February 2009 | Jeff Howard's Las Vegas Area Real Estate blog

FHA Loan Limit Back to $400,000 in Las Vegas

This has been confirmed! The FHA Loan Limit on Residential Real Estate in Las Vegas, NV among other areas has been moved back up to $400,000.

This is a game changer for our market! Since the loan limit was lowered at the beginning of the year, some have been very concerned about values in Las Vegas in the range between $417,000 (Conforming Loan Limit) and $287,500 (2009 Previous FHA Loan Limit). It was though that because of the difficult conforming loan guidelines and Mortgage Insurance (MI) policy guidelines, homes of that value would further deteriorate down to FHA limits. With limits raised back up, I think we averted this disaster. Couple this with continued low interest rates and we could see a market stabilization. Let’s keep our fingers crossed!

If you would like to confirm for yourself, here is the link to the loan limit website for HUD:
https://entp.hud.gov/idapp/html/hicost1.cfm.

Also, now that the loan limit has been raised again. Those that have FHA loans in that range can now take advantage of the FHA Streamline feature and capture the lower rates.

If you would like help taking advantage of these new developments, please contact me.
www.CapeCodAREI.com/contact

Apartments are empty because people would rather rent houses.

If you were forced to move out of your house, and you looked in the newspaper right now, would you look under apartments for rent or houses for rent? The answer is simple. In addition, in many cases, you can convert that renter into a tenant-buyer, over time because they used to own a home and now have poor credit. If you offer them a chance to own your property with seller financing, in many cases they are going to do it. There is not a better tenant on the planet than a tenant-buyer. They are never late on the rent, they don’t call you when something breaks, they care for the yard and eliminate the need for property management.

I love the doom and gloom that is constantly being reported. A new Forbes.com ranking lists Las Vegas as the emptiest city in America, the result of the foreclosure crisis and the surplus of empty homes and apartments built when times were good. Construction has ground to a halt. The Commerce Department reports that new home construction dropped 16.9 percent in January when compared to the previous month. That’s the sharpest month-to-month decrease ever.

There are apartments currently offering a flat-screen TV, two months free rent, and $100 off per month. With apartment vacancies becoming more common around town, apartment owners are offering better and better incentives. But if you have a single family home for rent in good condition in a good neighborhood, you can still fill that up as people who have been forced out of their homes are not thinking about renting apartments. If you were forced to move out of your house, and you looked in the newspaper right now, would you look under apartments for rent or houses for rent? The answer is simple. In addition, in many cases, you can convert that renter into a tenant-buyer, over time because they used to own a home and now have poor credit. If you offer them a chance to own your property with seller financing, in many cases they are going to do it. There is not a better tenant on the planet than a tenant-buyer. They are never late on the rent, they don’t call you when something breaks, they care for the yard and eliminate the need for property management.

The national apartment rental vacancy is at 10.1 percent, up from 9.6 percent one year ago. And as real estate values continue to dip, homeowners are finding themselves upside down with their mortgage, forcing banks to foreclose and leaving people without their own home, but they still want to live in one.

Passing Detroit as number one wasn’t easy. The Motor City has seen a heavy decline due to the ailing automotive industry. But the appeal of Vegas will never die and people should be careful in comparing Las Vegas real estate to Detroit.

In the short run, Las Vegas is going to suffer a little bit just like everyone else. But people are still moving here. December saw an increase in population of 4863. Detroit, nor any other city in the country can make that claim. And while those numbers are down slightly for Las Vegas, they still are much higher than anywhere else. The demographic trend is still to the southwest, and who can beat weather? Boston is reporting a high of 33 degrees Fahrenheit today with snow possible for Sunday. It will be windy and 65 today in Las Vegas and 70 on Sunday.

Your vacant rental house only has to be more attractive to live in than those apartments and other houses you are competing against. This is a large part of the reason why location is so important. Many investors don’t understand the neighborhoods to buy their rentals in and this can make a significant difference.

If you are even considering investing in Las Vegas real estate, I urge you to contact me. www.CapeCodAREI.com/contact Let me show you why you should.

Search Las Vegas Luxury Foreclosures?

Well, it had to happen, sooner, or later. People with money aren’t just investing in Las Vegas, now they want second (or third or fourth) homes at bargain prices. So, Luxury Realty Group, LLC has announced in a press release their new web site;
www.LuxuryVegasForeclosures.com

Now, finding luxury short sales and foreclosures for homes or high rise condos in Las Vegas is easier.

LuxuryVegasForeclosures.com provides pre-defined searches by high rise tower which is a first to be offered by a Las Vegas real estate brokerage.

LuxuryVegasForeclosures.com provides pre-defined searches for Las Vegas luxury homes and luxury high rise condos. For the high rise condos, specific short sale and foreclosure targeted searches are pre-defined by high rise tower.

The creator of this new website, Bruce Hiatt, broker-owner of Luxury Realty Group, said, “We are the first real estate brokerage in the Las Vegas area to offer a luxury short sale and foreclosure real estate targeted website. We know from feedback of users who participated in our beta version of the website that pre-defined searches were difficult to find on Las Vegas real estate websites. We believe we’ve filled a niche missing in our market until the arrival of LuxuryVegasForeclosures.com.”

Luxury Realty Group has already closed transactions in 2009 for both short sale and foreclosure luxury properties. Such transactions are expected to increase in 2009 with more of luxury real estate moving into short sale and foreclosure status in Las Vegas.

Some of you may be comforted to know that it is not just the average Joe that is losing his home to foreclosure.

What if you want Las Vegas real estate bargains, but, aren’t looking for luxury? Contact me.

www.CapeCodAREI.com/contact

Loan modification really makes sense, but don’t do it on your own.

What is loan modification? In its simplest form, loan modification is when your lender modifies the terms of your loan. They can defer amounts that are past due, change the interest rate, even reduce the principal owed.

The most common element being modified at the moment is taking past due payments and putting them ‘on the end’ of the loan, so that you still owe the money, but your loan is considered current. This happened with a friend of mine. She had lost her job, and gotten about 4 months behind in her house payments. When she got back to work, her bank offered her the opportunity to take the 4 months payments, and defer them, which brought her current. Many homeowners are doing this kind of modification on their own.

Why are they doing that? Because they are nice? Of course not! It’s a business decision. They are not in the business of owning real estate, yet they own quite a bit of it and they really don’t want anymore. So if you make enough money to pay a lower mortgage, they lose less money in the long run.

The next element I have seen modified is the interest rate. If your interest rate has adjusted (or is going to soon), lenders are helping people stay in their homes by offering a reduced and fixed interest rate. If your rate was 5 1/2, and has spiked to 8 for example, many lenders are bringing that rate down to 5. Some people I know have been successful at this on their own, by simply calling and asking, but only if they are already behind.

A less common type of modification is to get the amount owed reduced. This I have only seen done by professional loan modification firms. Companies that do this for you.

There is an attorney here in Las Vegas, helping homeowners (and there are many companies – just check the internet). He is asking the bank for a principal reduction to 10% below the current value of the property and 4% – 6% interest rates, fixed. In other words, if you currently owe $300,000, and are paying 8%, but your house is only worth $250,000 – after the modification you are only paying 4% – 6% on a principal balance of $225,000. Of course there are many factors involved in your final outcome – not the least of which is that you have to be able to prove that you can afford the new payment, so that the bank is not wasting their time stalling the inevitable.

Here is the best part! He only charges $1,250 and if he can’t modify your loan, you don’t pay! Oh yeah, did I forget to mention that they do not pull credit? You do not have to have good credit to get the modification. Sometimes you don’t even have to be behind! (depends on the lender)

Think about it. If he reduces your monthly payment by $200 per month, in 7 months, you are ahead – even if he did not reduce your principal! If you are interested, let me know. www.CapeCodAREI.com/contact

What if you just don’t have the $1,250? Drop me a line, let me see if I can help. www.CapeCodAREI.com/contact

My plan to turn around the economy.

Good news for some homeowners. JP Morgan / Chase announced today a self-imposed 90 moratorium on foreclosures. Executives said that they want to give the government time to implement their stimulus package, and they want to allow themselves enough time to properly act on the changes.

So here is my government stimulus package idea (since everyone has one). What if we paid off every owner occupied mortgage in the country? Simply paid them off. You live there, you have a mortgage, now you don’t. Add a rule that says you cannot borrow more than 25% of the value of that property for 5 years (so people did not go too crazy with there new found windfall). It would stop the foreclosure mess in it’s tracks. OK, it’s not a perfect plan, I can see flaws with it, but there will never be a perfect plan, and it would definitely stimulate the economy. It would also loosen up the credit crunch. Many will argue that it does not help the poor. Sure it does. As soon as money begins flowing again, we all win. Businesses will begin to thrive again. Jobs will be created because those businesses will need employees. And I like that it rewards people who were financially savvy enough to own real estate in the first place. As for investment property or a second home, modify all mortgages to an affordable payment, but don’t lower the principal owed. That way, those investors will have to hold on to the property, and provide rentals for those that need them until prices return to more than is owed on the property. No more short sales.

They finally recognize that we are part of the solution.

They finally figured out that we are not the enemy. For more than a year real estate investors have been called very nasty names, been blamed for the housing market and been generally dismissed as ‘the problem’. There is no doubt that speculators contributed to the current state of the economy. But in most cases, we were just trying to capitalize on certain opportunities. I think that is what makes this country great. And the truth is, investors, if given the opportunity, will help the housing market settle down and turn around. Why, because we will buy.

So, last week, FNMA announced on their website that the 4 loan limit has been removed, and, under favorable circumstances, they will allow an investor to have up to 10 loans. This is great news for investors who are picking up foreclosures and other distressed properties and keeping them for rental or selling on lease-options.

You can get all of the details at FNMA’s website by clicking here.

What does this mean? Well, certainly it is not an end to the credit crunch, however, if you have some cash and good credit, you can own more properties and ensure your ability to prosper when all of the dust settles. Let’s face it, people have to live somewhere, and someone needs to provide that housing. Now please let me remind you. Being a landlord is not rocket science, but you should take some time (and probably some money) to learn how to be an effective landlord, so that your tenants help make you wealthy instead of miserable. I’m actually in the process of getting ready to write a home study course for landlording – but it will be awhile before it is finished. Come to think of it, I have to finish my negotiating course first.

Are you ready to buy more now? Are you interested in Las Vegas real estate? (You should be.) Drop me a line and let’s see what we can find you. Visit me at www.MyFastEasySale.com

Facebook

I read somewhere recently that 600,000 people a day are getting a facebook account (www.Facebook.com). I’m open to trying anything twice, so even though I don’t know much about it, here I go. If you read my blog, then I consider you a friend, so if you don’t have a facebook account, get one (at least try it). If you do, drop me a line and I’ll add you as a friend.

The Facebook site is interesting. I have only 2 ‘friends’ as of this moment, but I reconnected with an old friend from high school and I keep hearing how great it is as a networking tool. I uploaded some photos, and filled out my profile. I’ll see how it goes.

So click here to Facebook me!

New Real Estate Contract Guidelines?

I have probably written over 200 real estate contracts. I have had 35-40 offers accepted, and entered the due diligence phase on those. I have closed on the purchase of 25 properties now. There is one item that has been a hassle for me on 3 different occasions. Getting my earnest money back.

First, in case you are not aware, let me explain some important elements to understand about escrow. Usually, the seller gets to decide who will hold the earnest money in escrow. This never concerns me because the fiduciary duties of the escrow agent are clear. They must remain impartial and only do as instructed by both parties. The reason this is key, is that if the sale does not go through for any reason, the escrow agent will not release the money to one party without the other party’s permission. If there is a dispute, it is not for the escrow agent to preside over the dispute. In some states, the escrow is held by attorneys, in others, like Nevada, it is held by a Title Company.

So on 3 different occasions as a buyer, I have had a seller try to ‘strong arm’ me into giving them some of my earnest money when I did not buy. As near as I can figure, they determined that it would cost me a certain amount of legal fees to prove that I had done no harm, and not been in breach of the contract. So, if I just give them an amount of money less than that, I come out ahead.

I read somewhere recently that the United States has 20% of the worlds population, and 80% of the worlds civil lawsuits. This is a large part of the reason why. People want money that they are not entitled to. And so contracts get longer, and longer, and longer.

The first time this happened, was over a pretty small amount of earnest money ($2,500) and the seller eventually gave in and signed the agreement. I believe their realtor may have convinced them to.

The second time, the earnest money was $10,000 and the purchase was in another state (Tennessee) and we eventually decided to give them $2,000 – not because we were wrong, but because it was going to cost us at least that much to fight them. I call that extortion. You call it what you want. It happens often in our legal system. Someone files a lawsuit that has no real basis, and the defendant pays them some amount of money without admitting guilt – because it’s cheaper. The media will always paint this settlement as an admission of guilt. It’s just sad.

I’m currently involved in another scenario, where after I cancelled the contract, the seller said to me, “You have cost us time on the market. How much of the $6,000 earnest money are you willing to give us?” The answer was “none”. Again, we were within our rights to cancel, but they want to strong arm us. Now we are getting a lawyer. At some point, even though it costs more, you fight them, on principal. The bummer is, that we could technically spend more than $6,000 to get our money back if this goes to trial, but we don’t want them to have any of it, because it is just wrong.

So what can be done about this? My Real Estate contracts are about to get longer. When I am the buyer, the first thing I will do is insist that during the due diligence phase, the escrow release has to be single signature – MINE. This means that if I cancel the contract for any reason during that time period, I get my earnest money back; no questions asked.

After the due diligence phase is over, if there is a dispute, the contract will require binding arbitration. That way if they try to strong arm me, I have a less expensive option in front of me. Then I will stipulate that the prevailing party shall be reimbursed for costs and fees associated with attempting to resolve the dispute.

A friend of mine who is a business consultant says that he is amazed that this is not part of every real estate contract already. In all of the ones I have seen, I don’t even recall seeing it. Maybe it has been in plenty of them, but not in those 3.

The Mechanics of Buying Real Estate

I talk a lot about the good deals in Las Vegas, but I think it’s fair to say that some of you who read this may not even be familiar with how to purchase a property, for an investment or personal use. If you have only done it once or twice, or if you have never done it, there may be some things you don’t know.

Unless you are paying cash, finding the right home starts with finding a good lender. You need to know how much home you can afford, how much money you will need for down payment, and closing costs, and what your monthly payments will be, before your real estate taxes and insurance. A lender can pre-approve you for a loan and issue an approval letter. This is imperative when you are negotiating on real estate! If more than one comparable offer has been received and none of them are cash offers, the seller will always choose the buyer who has the financing in place. Many sellers will not even look at your offer without a pre-approval letter. (If you need lender recommendations, I have them for you!) Of course, cash is still king!

The next step is determining which neighborhoods you prefer within your budget. Since the first rule of real estate is location, location, location, if the property will be your home, I suggest choosing the best community you can afford even if it means choosing a somewhat smaller or less luxurious home, as long as it will accommodate your lifestyle comfortably. Then when you are ready to sell the home and move on you will be assured of a better pool of buyers. Of course location is important for investment properties as well. You want to be in a neighborhood poised for appreciation, but where the tenants are not going to have the Home Owner’s Association (HOA) after you all of the time. Make sure you look into the real estate taxes and insurance costs when determining affordability, and know that landlords have different types of insurance coverage than homeowners. (If you need a great insurance agent, let me know.)

Once you have identified several neighborhoods to look in, I can customize your search to fit your special needs. I can search by size, number of bedrooms & garages, school zones, lot size, pools, fireplaces, floor plan style, etc. I will preview the homes for you, and only show you the ones I know are the best on the market for price and condition. And don’t worry, you will know the home when you walk into it! It will feel like your space. For investors, the best buys typically have more bedrooms and less square footage.

Next we need to negotiate an offer with the seller, often a bank. The two most crucial points in the contract will be the selling price and the closing date. To find the proper offer price, we will do a market analysis on the neighborhood for you and determine how much other similar homes have been selling for. The seller will not want to spend a lot of time waiting for you, however you must have a reasonable time to inspect the property and evaluate the HOA. Then your lender’s job (if you have one) is to close quickly.

Don’t be afraid to offer the seller an amount that the property is really worth – having said that, if a property is priced right to begin with and you waste time making low offers to save even more, someone else is likely to swoop in and buy it out from under you. Sometimes trying to save a couple of thousand dollars is not worth losing the home of your dreams or a great investment property.

After the offer is accepted it is time to choose a home inspector. I always recommend having one. In fact, if the property is bank owned, I suggest spending a few dollars more and getting an engineer to inspect. Your inspector will go through the home and up in the attics checking all the major systems. They will find defects a normal buyer could not reasonably expect to discover and often the seller doesn’t know about them either. A few hundred dollars invested here can save you thousands. Of course also understand that the inspector’s job is to point out every single defect in the property, so don’t let your inspector scare you away.

The lender will eventually be sending out an appraiser. The appraiser’s job is to make sure you are not paying more than fair market value for the property.

Just before you have ‘closed’ on the purchase, contact the utilities to get those into your name including water, sewer and trash. If you will be hiring contractors to do work, you will want to schedule them now, as the good ones are usually busy.

The day of the closing you will want to do a final walk through of the home. (I can do that for you if you are not in Las Vegas) You will check to make sure everything in the home is still in good working condition and anything that the seller was supposed to fix has been. Then we will go to the escrow office to sign the final loan documents and turn in a cashier’s check for the balance of the down payment and closing costs. Of course if you aren’t in Las Vegas, this will be done by overnight courier and wire transfers.

The day your home is recorded at the county recorder’s office is the day you get your keys. You can now either begin to work on it, move in or get it rented!

Are you ready to buy real estate in Las Vegas? Visit www.MyFastEasySale.com, click the “Wholesale Buyers” link, and fill out the form. Let’s get you going.

Two great words that can really get you in trouble.

What a game yesterday!

One of the best big games that we have ever seen. Someone help me understand this please.

We are not allowed to call the event by its name. (You know, the two words – the first word starts with an ‘S’ and the second word starts with a ‘B’).

As I understand it, radio stations, TV stations, bars, restaurants, etc., can’t say it because it is copyrighted. We can say that the Pittsburg Steelers played the Arizona Cardinals at Raymond James Stadium a short 2 hour drive from Disney World in the big game this weekend. After the big game people went back to the Marriott Hotel and drank Budweiser or Jack Daniels with Coke to celebrate. That seems to be OK.

We can say that the Tampa Bay Buccaneers were not present for the big game at Raymond James Stadium.

Why is it we can say Pittsburgh Steelers but not S**** B***? How come everyone who says Arizona Cardinals is fine as long as they don’t say that they lost the S**** B***?

I can understand not allowing people to sell items that use the logo’s, but when I’m chatting with my friends in a public place, if I call it its name, instead of the big game I hope I don’t get in trouble – because I said those words today a few times (of course I don’t dare write them).