What Buyers need to know about Las Vegas real estate!

We have all seen deals that are to good to be true.  When we were kids we saw toys that seemed to walk on their own and come to life. “Wow, I got-ta have that G.I. Joe he fires a real bazooka!”  Then when we get older we realize when we are presented with a deal that is too good to be true, right?  Well maybe not.  I am constantly amazed by the chances we all take thinking we can get, not just a good deal but, a deal that no other human being could think of getting.  We are all suckers for the great deal and as my dad used to tell me “if a deal looks to good to be true, it usually is to good to be true and not a real deal.”  Even the super rich and well educated get suckered into “The Deal of a lifetime!”  Look how many people stood in line to invest with Bernie Madoff who like his last name Mad-off with their $50 billion!

So here you are thinking about getting the deal of a lifetime in Las Vegas real estate because you know it is one of the foreclosure capitals of the world right now.  You know that the average price of a Las Vegas home is down about 33% from a year ago and economists are saying the market is under valued for what the average income is by 18%.  “Wow, I got-ta have one of those Las Vegas homes for sale! Maybe I’ll even take more if I can find a good deal!”

You are looking through North Las Vegas houses on line when one leaps off the page at you. It looks nearly new and the asking price is only $44 per sq/ft. That’s $99,000 for a 2,250 sq/ft home built in 2005. The other homes that size in that area are asking between $135,000 to $177,900. Wow. You call your real estate agent and immediately run over to see this beauty and after viewing it immediately make an offer at full price!  What Seller could resist full price and you happen to have cash so the sale will be guaranteed right?  Through your agents research you discover that comparable homes in the North Las Vegas area have sold from the lowest price of  $105,000 (a beat up repossession) to a high of $215,000 (also a repossession). Your agent presents your offer and the Seller immediately accepts it on the condition that his lender approves the sale.  Time to break out the Champaign and celebrate you just made the deal of the century right? WRONG!  It is more likely you just got suckered. This is a Las Vegas home “SHORT SALE.”

 Approximately 10% of the total homes listed in the Las Vegas Multiple Listing Service are “Short Sales.” Of the total sales each month only about 1% of the total listings that close/sell are “Short Sales.”

 To understand this sucker punch you just took we need to “walk in some other peoples shoes” as the saying goes.

 The Seller of the Las Vegas home- This guy is currently 90 days late on his payments and has received a foreclosure notice from his bank telling him his home will be repossessed if he doesn’t make up his payments.  He has listed the home with a real estate agent knowing that if he is lucky enough to find a Buyer and the home is sold he will receive $0, none, nothing from the sale. He will only be salvaging some of his credit rating allowing him to sometime in the future buy another home.

 The Sellers Real Estate Agent-  This guy understands he has about 60 days to find a Buyer for his clients home.  He also knows that the bank will not accept an absurdly low price but that if he were to list it at market price he more than likely will not get any offers on the home resulting in his client not selling and being foreclosed upon.  If this occurs he is not acting in his clients best interests (which he is required to do under the law) and he as an agent will make nothing for all his work.  He determines that the best possible outcome for his client is to list the property well below its value in order to attract offers and then let the Sellers bank negotiate the sales price up to what they will take.  At least he has offers and a possible sale. This agent knows that once a Buyers make offers and they are accepted by the Seller the Buyers become emotionally invested in the home and thus are more likely to take the banks counter offer and make the deal. He also knows that if he can secure multiple deals subject to the banks approval he has a better chance that the home will sell before it is foreclosed.

 Your Real Estate Agent-  Your guy is a good guy and tells you that it can take between 3 weeks to 3 months to get back an answer from the Sellers mortgage company.  He also warns you that the bank may not take your deal or may counter offer at a higher price. But you smell a deal and its in your grasp for only $99,000.  You are locked on to this deal (in other words you are emotionally invested). So your agent writes the offer presents it and notifies you of its immediate acceptance by the Seller subject of his mortgage companies approval.

 The Sellers Bank-  The Sellers Bank receives the offer along with the Sellers information proving he can no longer afford the home. They also see that you are a strong Buyer and can pay cash for the property so they know you are a real Buyer and not subject to getting financing. They pull the Sellers loan and see that they made the Seller a loan on the property in July of 2005 for $290,000.  Your offer is $99,000 so you are asking the bank to take a loss of $191,000 and release the Seller in the process. 

Now take a walk in the Bankers Shoes. If you were the Banker would you just look at this deal and take a loss of $191,000?  Banks have an obligation to their stock holders and must meet federal regulations on banking practices. These practices help the bank maintain liquidity and help insure that they do not fail. The bank orders one or two of their real estate agents who are not representing you or the Seller to do a “Brokers Price Opinion” on the property.  This is an opinion of what these agent feel the property will sell for on the open market given reasonable time and considering its condition if they were to get the listing and had an obligation to sell it.  The Bank may also order a formal appraisal of the property by a licensed real estate appraiser who will give his opinion of the value of the property.  These evaluation reports take time to order, complete and receive back by the Bank. 

Also remember that the Banks are flooded currently with these types of “Short Sale” proposals and are having problems processing them.  The Bank must evaluate the Sellers information and make sure that he truly can no longer afford the home.  If, in the Banks eyes, the Seller can continue to pay for the home then the Bank will refuse your offer.  If the Bank determines that the Seller can not continue to pay for the home then they will review the pricing opinions and determine the price they will accept for the home.

The three price opinions have come back to the bank. The two Las Vegas real estate agents have concluded that the home could sell for around $160,000 due to its condition and location.  The appraisers report is considered more accurate due to their extensive professional training, certification, licensing and liability for their work. The appraiser places the value at $184,000. His report reveals that since this property is not a repossession and is not selling without warranty or any hidden problems, its value is higher than a similar repossessed property. The Bank has an legal obligation to get as much for each Las Vegas home as it reasonably can.

 YOU the Buyer-  The Sellers bank reply’s quicker than expected to your offer. You have only waited 60 days.  The bank emails the Sellers agent and tells them that they will accept the deal if the sales price is $178,500 net to the bank after closing costs. This means you must change your purchasing price to $184,000 in order to cover the banks closing costs. WOW, that is not near the $99,000 you offered and you have just wasted 2 full months waiting.

What you need to know-

1)      The banks have never been and will never be easy. They will never just write off a loan without trying to get every dollar they can. They are professionals in the Las Vegas real estate market and will use professional means to establish real value.

2)      The banks “loss mitigation department” handles all “Las Vegas Short Sales.”  This is a separate department totally different and often located in a different geographical location for the Banks Asset Management department that handles Las Vegas Repossessions. In fact the two departments operate on two different set of rules and regulations.

3)       It is possible that a house for sale as a Las Vegas Repossession is in the same neighborhood as the Short Sale house you made an offer on and is owned by the same bank and that reposessed house may be for sale for $140,000.  Repossessed homes are priced differently as the Bank is having to pay taxes, insurance and other expenses to maintain a repossession while a Short Sale is not being maintained by the bank yet. Thus your counter offer by the Bank is effectively $184,000.

4)      The bankers are basically great book keepers. If you ask for concessions in your offer they will apply a dollar value to them and they will always figure their bottom line to the deal. So don’t ask for things you don’t really want as their counter offer will raise to cover the cost of these items.

5)      When making an offer on a property in today’s Las Vegas real estate market you need to make the offer based on what other like homes in like condition are priced in the same area. This does not mean you can not make a lower offer and still get a great deal. The offer needs to be proportional to what the market is offering. You need a great real estate agent to help you craft an offer in this market. He needs to understand the Las Vegas real estate market.

6)      Because your offer was conditions on the Banks Acceptance. The property was never taken off the market or the MLS and while your deal was being considered another Buyers agent put in an offer on the same property for $178,500.  Neither the Bank or the Sellers Agent are required to tell you about this.  So when the Bank counter offers your proposal they have canceled your contract. Which leaves them free to accept the other offer. Generally the bank will just reject your offer and accept the other offer.

7)      The asking price of a Las Vegas Short Sale can have little to do with what you can buy the home for!

 Your offer is no longer valid as the Bank has not accepted your terms. You have lost 2 months of shopping time. Your Earnest Money Deposit has been in Escrow for over 2 months. While waiting, you have passed up other Las Vegas homes for sale that you may have been just as happy with. You have suffered the emotional frustration of 2 months of waiting only to find out you never really had a deal.

Of course it could have been worse! It could have taken 3 months!

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For more insight on the Las Vegas real estate market I invite you to visit my “Las Vegas real estate site.”

I would also like to invite you to contact me in person for specific opportunities in this exciting Buyers market.

Max Schmidt
702-334-2200

Contact Max and let him know what you are looking for here NOW!