Vegas Foreclosures

New Program Provides Up to $15K Towards Down Payment for Qualified Home Buyers

Team Plantone in Las Vegas, NV recently announced that they are working with Wells Fargo to help potential Las Vegas home buyers qualify for a special program that can provide home buyers with up to $15,000 in down payment assistance to purchase qualifying residential real estate. This new program, called Neighborhood LIFT, is sponsored by two non-profit organizations... the Wells Fargo Foundation and NeighborWorks America. The down payment assistance provided by the program is forgiven at the rate of 20% per year for every year that the home buyers remain in the property. This means that the down payment assistance is fully forgiven after 5 years of residency in the home.

In order to qualify for the program, applicants must meet certain qualifications and the home itself must also qualify. Team Plantone has been working closely with the local program representatives from Wells Fargo to develop a plan for helping interested home buyers qualify for the LIFT plan and find their perfect home that also meets the LIFT criteria.

Qualified applicants must have a household income that does not exceed 120% of Area Median Income (AMI) adjusted for family size. Applicants DO NOT need to be first time home buyers, but if the applicant owns a home already, that home must be sold prior to closing. There are also several requirements limiting the properties that can be purchased using Neighborhood LIFT funds. Team Plantone is working with Wells Fargo to help potential participants in the LIFT program find suitable properties.

Team Plantone and Wells Fargo are offering this service free of charge to any interested home buyers in the Las Vegas area. If you are interested in learning more about the Neighborhood LIFT program or applying for down payment assistance, please contact Team Plantone for more information.

Las Vegas Real Estate Market In For Another Roller Coaster Ride

Las Vegas real estate is currently experiencing its largest upheaval since the bubble burst four years ago. The passage of Nevada Assembly Bill 284 has resulted in extreme and far reaching consequences that have rapidly and dramatically changed the face of the Las Vegas real estate market. Most notably has been the unbelievable drop in foreclosures over the last seven months and the resulting steep decline in standing inventory of REOs. In August of 2011 there were 4,063 notice of defaults (NOD) filed in Clark County. The notice of default is the first step in the foreclosure process. In the following month, September 2011, there were 3,108 NODs. Immediately after the passage of AB 284, in October of 2011, there were only 44 notice of defaults filed in all of Clark County! 44! In the six months since that time the largest number of NODs recorded was 209 in January of 2012.

At first glance, one might be tempted to look at these numbers as a positive for the Las Vegas housing market. If banks can’t foreclose then there will be no new foreclosures coming up for sale on the market (true.) If there are no new foreclosures then the existing supply of distressed properties for sale on the Las Vegas MLS will be consumed (also true...there are currently only 400 REOs for sale, less than a two week supply.) So once the REOs and foreclosure properties are consumed buyers will be forced to purchase “conventional” sales and pay the higher prices that those owners are asking for their properties (false...here is where the paradigm breaks down.) In a perfect world, it would be nice to assume that falling foreclosure rates would signal a rise in home prices as potential buyers are forced to purchase homes through conventional channels and pay the higher prices needed to break even by sellers who bought several years ago when Las Vegas prices were on their way up. Unfortunately, that’s not what is happening...and here’s why:

1. Over 50% of sales in Las Vegas in the last three years have been cash deals. Why? Because the Las Vegas real estate market has been kept afloat by investors. These investors have come in to take advantage of the great cash flow rates that can be generated by purchasing distressed properties, in many cases renovating them, and then offering them for rent to displaced homeowners. But this equation only works if the homes the investors are purchasing can be bought at a cost low enough to allow the properties to cash flow once they are rented. If there are no longer distressed properties to buy, the investors will not pay more for conventional homes, they will simply stop buying real estate in Las Vegas and move on to the next opportunity. This will effectively eliminate over 50% of Las Vegas real estate sales, drastically slowing demand and dramatically hurting the Las Vegas housing market’s chances for recovery.

2. Loans are still extremely difficult to come by. It has never been harder to qualify for a home loan. Many would-be buyers continue to be sidelined by lending restrictions and the ongoing credit crunch. Some buyers have been able to successfully purchase foreclosures or REOs using hard money or alternative financing and then refinance into a more attractive loan after several months. This type of purchase was only possible because of the instant equity available to home buyers when they purchase a foreclosure or REO. Eliminating foreclosure properties from inventory eliminates this option.

3. Even when potential home buyers are willing to pay the asking price on a conventional sale and have the necessary pre-qualifications to obtain financing for a home purchase, properties are simply failing to appraise for the sale price. We have run into this time and time again when selling our own properties. Because the only comps available to appraisers, in many cases, come from years worth of foreclosure sales, the properties are just not being appraised high enough to allow sales to go through with financing. This means that even when owner occupant buyers are willing to pay the price that the seller is asking, the banks are not willing to finance the purchase without a qualifying appraisal...thereby killing the deal.

Of course these are just the immediate effects of AB 284 on the market itself. None of this takes into account the effect that AB 284 is having on the lending institutions themselves. If the banks are unable to foreclose on non-performing assets, they are unable to put themselves in a position to be able to loan more money...a situation that further delays the recovery of the lending industry and the end of the credit crunch.

Now What?

The logical next question for investors is, “Does this mean that the Las Vegas real estate market is dead for investors and it’s time to move on?” The short answer is “No.” There are still great deals with tremendous cash flow to be had in Las Vegas. But you have to know where to look. The strategies that were working six months ago are not working now. The trustees’ sale is hopeless. What few properties that are available are being bid up to prices that no longer make sense for an investor. REOs are almost non-existent and are also selling for ridiculous prices. So, once again, we have had to reach deep into our bag of tricks, completely reimagine our acquisition process, and find a way to secure high quality, high cash flowing properties for our investor clients...just like we’ve been doing consistently for the last three years. In the second part of this article, I will tell you how.

Until then, if you are interested in learning more about how to invest in the new face of Las Vegas real estate please contact me directly:

Glenn Plantone
VIP Realty
(702) 656-3264 xt: 203
glenn@teamplantone.com
www.teamplantone.com

Seeking Mortgage Lender for 70% LTV Cash Out Refis in Las Vegas

Glenn Plantone has established a reputation for his Team in the Las Vegas valley by catering to investors looking to cash in on the historically high cash flow rates currently available in the Las Vegas real estate market. Glenn has sold over 300 homes to investors since 2009. The vast majority of these have been single family homes, sold to buyers paying cash. These clients intend to hold the properties long term in order to take advantage of their cash flow, tax benefits and appreciation.

With interest rates at record lows, Glenn has received numerous requests from his clients for referrals to a lender who is able to refinance these homes at around 70% LTV. Glenn’s investor clients want to take equity out of their current holdings in order to purchase more Las Vegas foreclosures, REOs, short sales, etc. By doing this they hope to double or triple their real estate holdings in Las Vegas.

If you are able to write these types of refinance loans, please contact Glenn right away. Another element to consider is that many (but not all) of Glenn’s clients are foreign nationals, with the majority hailing from Canada or China.

Glenn can be reached at (702) 656-3264 xt: 203
glenn@teamplantone.com

The Last House In Las Vegas

They say that a picture is worth a thousand words...but when this image crossed my desk it rendered me speechless:

This graph shows the Notice of Defaults that have been filed in Clark County from March of 2011 through February of this year (2012.) You will see that as soon as AB 284 passed the Nevada legislature banks became almost completely handcuffed against trying to pursue the foreclosure process. This lack of fresh inventory has pushed Las Vegas standing inventory to ridiculous lows. This is not helping the economic recovery!

I wrote an open letter to our local politicians regarding AB 284. In it, I outlined what the results would be if AB 284 was allowed to pass. My predictions are all coming true. A copy of the letter follows:

AB 284 - Fighting Corruption or More Red Tape?

The Problem

Free market capitalism rests on the idea that the best way to ensure a fair economy is to allow the forces of supply vs. demand to set prices within an open market. Real estate markets have traditionally been one of the purest examples of demand driving prices. A home owner (be it an individual or a builder) places their home on the market for the price that they believe the potential buyer will be willing to pay. Once a final price is agreed upon, in most cases, a third party enters the equation. This third party is the bank (or other lending institution.) The bank makes a contract with the home buyer that they will pay the seller the full amount of the purchase on behalf of the buyer, and, in exchange for that, the buyer will repay the bank over a period of time (usually 30 years.)

As we know from watching the world’s markets, perhaps most notably the commodities market, the price that real goods sell for does not always reflect their “real” value. Prices can become “artificially inflated” for a wide variety of reasons including speculation that many times proves to be incorrect. When this happens prices often rise or decline quickly to “correct” for these misperceptions.

Unfortunately, in 2008 we witnessed a very large correction in the nation’s real estate market. Over the previous several years, especially in states like Nevada, California, Florida and Arizona, home prices had risen dramatically. These price spikes were based on many factors including population growth, sudden shortages of supply, perceived continued economic growth in these regions, etc. During this time period, millions of consumers signed their names on the dotted line and agreed to pay what they felt was a fair price for their home. The banks agreed to finance these buyers and the sellers of the properties walked away with the money.

Fast forward 3-8 years. The economy has declined, population growth and economic growth have halted in these metro centers, and home prices have plummeted up to 75% in some areas. Individuals find themselves in the regrettable position of not being able to meet the mortgage payments on their homes and not being able to sell them for anywhere near the price that they purchased them for. Investors who purchased properties in order to generate income find that they cannot rent the properties for enough to cover their payments to the bank. Some homeowners decide to strategically walk away from properties are valued at 25% of what they once were and will likely take 10, 20, or even 30 years to return to their previous value.

Do I feel sorry for these individuals? Absolutely. Have I personally, as a real estate investor and realtor, been adversely affected by the decline in home prices? Absolutely. Do I believe that people who don’t make their mortgage payments deserve to be foreclosed upon? ABSOLUTELY! That’s right...you heard it hear...I believe that anyone who does not make their mortgage payments deserves to be foreclosed upon. This is the process that drives our economy. This is the core of capitalism. It is plain and simple and everyone knows and expects it.

The Solution?

On May 20th, 2011, the Nevada Assembly passed (33-9) Bill 284 with overwhelming support from Assembly Leader Marcus Conklin. This bill was widely touted as a measure to aid economic recovery and bolster housing prices in our troubled state.

One of the writers of the bill commented, “AB 284 will help the Nevada economy recover...AB 284 increases criminal penalties where “robo-signing” conduct occurs, and it creates a NEW private right of action for borrowers, which includes attorneys’ fees and a mandatory fine when a foreclosure has not proceeded properly. Ultimately, this will aid in stabilizing real property values and restoring transparency and integrity in the foreclosure process, both of which are key to recovery. The Bill requires that the foreclosing party supplement the Notice of Default with a notarized Affidavit of Authority. The Affidavit of Authority, i) states the identity of the trustee, ii) describes the amount in default, iii) lists the full name and address of the current beneficiary (and every prior beneficiary under the deed of trust), and iv) includes the penalties and costs related to the default and foreclosure.”

The Scapegoat

Ultimately, allowing the real estate market to correct itself through the foreclosure process may be painful, but it will work. Just as the stock market and the commodities markets regulate themselves and move forward, real estate will do the same thing...if left alone. The problem is that we can’t seem to let it alone and allow the process to run it’s course. Why? Because we must punish the scapegoat.

In ancient times a scapegoat was sometimes a literal goat and sometimes a criminal or a beggar who would be thrust out from a community or put to death after a natural disaster or other calamity in order to appease the gods or god of that nation. Our modern day scapegoat for the housing crisis has become the banks and other lending institutions.

Let me stop you for a moment as you remind me that the banks have re-packaged loans in ways that might not have been transparent and they have, in some very few cases, “robosigned” documents relating to foreclosure proceedings. Yes, I know. It doesn’t matter. Nothing that the banks have done has affected the price of real estate in any meaningful way WHATSOEVER. The banks are very large and have massive resources on hand so they have become a perfect scapegoat. But, as inconvenient as this truth may be, the banks have done nothing wrong here...at least nothing of consequence. Buyers came to the banks and mortgage lenders several years ago and asked for a loan to purchase property. The banks approved the loan, gave the money (mortgage) and the home was purchased. Whether or not the loan was sold, or packaged, or “robosigned” really does not matter. The buyer, somewhere along the line, stopped making payments. He received a notice of default. This was followed by a notice of foreclosure. At this point the bank has a right to foreclose. End of story. Or at least it should be.

The Scenario

As it stands currently, in default saturated areas like my hometown of Las Vegas, foreclosures are dragging on for unbelievable periods of time. I personally know individuals who have not made a payment on their homes for almost 5 years and have still not been FORECLOSED UPON! The banks are overwhelmed. They have lost money (as they deserved to as a result of their bad investments, just as homeowners deserved to lose money on their bad investments) and have cut staff in response. They are now trying to process a huge increase in foreclosures with limited personnel. The government’s recent response to this is to add a huge measure of red tape to the foreclosure process in the form of Assembly Bill 284. This bill forces banks to provide, among other things, affidavits proving that they have the right to foreclose on each individual homeowner. One of the attorneys who helped draft the bill summarizes the purpose of this law accurately when she states (as quoted above), “this will aid in stabilizing real property values.” How, exactly, will it accomplish this? There is only one way: by making it so difficult for banks to foreclose that the number of foreclosures decreases.

Why Not?

So what’s not to love? Fewer foreclosures means more people get to stay in their homes right? Yes, their homes that are still unsellable because the basis price is ridiculous compared to today’s values. The only way to “reset” a property’s value is for it to go through a foreclosure or short sale process. Delaying this is simply delaying the inevitable while also crippling the very lending institutions that you want to start making loans to new purchasers in order to defrost the current credit freeze.

As opposed to this delay, here is how things naturally take their course when foreclosures are allowed to move forward: Typical owner occupants in Las Vegas may have bought a home in 2006 for $300,000 with payments of $2650 per month. They had an FHA home loan and put down 3.5% (about $10,500) when they purchased the home. They made their payments for 3 years and stopped sometime in 2008. They stayed in their home making no mortgage payments and got foreclosed upon sometime in 2011 (3 years after they have made no payments on their home). Once foreclosed they move across the street into a totally rehabbed turnkey model match home bought by an investor for $80,000 at a trustee sale or as an REO (real estate owned bank foreclosure) and pay $1200 in rent per month to that investor (saving over $1450 per month from their previous home payment.) This savings is actually even greater as they are no longer paying property taxes, insurance, HOA dues, or maintenance on the home as these expenses are being covered by the investor, who by the way is getting a nice 10% return on his money if this is a cash investment and a 20% return if he was able to finance the investment home.

This is not the ideal situation, but this is how the economy works. This is how the housing market heals itself and moves on. If our politicians continue to take the “feel good” approach to economics they will hurt the very homeowners that they pretend to be helping. Politicians at both the local and national level have been playing the procrastination game for the last three years and it has only caused our city and our nation to slump further and further into the grips of recession and home value decline. As difficult as it may be, the only way to get out of this crisis is to walk through. Let the banks foreclose. Let the bleeding stop. Then the healing can begin.

Another Bulk REO Transaction in Las Vegas

Glenn Plantone of VIP Realty recently brokered another bulk transaction of foreclosed properties here in Las Vegas. This time, the bulk package was held by a Midwestern bank looking to move their Las Vegas inventory quickly. The package was comprised of nine REO properties and was sold to a local Las Vegas investor. This is the second such bulk deal that Plantone and his team have successfully brokered in the last few months. Late last year, Team Plantone completed a transaction of 15 homes for a Hawaiian investor looking to acquire buy and hold properties with great returns in Las Vegas.

The current bulk package consisted of four former model homes in the northwest part of Las Vegas and five other one-of-kind casita homes in North Las Vegas. The homes were built in 2007 (North Las Vegas) and 2004 (Northwest). Glenn Plantone represents buyers from all over the world that are looking to the Las Vegas real estate market for cash flow and future appreciation potential. Team Plantone has developed a reputation as a one stop shop for out of state investors looking for a full service real estate team that makes buying Las Vegas investment property easy. By catering to this need, Glenn has become one of the busiest buyers’ agents in Las Vegas.

The Las Vegas real estate market has become a hot bed for cash purchases in the last two years, as investors from all over the world flock to Sin City looking for 8-12% returns on their money. During the last three years, more than 50% of all single family home sales in Las Vegas have been all cash purchases. Many of these buyers are foreign nationals, with Chinese and Canadian investors leading the pack.

Plantone’s team represents buyers (and occasionally sellers) who are looking to purchase short sales, foreclosures, bulk packages, trustees’ sale properties, auction properties and distressed homes. Once the homes have been purchased at low wholesale prices Team Plantone manages the complete renovation of these properties and gets them ready for investors by placing long term tenants in the homes. These turn-key investment properties are generating average CAP rates of between 8-12%. A typical example from recent sales would be a 3 bedroom, 2 bath home built in 2005 that rents for $1000 per month and sold to an investor for $84,995. Most of these cash buyers are purchasing newer homes (2003-2007) for prices in the range of $80,000 to $150,000.

The full service team at VIP Realty is led by Plantone and specializes in accommodating the investor from the purchase to the rehab and from rental to management. Glenn Plantone truly understands what investors are looking for because, in addition to being a full time Broker and Agent, Glenn is also a full time investor. He currently owns over 30 investment properties himself.

Buy And Hold: It's The New Flip

After leading the nation in foreclosures for the past three years, the real estate market is changing quickly here in Las Vegas. Banks have literally stopped foreclosing on homes, and the lack of REO listings have combined with other factors to push Las Vegas REO inventories to record lows. As of March 2012, there are only 956 REOs (bank-owned, post-foreclosure homes) listed for sale on the Las Vegas MLS. When you consider that Las Vegas is still averaging approximately 4000 homes sold per month and that ½ of our sales consist of REO properties, these numbers mean that we currently have a two week supply of REOs available on our MLS. This is an unbelievably small amount of standing inventory.``

Now you might be thinking that this is surely good news for homeowners. Fewer REOs driving prices down means that homeowners will begin to once again sell their homes for reasonable prices and this will drive an economic recovery right? Not really. The problem with this theory is twofold. First, more than 50% of the sales in Las Vegas continue to be cash sales to investors. Why? Because banks are still keeping a tight grip on their funds and finding loans is continuing to present serious difficulties for the average home buyer. Second, even if potential owner occupants can find financing, we are seeing appraisers that, time and time again, are unwilling to appraise properties for their selling price. If you can’t get an appraisal for the home, it doesn’t matter how much someone is theoretically willing to pay for it.

On the other side of the fence we are watching foreclosure inventory continue to decline as banks shrink away from foreclosure proceedings. In February of 2012 the banks only took back 737 homes at the Las Vegas Trustees’ Sale. Even the “vultures” at the sale only picked up 597 homes. This is one of the lowest totals in the last several years. As a result of the robo-signing fiasco, AB 284, and government intervention in various forms, banks have ceased most of their foreclosure proceedings on properties that they have every right to repossess because they are worried that the foreclosure may be overturned on a technicality.

What does all of this mean for the Las Vegas real estate market moving forward? No one can really say for sure. What we do know is that we faced a similar situation at the beginning of 2010 where REO numbers began to decline dramatically and it became more and more difficult for our investor clients to acquire investment property in Las Vegas at reasonable prices. Now, as then, many REOs are going to a highest and best situation and are being bid out of the realms of cash flow for potential investors. In 2010, we dealt with this problem by developing a system for aggressively purchasing short sales. This succeeded and we were able to continue to provide properties for our investors. But we have learned and grown from our previous endeavors. This year, as REO inventory lightens, we are focusing on purchasing bulk portfolios, private auction properties, bank-owned non-listed REO packages, and some short sales as well. We recently closed on a 15 home package and a 9 home package purchased directly from the banks, who were looking to move their inventory quickly.

And so we get to our title: “Buy And Hold: It’s the New Flip.” Because it has become so competitive searching for properties with great spreads, the flipping market has slowed tremendously. The savvy investors are now buying and holding properties and taking advantage of the phenomenal interest rates that can currently be had (and will, most surely, soon be gone.) There has never been a more perfect time to leverage your investment or IRA dollars into real estate. Historically low prices, combined with rock bottom interest rates make this the perfect time to buy and hold cash flowing property in Las Vegas. Our cash buyers are getting returns of 8-12% annually on their money, and financed buyers are doing even better with returns of 15-25%.

If you are interested in learning more about what we do or investing in the Las Vegas real estate market, please contact Glenn directly.