within formats and parameters the bank works with day-in-day-out to stop foreclosures. It is smart to get a foreclosure specialist who offers comprehensive effective foreclosure programs to help you when dealing with a mortgage company.

The Myth: I must take every action I am able to save the house and continue to live in it.
The Facts: There are times when people needs to move on and begin again. Also there are situations where the owner just dislikes the house and has no desire to save it. There are ways to get out of a mortgage without ruining your credit by going through a foreclosure or just walking away. The plan should be to research the least damaging option to achieve the result you want.

The Myth: When I tell the judge my sob tale they will not kick me out.
The Facts: A judge is going to follow the law regardless of your tale. You may get more time, but you will only be stopping the foreclosure temporarily. You will eventually be removed if you are unable to come to an agreement with the bank.

The Myth: No one can assist me in preventing my home foreclosure
The Facts: Many ways exist and there are many specialist who can assist you avoid foreclosure of your home. Loan-Modification-Masters.com is one such place to get assistance in dealing with a foreclosure.

The Myth: By filling a chapter 13 bankruptcy I will maintain possession of the house no matter what.
The Facts: When you file a chapter 13 bankruptcy it has to be accepted by the judge. In addition you must make all the payments assigned by the judge or you will forfeit.

The Myth: The lender is not going to make me cover their legal fees for taking my home.
The Facts: Yes they will. Look at your mortgage contract, it is very clear. It is not going to be inexpensive: $2000-$5000 is not uncommon.

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Several years ago, right after I mortgaged my home after a divorce, a housing boom made its way into the American real estate market. Housing prices sky rocketed as interest rates fell; sellers had the chance to evaluate several offers at a time on one piece of property; buyers scrambled to buy the home of their dreams before interest rates rose again; some sellers even had bidding wars going on over their property.

Buyers market

All that has changed now! The Buyers market has turned around, and many of those people who were so willing to pay top dollar to get the house they wanted are finding themselves in financial woes. It is now a buyer’s market as homes all over the country sit with for sale signs in the front yard for months and even years at a time. Asking prices are being slashed to the bare minimum; the number of Foreclosure is at an all-time high, and economists say that the number of Foreclosure is only going to rise for quite a while.

Regardless, real estate can still offer a okay return on investment if you take advantage of the market conditions wisely. One way to do that is to venture into Foreclosure home investment.

Whether you want to purchase a home to live in or are looking for a way to make your money grow for you, Foreclosure home investment is a strategy whose time has come. With the increased numbers of Foreclosures that have already taken place and the forecast of even more to come, lenders are finding themselves with too darn many houses and other pieces of property in their possession.

Many folks believe that banks and other lenders are elated with the idea of foreclosing on a piece of property, but the opposite is really true. Banks, credit unions, asset management companies, and the like would much prefer to do what they are in business to do—banking. Most lenders find the Foreclosure process ridiculously time-consuming, expensive, and contrary to their fundamental purpose which is to loan and invest money, not sell houses.

With that understanding, it becomes clear that the possibilities to make a profit via Foreclosures home investment are upon us. With so many Foreclosure already happening and the likelihood of even more in the near future, real estate is available at all-time low prices.

Foreclosures

After buying a piece of property, you can choose one of several paths to travel in your Foreclosures home investment travels. You can purchase a house to live in and sell later. You can acquire a distressed property – one that is in need of repair – and fix it up to turn around and sell it again. Many lenders find themselves not only owning houses they don’t want, but also owning houses that are in bad shape. They definitely are not in the carpentry business, so fixer-uppers can often be bought at a steal.

You may also consider using your house Foreclosures investment as a rental property. All those people who are losing their homes still need a place to live, and they find themselves renting. Some people are hesitant to buy in today’s economy, so they choose to rent as well. Students rent all the time. Lots of people rent.

Home Foreclosures investment is an opportunity whose time has come.

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Cheap houses in Las Vegas

It is well established common knowledge that many service jobs in the Casino/ Hotel industry rely on tips as a major portion of these workers income.  From about 2004 through 2006 with historic low interest rates and the ability of these workers to use “Stated Income” rather than prove their income these workers who were locked out of home market previously started buying homes in record numbers and seeing their homes values rise at an unprecedented rate. This lead to more of these workers jumping into the home buying game to get their piece of the appreciation pie further driving up prices and attracting a national feeding frenzy of investors to crowd the market and further drive up prices.  Finally the appreciation spiral abruptly stopped in late 2006 and the loans began to unravel in early 2007 as these sub-prime loans monthly payments began to reset from their unrealistic low starting payments to as much as 40% more.  Suddenly the people were unable to meet these steep payments and the finance companies started taking them back and selling them for less than their original value as R.E.O’s (Real Estate Owned) properties. This resulted in surrounding houses being valued lower preventing others from refinancing, resulting in additional repossessions further driving down prices and thus the downward spiral of prices began. As home prices fell in value creating more foreclosures in Las Vegas the defaulted loans caused a meltdown in the secondary mortgage markets and financial institutions all over the world no longer knew what the value of the mortgages or even worse what their mortgage back securities were worth. They therefor stopped buying any more mortgages and world financing started drying up.  We are now trying to drink from a dry well.

In an emergency effort to free up credit so that business could continue in the U.S., and world wide, our government created the $700 billion dollar TARP (Troubled Asset Relief Program) asserting that it will help rescue the home owners from foreclosure and thus strengthen the failing mortgage backed securities.

Our governments first act was not to rescue the home owners, it was to rescue the banks using $250 billion dollars and leaving the balance of $450 billion to rescue the home owners at a yet to be determined date and program. Please keep in mind the $250 billion was that all that congress initially authorized under the plan. The President can now authorize an addition $100 billion for distribution.

Now the government is offering some non-banking organizations TARP monies. These corporations, such as General Electric, are not under federal banking controls. The reasoning is that it will further free up commercial finance in an effort to curb job losses.  How much money they will lend to these corporations has not had any limit set to date.

Next in line for TARP money are the many U.S. insurance companies and the big 3 auto makers are lining up as well as other commercial finance companies who are not banks but may be labeled as “to big to fail.”

Let’s not forget that when TARP was enacted it included the all important $3.92 billion of the $700 billion for neighborhood stabilization (just above one half of 1% of the total budget).  Las Vegas areas share of the money is approximately $46.6 million dollars to buy up vacant homes in distressed neighborhoods and get them back into the housing pool. With the average price of a Las Vegas foreclose home selling at $190,000 the budget would allow the valley governments to purchase 245 homes (or 1.6%) of the 15,000 now repossessed homes in Las Vegas. And this would assume any further discounts the local governments could obtain from the bulk purchase of these R.E.O’s would pay for the overhead and management of the program.  I think that any reasonable person can see the lip service provided by our federal government in solving our empty neighborhood problem here in Las Vegas.

On October 15, 2008 Ben Bernanke address the “New York Investment Club.” During the question and answer session after his written speech he revealed that the mortgage debt in the United States is about $14 trillion dollar problem which means our government is using $450 billion dollars to solve a $14 trillion dollar problem (3.2%).  It becomes very apparent that this program along with hunting elephants with fly swatters is not going to have any success.  I think the Fed’s already know this.

The longer you can hold main street off and prop up the financial sector the sooner we will get to the bottom of this real estate devaluation thereby allowing a real valuation of mortgage back securities.

There has been a huge impact on the Las Vegas travel industry due to high oil prices and a melt down of the financial markets. Tourists visitation is down, gambling revenue is down, convention attendance is down and thus the need for workers is down.  Las Vegas has 7.4% unemployment rate and a great many workers are under employed only working 30 hours a week thus reducing their incomes by 25% or more.  This adds to the pressure as sub-prime mortgages reset because these workers can no longer prove their incomes to rewrite their loans.  Thus the numbers of home forclosures will continue to climb.

There is a solution that is fair and equitable but the power of the Washington Bank lobbyists will not allow the solution to ever be enacted.

Bankruptcy courts do not have control of home mortgages in the United States. If they did they could work out an equitable solution for all parties by standing in the middle and deciding the resolution of the home as they currently do with all other assets of the bankruptcy petitioner.  Yes the banks would loose control of managing their assets in these situation and yes it may affect mortgage loan rates in the United States.  The problem is the current mis-management by the mortgage companies are already affecting mortgage rates.  Mortgage rates are already much higher than they should be given the 10 year Treasury bill rates of 3.75% if the mortgage rates followed historical patterns the the current 30 year mortgage rate would be 5.75% but in fact we are currently paying over .25% higher reflecting the damage that has already been done in the mortgage industry.

The mortgage industry and the Bush administration have been featuring the success of the “Hope Now” program. A voluntary program for the mortgage industry that has resulted in few principle write downs and generally just an extension on the loans tacking on additional principle for the home owner to pay longer on their home.  These rewritten mortgages are now failing at a 47% rate again!  This program should be renamed “Hype Now.”

If the bankruptcy courts would be allowed to renegotiate and make decisions on mortgages then all parties interests and welfare would be represented. So long as our government fails to withdraw this special exemption from the mortgage industry, property values will continue to spiral down, bankrupting our smaller banks who will be acquired by the banks “to big to fail” and driving property values below their true worth.

This damages every American that has a home as our homes are one of our biggest assets.  Most Americans have made the prudent choices in purchasing and loan decisions.  Most Americans are now being damaged by property values plummeting below their replacement costs. Weather it be their personal residence or the retirement program they are invested in that has purchased mortgage backed securities.  The real victims in this scandal is not necessarily the person loosing their home but the person who has not lost their home but has lost their equity, their retirement and most importantly their trust in their government to do the right thing for the interest of all of us, not for the few on in the banking industry.

Without further change Las Vegas will continue to see record foreclosures as we enter into a new set of loan problems.  We are just over half way in the Sub-prime loan crises. But in February of 2009 we face a new problem with the failure of Alt-”A” loans.  It seems much more likely that with the opening of the new major properties in Las Vegas that the current under employed and unemployed work force will be redistributed into the jobs being created by theses new resorts creating almost no new employment opportunity and thus no rush of new residents to fill our empty houses.

So when will things turn around in Las Vegas?  Probably in late 2010 or early 2011 when tourism and the economy begin to recover and people seek cheap vacations close to home.  Perhaps building high end casino properties may have been the wrong bet for the next 5 years.

I think that housing will bottom out sometime in December 2008 through June 2009.  My reasoning is that the mortgage markets will become more open to qualified Buyers. The replacement costs of homes will be far higher than the prices that people can purchase existing homes, creating a opportunity for equity gain as the market recovers. The opportunity for foreign and American retirees are now seeing the fantastic purchasing power they now have in this market. Their purchases are for retirement and winter homes. They don’t need employment, they don’t even need schools and most don’t even need financing.  And most can start now purchasing at 50% off the price at the height of the Las Vegas real estate home market.

If you would like to see the latest Las Vegas real estate market statistics click on this link.  If you would like to see specific details of current Las Vegas home purchases and what great deals people are making in this market please contact Max here.

For the Latest in Las Vegas real estate call Max at 702-334-2200. Or email me at:Max@MaxSellsVegas. com. Your comments and questions are welcome.

I think it’s safe to say that no one really wanted the $700 billion bailout. Unfortunately something had to be done as the credit cash-flow spigot was down to a drip. Even those with good credit were beginning to have difficulty getting funding of today’s tighter standards approved loans. Not only in our own industry, but just about anywhere, a 700+ credit score was no longer good enough. For business, equity credit lines were being shut off and large business commercial paper unable to find takers. These short term business loans are how they keep the doors open, pay the bills and payroll, and buy materials and supplies, while they wait for their money to come back from the billed customer. Not enough cash flow for 30 to upwards of 120 days can be tough to manage in a household, let alone when you have so many households that depend on them for a paycheck. The alternative is to cutback, and the last thing we all needed is more national unemployment.

The finger pointing heads to Wall Street, creators of exotic loans. From there to mortgage brokers and loan officers for arranging loan funding. Real Estate agents because they sold these homes at the increasing market prices to buyers knocking at their door. Home builders who supposedly ‘overbuilt’ in their quest to keep up with demand. Greedy? Yes there were some in the mix, some even to the extreme of fraud and now arrested or investigated, as should be. The rest were simply doing their jobs and caught up in the mad rush. Even the majority of media was on board, cheerleading the boom and the economic growth and prosperity along the way.

There were others that were greedy as well. Some home buyers and owners for one. Exotic loans or not, you still need to know what you can afford….or not. To this day you often hear “it was the credit card companies’ fault” for some amassing debt, because the lenders increased limits or sent offers in the mail, and made it ‘too easy’. No, not that people need to be responsible and budget themselves, and that available credit lines are to be used wisely and to your advantage, not simply buying until they max out. The same happened with some home owners that began cashing out equity, using their homes as ATM’s for extravagances or ‘moving up’, on equity credit they couldn’t afford to repay. Yes the system was loose, but it’s a 2 way street. The majority respected their credit, and they most likely have even more opportunity to extend it well beyond their means.

That brings us to the uneducated speculators, especially in the ‘hot’ markets, like Las Vegas. They bought up homes like hotcakes, but couldn’t afford to carry the ‘investment’. They created an imaginary demand, and in turn artificially inflated prices. They helped create a battleground and bidding wars for legitimate home buyers and investors, that added to the feeding frenzy and more hype to the media. I myself had 6 months of ‘oops, just missed it’, and my parents later shocked with a ‘lottery’ on building lots, and 2 months of searching resales to finally catch a lucky break (literally) for them to be able to buy.

All the while our ‘leadership’, from both sides of the isle, kept a blind eye. The too little, too late housing bill of this summer, years after the opposite swing of the pendulum began. Now we’re caught up in election year divisiveness. He-said, she-said mud slinging ads to divide and conquer have been filling our airwaves and our mailboxes, at a time when we need to pull together to dig out of this hole. Instead we hear a barrage of constant negativity from the media, that not long ago was lauding the housing industry as the white knight leading the charge from the recession and added devastation of 9-11 a few months later.

While details are few of how this $700 billion will be used, the media does little to explain anything. Instead they throw out misleading information on costs to taxpayers, to households, and ‘Fat Chance’ as to if it will work. They use their ‘news framing’ to keep the public tuned in, instead of offering an objective view and truly informing the public of all sides of the issues at hand.

First you need to understand that sub-prime mortgages and foreclosures aren’t the only problem with this financial crisis of banks holding ‘toxic loans’. At the moment it is estimated that foreclosures account for roughly 3% of all outstanding home loans. The issue is, what that and the falsely inflated home pricing had caused. A reduction in value for the rest of us home owners, many of whom may have had a downpayment vanish, equity disappear, or are now upside down even in their conventional mortgage. The banks are holding assets that have devalued from solid upstanding home buyers. Should they need to move for employment, they are often trapped in their homes to either take a loss they can’t afford, or to walk away and add to the problem. Not a good situation in an economy that is shrinking and shedding jobs.

So how will this ‘bailout’ be handled. Again the exact details aren’t out, but it’s safe to say the government will be buying these mortgage assets, that will also include commercial loans. Buying at face value? Probably not, more like pennies on the dollar. It’s not unlike what you may have seen with cash investors entering the Las Vegas real estate market, purchasing bank owned properties at below value prices and able to hold until the market rebounds.

http://www.msnbc.msn.com/id/22425001/vp/26422565#26422565

IF the market does return to normalcy and has some stable growth along the way, there could possibly be a profit returning to the Treasury over time, not taxpayer debt. That’s what these investors are looking at, as well. Unfortunately you don’t find explanations of that making headlines of the bailout, and may have to go as far away as India for an objective story.

The treasury will have the option to help out homeowners though the process. Reconfiguring the loans for some and slowing the bleed of foreclosures into the market that hurts everyone’s values. They can also begin repackaging solid loans for resale to investors at a new face value that could offer returns. Will it work? That depends on how many investors look past the fear and negativity that abounds. As you can see from the Business Standard article above, the banks will still need more liquidity for all to come together. I’d expect to see some more from the Fed and the Treasury along the way, and from other foreign governments as this has esxcallated globally, but so much depends on returns of capital investment into the marketplace.

While some, including billionaires, have professed government bank takeovers and preferred stocks for ultimate control, that also raises issues. Would there be Congressional support for nationalization of banking, or more boondoggle with some crying socialism, leading to lengthier debate while Rome burns? Mass confusion from the government bureaucracy, with it’s hands in control of so many individual lending institutions, and how many people needed and how much time to organise it all? In either method, it still needs the support of the private investor to come on board.

So no, the entire problem is not just about the evil loans of Wall Street, it’s now about the average homeowner that has been gutted by the greed of wild speculation. The same thing was seen in the tech bubble burst of the 90’s, where penny stocks of ‘tech companies’, even without any business or building, were drummed up into the hundreds of dollars before they imploded. We all just saw it again with the speculation in oil futures with estimated, or fabricated, ‘demand’. A few ran up the market, leaving the masses to pay the price at the pump, grocery store, job losses, and beyond. Leverage and risk taking can be good and create growth, but only works when used in moderation. Wild price fluctuations are typically the first clue of something gone wrong.

A number of the ‘exotic loans’ did help create grwoth and jobs, and the majority achieve home ownership and they did pay their bills. Yet now all are stuck in this quagmire with the rest of us. Downpayment assistance also helped many, but because of a few that failed with the hand up, the programs were axed from the 2008 Rescue Bill. Fortunately that has been brought back to the table with HR 6694, now with added protections and guidelines to help reduce abuse of the system and help insure against those slightly higher percentages of loan defaults. The bill has passed the House Finance Committee and next to be brought to the floor. The recent Congressional Budget Office Report on HR 6694 concludes that with it’s estimates it would have a negligible cost to taxpayers. Obviously if allowed to return in it’s new form, it could help reduce national home inventory that is hindering the market’s and our economy’s stabilization. You can find out more and send a message to Congress at SupportHomeOwnership.org.

Yes there are a lot of questions yet to be raised and no one can predict the future. Obviously much of our success, or failure, will depend on whether a half-full or half-empty attitude prevails. That’s why I wanted to present some of the other side of the story that seems to be missing from the major news of the day.

If you are interested
in relocating to Las Vegas or would like information on Las Vegas real estate, please email me, Roberta LaRocca, at roberta@search4lasvegashomes.com,
or call me at 702-354-8988. I look forward to hearing from you!

Bail Out or Hand Out? That is the ultimate question at the moment isn’t it. This question is the most important question of our time that needs to be taken seriously and not just brushed off. Our elected officials who are suppose to voice the concerns for the masses have become completely contempt about this who song and dance that is occurring. Our markets are in turmoil and greed is surpassing the American way. It is time we stood up for ourselves and put a stop to the nonsense that Washington and Wall Street have both taken part in over the years. This bail out bill or amendment or piece of toilet paper what ever you prefer to call it will destroy our country and brings us into a depression unlike any other. The dollar is at it’s weakest point, Large Banking institutions are failing, foreclosures across the board are sky high and it seems that the American people are more worried about the next lie to come out of Mccain or Obama’s mouth. Both of the presidential candidates have had hundreds of thousands if not millions of dollars given to their campaigns by the same banking institutions and corporations that are falling apart and destroying our economy. Why should we support these two candidates who have been supported by special interests & untrustworthy corporations for their entire campaigns? I hate to write about the negative and would prefer to stay on point and discuss Las Vegas Luxury High Rise Condos but there are so few of us in the Real Estate industry and country for that matter who understand what is happening, I felt compelled to write briefly about what devastations we are facing as a country if we don’t snap out of this daze we are in. Below are a few videos that will show you that our entire Congress is not corrupt with greed and that there still are some true American patriots who have our best interest at heart. Please pay attention to the videos because these people are trying to save our Country from total destruction from with in & they need our help.

This post was originally published by Mr. Grant House on May 27, 2008. Interesting insight into how banking/lending may impact the Las Vegas real estate market.

I was talking with John Diffiore (Wells Fargo Private Banking) this morning, and he told me (basically) that investors will be needing 20% down, that Fico scores below 720 will be asked for additional interest points, and that banks will be asking about cash available to the buyer AFTER the close of escrow. In other words, as Archey Bell and the Drells of Houston Texas once said, “Do the tighten up!” We are going back ten years to sound fiscal policy. Great! Like it or not.

So, the banks hold all the cards on who gets a loan. FHA will probably nudge into the room to help some worthy candidates pay only 3% down. As I understand it, PMI (private mortgage insurance) is being farmed out to companies that must also approve the transaction and perhaps the appraisal, so they will likely make a mess of a few transactions at the last moment – be afraid. Be very afraid.

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