Another Short Sale Success for Shelter Realty in Las Vegas

Shelter Realty closed another short sale listing last week, its 17th in a row with full liability release for our clients. In this case the subject property was also an investment, high-rise condo property. Contrary to myths about short sales that exist, investment properties may also be sold as a short sale.

Ultimately, the mortgage bank which holds your note evaluates each and every short sale approval as a unique agreement based on the individual borrower’s situation. This is why effective representation is so critical. You not only have to sell your property, but negotiate favorable terms with your mortgage bank.

If you have questions about a short sale in Las Vegas or anywhere else in the southwest, please contact us through this website or call us directly at 702-376-7379.

Many media outlets such as The Wall Street Journal and Bloomberg are reporting that the Obama administration is considering plans to get the government out of the mortgage business and are submitting different plans “to bring a controlled end” to the government sponsored enterprises (GSE’s). In other words, their going to pull the plug on these brain-dead behemoths.

Neither Fannie or Freddie has posted a profit in over three years and the American taxpayers have subsidized them with $150 billion dollars of support to keep them operating. Many opponents of the bailouts felt nothing could save the GSE’s and the any monies spent would be wasted. It seems they were correct.

The government is finally crying “uncle” and this is a good thing. They should stick to oversight and get out of the mortgage business. Private companies are best equipped to provide financing; however, they need to do so in a lucid manner that best serves the long term interests of their shareholders…responsible lending.

Although no final plans have been adopted, the general consensus is to phase out Fannie and Freddie in the next few years. It should be noted that the process of eliminating Fannie/Freddie will have no impact on persons who are currently doing short sales or are in the loan modification or foreclosure process. These are huge institutions and shutting them down will take 3-5 years.

If you have any questions if you are delinquent or about to be on your home, please call Shelter Realty at 702-376-7379.

Savvy listing agents know that pricing the home is not simply a matter of maximizing the amount a buyer is willing to pay for a home. This may sound counter-intuitive to the average person. After all, doesn’t offering the bank the most amount of money, give you a better chance for an approval? Not necessarily.

Here are some issues your listing agent has to account for in a short sale:

• You can elicit an offer so high that it won’t appraise for the buyer’s loan.
• There may be other liens which have to be paid or monetary contributions must be made. Is there a 2nd loan? Maybe the first lien holder will only agree to a certain contribution that is less than the 2nd lien is willing to accept. Where will that money come from?
• The seller’s lender may require some sort of cash contribution by the seller or accepting a promissory note. If the seller doesn’t have it and the bank won’t budge, how do you keep your transaction from falling apart? I recently had a lien for a delinquent credit card show up right before closing. We then had to figure out how to come up with another $2300 in order to make the transaction happen after we had a previous approval that did not account for the judgment.
• What if you have delinquent homeowner association dues that exceed what the bank  is willing to allow?

I look at a purchase price as a pool of money. Yes, we have to get a qualified buyer willing to pay something reasonably close to market value to get the bank interested, but if you lock up too much of the money for the primary bank, you lose the flexibility to solve some of the difficult to foresee problems I mentioned above.

We like to work with our buyers on the pricing. Sometimes it is hard to break through the traditional mentality of a price just relating to the home itself, but it is imperative that we educate buyers and get them on our side that a short sale is more than a purchase price for a home, it is a negotiated debt settlement that includes a transfer of property. There are many aspects of that home which must be resolved in order for that buyer’s offer to get approved by the seller’s bank.

Agents who do not take into consideration the eventual need for monies to cover additional obligations often are unable to close the transaction and relieve the seller of their debt. They will often say things like ‘well, the bank just wouldn’t allow enough money for this or that’, but had they structured their offer properly, they might well have been able to get the short sale approval in the end.

It is my opinion that a Las Vegas Property Manager should inspect a residential rental property inside and out at least two times a year.  I can’t tell you how many times I have been contacted by a landlord who has recently fired his property manager due to the damage caused by the tenant which was only discovered after they moved out and come to find out the property manager never inspected the property during the tenancy.  Sure enough, when the tenant moved out of the property, the landlord was stuck with all the expenses in order to get the property rent ready again.

Shelter Realty schedules an inspection every 6 months for every property we manage.  A property manager does an inside and outside inspection of the property to ensure the tenant is properly maintaining the property.  A form is completed depicting the condition of the property and listing any maintenance issues that need to be addressed. By conducting multiple inside and outside inspections of the property, it enables us to catch small issues before they become bigger and in most cases it’s a deterrent for any future problems.

In order to protect your investment, make sure you property manager is conducting regularly scheduled inspections by requesting a copy of the inspection report.  If it is time to renew your property management agreement, request that inspections of your property be completed every 6 months in order to ensure your property is being maintained by the tenant before you sign the renewal.

If you have any questions about our property management services in the Las Vegas Valley, feel free to give us a call at 702-376-7379 or complete our contact  form.

In 2010, the government rolled out a supplemental program to Home Affordable Modification Program called HAFA. HAFA stands for Home Affordable Foreclosure Alternatives. This program was specifically designed to facilitate short sales and “Deed-in-lieu” of foreclosures. From the very beginning there was strong skepticism from real estate professionals who specialized in selling distressed properties about the ability of this program to deliver. Housingwire.com reported that between April and December of 2010, only 661 deals had closed under the HAFA program nationwide.

Over-Promised, Under-Delivered

HAFA has many fatal flaws. First, it was born of another complete failure, the HAMP program. Secondly, the program was supposed to fast-track short sales and deed-in-lieu’s but in doing so, participating banks were not incentivize, and in fact, lost many of their recourse options. For example, 2^nd lien holders had to accept meager payoffs and waive any deficiency balances on their losses. Thirdly, this program was completely voluntary on the banks’ behalf. They only had to consider borrowers for approval, not approve them!

2^nd Lien Holders say no thanks!

Junior lien holders if they chose to participate in HAFA had to accept a maximum payoff of $6,000 or 6% of the loan balance, whichever was less. You can see the problem. A 2^nd lien with a $50,000 balance would have to accept a $3,000 payoff and waive any right to pursue the borrower? Not likely. This rule meant that unless your 2^nd lien was the same bank as your first, you had zero chance of an approval. I recently just obtained a HAFA approval for one of my short sale listings here in Las Vegas. The home had two loans but they were with the same lender.

This week the Treasury Department announced:

• HAFA eliminated loan servicers from having to verify borrower’s finances
• HAFA also relieved loan servicers from verifying whether a borrower’s monthly payment exceeds 31% of their gross monthly income
• 2^nd lien holders may receive a max payoff of $6,000, even if the payoff exceeds the 6% of the unpaid loan balance. This should help small 2^nd liens under $50,000
• Once approved for HAFA, loan servicers have 30 days to approve an offer. The previous requirement was 10 days which was unrealistic

In the end these measures may allow more short sales and deed-in-lieu’s to proceed but it will never approach the demand represented by millions of homeowners. When you’re trying to top 661, anything will look like a victory, I guess.

Las Vegas developed into a prime real estate investment attraction primarily due to four things:

• Sustainable Work:  A diverse pool of work opportunities.
• Population Growth: Population growth as a by-product of sustainable work.
• Supply & Demand: Population growth increased supply and demand and fueled building activity.
• Climate.

Ample employment opportunities, and a surging population gave rise to suburban development projects such as the award-winning 39-square-mile master-planned community of Summerlin, at the edge of the Spring Mountains and only a short drive from downtown Las Vegas.

The sudden growth of high rise construction, previously unknown to Las Vegans was primarily due to the pressures of population growth, and land use restrictions.

Land-locked Las Vegas is surrounded by vast Government owned land holdings under the auspices of the Bureau of Land Management (BLM) and bordered by Native American reservations, with Lake Mead to the east, mountains to the west and Nellis Air Force Base to the northeast.

Approval for any transaction of BLM regulated land to be incorporated into the city requires formal federal government approval.

Lured by the promise of jobs, lower than average housing costs and a favorable tax structure for individuals and businesses, thousands of people were moving into Las Vegas putting continuous pressure on the need for available housing.

Of course, it would be just a waste of space to reiterate what caused the sudden cooling off of a superheated economy, and the end of the real-estate gold-rush. The reasons are due to an unfortunate combination of circumstances and well-known to everyone.

Suffice to say that despite the current less than ideal real estate environment, opportunities to build wealth will always prevail for the astute real estate investor who has the foresight and flexibility to adjust to any and all prevailing market conditions.

Though the overall condition of the Las Vegas real estate marketplace is far from ideal at the present time, there are many undervalued properties available that should prove to be excellent investments over the long term.

With interest rates at an all-time low and a huge inventory of distressed properties selling at very attractive prices, the home-buyer looking for a primary residence won’t find a better time to buy then right now.

So, there is some sunshine over the horizon to brighten a somewhat gloomy picture, and hopefully predictions for the beginnings of an upturn in the overall economy around the early or mid part of 2011 will ring true.

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?

A mortgage is generally the largest debt most homeowners have to manage.  It’s a good idea to give your personal real estate finance portfolio a check-up at least once a year. Since there are many reasons a homeowner may choose to refinance, we’ll take a look at the four most common.

1)  Mortgage Rates Drop

Typically, the most common reason that homeowners refinance their mortgage is to secure a lower interest rate. Interest rate and loan amount determines the total cost that a borrower will pay. The lower the interest rate, the less the overall cost will be. Interest is calculated on a daily basis and usually paid back to the lender on a monthly basis.

2)  Lower Payments

Lowering a mortgage payment can be achieved by lowering the mortgage rate, lengthening the loan term, combining two or more loans or removing mortgage insurance.

3)  New Mortgage Program

Refinancing an Adjustable Rate Mortgage (ARM) to a new Fixed Rate Mortgage (FRM), combining a first and second mortgage or paying off a balloon loan are three possible reasons to explore a refinance.

4)  Debt Consolidation

If there is sufficient equity, sometimes paying off consumer debt by combining all debts into one lower monthly mortgage payment can significantly reduce the short-term deficits in a budget.  However, it’s important to keep in mind the total cost of that debt by adding it into a 30 year mortgage payment.

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Frequently Asked Refinance Questions:

Q:  Do I have to refinance with my current mortgage company?

No, you may choose any company to refinance your mortgage since the new loan will replace the existing mortgage.

Q:  Is it easier to refinance with my current mortgage company?

It is possible your current mortgage company may require less documentation, but this could add additional cost or a higher interest rate. Do your homework and shop around to make sure you’re getting the best deal.

Q:  Will I automatically qualify if I’ve never made any late payments?

No, you will have to qualify for your new refinance. However, certain programs will allow for reduced documentation like a FHA to FHA Streamline Refinance.

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Related Article – Refinance Process:

• Refinance Process Overview
• Mortgage Approval Process
• Calculating The Net Benefit Of A Refinance
• Should I Refinance Or Get A Home Equity Loan To Make Improvements?
• What Do Appraisers Look For When Determining A Property’s Value?
• Understanding The Difference Between Appraised Value vs Neighborhood Listing Comps
• Five Myths About Home Values

Let’s start off by saying that purchasing price aside; it is obvious that a new Las Vegas home will be relatively free of the aging problems that require maintenance in older homes. Kitchen and laundry room appliances will be under temporary warranty for a year or so, the a/c system may be under a manufacturers warranty for five to ten years, the hot water heater is usually under warranty for about five years, sometimes longer.

In regard to purchasing however, due to the higher costs of land today, the price per square foot of new construction will be considerably higher than in an older home. The interior design of new homes, however, makes more efficient use of space than most older homes.

A builders warranty covers structural defects, and the buyer’s homeowner insurance adds further protections. New, energy-efficient appliances, Energy Star windows and improved insulating materials make for lower utility costs than older homes.

Older homes, those that are in move-in condition, and are about five to ten years old may have added amenities that might be very expensive to add to a new home.  Older homes than that may have architectural features that are more pleasing to the eye than many of the newer “cookie cutter” designs seen in many communities.

Many older homes were made with sturdier building materials than today’s homes, and the exorbitant costs involved in building a home today has forced builders to compromise in certain expenditures affecting the home’s construction.

Older homes will unquestionably require more maintenance and a home owners warranty would be a sound investment. Well-kept older homes are usually on larger lots and have mature landscaping, that lends ambience to the property. Shrubs and trees on new property may take years to mature, and the expense of lushly landscaping a new property can be cost-prohibitive.

Some buyers look for quiet, well-kept and stable, established neighborhoods where older homes are located. Others may prefer a modern sub-division with amenities such as a clubhouse, tennis courts, and a workout room.

As it can be easily seen, age of the buyers, number of children, if any, overall family lifestyle – active or sedentary – financial resources, etc. will generally dictate the preference for housing type and neighborhood.

As with any purchase, “let the buyer beware.” What that means is if you are buying a new home, check the builder’s reputation and net worth, and make sure it is the builder and not some subsidiary you are dealing with.

An older home’s overall health should be verified by a certified home inspector before you take the plunge.

 If you have any questions about buying a home in Las Vegas, feel free to give us a call at 702-376-0088.

Although every situation is unique, it is not uncommon for home-buyers to qualify for a mortgage on a new home while still living in their primary residence.

Perhaps you are outgrowing your current house, or have been forced to relocate due to a job transfer?  Regardless of the motivation for keeping one property while purchasing another, let’s address this question with the mortgage approval in mind:

So, Do I Have To Sell?

Yes. No. Maybe. It depends.

Welcome to the wonderful world of mortgage lending. Only in this industry can one simple question elicit four answers…and all of them may be right.

If you are in a financial position where you qualify to afford both your current residence and the proposed payment on your new house, then the simple answer is Yes!

Qualifying based on your Debt-to-Income Ratio is one thing, but remember to budget for the additional expenses of maintaining multiple properties. Everything from mortgage payments, increased property taxes and hazard insurance to unexpected repairs should be factored into your final decision.

What If I Rent My Current Property?

This scenario presents the “maybe” and the “it depends” answers to the question.

If you’re not quite qualified to carry both mortgages, you may have to rent the other property in order to offset the mortgage payment.

In that scenario, the lender will typically only count 75% of the monthly rent you are proposing to receive.

So if you are going to receive $1000 a month in rent and your current payment is $1500, the lender is going to factor in an additional $750 of monthly liabilities in your overall Debt-to-Income Ratios.

Another detail that can present a huge hurdle is the reserve requirement and equity ratio most lenders have. In some cases, if you are going to rent out your current home, you will need to have at least 25% equity in order to offset your payment with the proposed rent you will receive.

Without that hefty amount of equity, you will have to qualify to afford BOTH mortgage payments. You will also need some significant cash in the bank.

Generally, lenders will require six months reserve on the old property, as well as six month reserves on the new property.

For example, if you have a $1500 payment on your old house and are buying a home with a $2000 monthly payment, you will need over $21,000 in the bank.

Keep in mind, this reserve requirement is incremental to your down payment on the new property.

What If I Can’t Qualify Based On Both Mortgage Payments?

This answer is pretty straightforward, and doesn’t require a financial calculator to figure out.

If you are in this situation, then you will have to sell your current home before buying a new one.

If you aren’t sure of the value of the home or how your local market is performing, give us a ring and we’ll happily refer you to a great real estate agent that is in tune with property values in your neighborhood.

As you can tell, purchasing one home while living in another can be a very complicated transaction.  Please feel free to contact us anytime so we can review your specific situation and suggest the proper action plan.

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.