LAS VEGAS REOS CAN BE IN THE CINDERELLA SITUATION
There are acronyms that have grown so familiar that they are more like words than the phrases they represent (think “SCUBA” for self-contained underwater breathing apparatus or “laser” for light amplification by stimulated emission of radiation). Las Vegas REO properties aren’t in that category. For instance, REO homes aren’t located next to a river with a Spanish name. Most people have never heard of REOs, although they are familiar with what they stand for. REO is the acronym for ‘Real Estate Owned,’ but even that doesn’t help (every bit of real estate is owned, for Pete’s sake!) In case you think that REO looks a lot like OREO and that it could have something to do with the U.S.’s most popular cookie, you are closer to the truth than you might imagine. REO is shortened from a financial term used by banks: “Other Real Estate Owned”—OREO—meaning real estate that is owned by the bank but not directly connected to its banking business. Which is very much on point for what Las Vegas REO opportunities represent. Although its ownership has reverted to the bank that issued a mortgage loan for it, a Las Vegas REO is in a kind of Cinderella situation. The REO may not have to clean the bank’s floors at night, but its new owner likes all its other investments better. The bank probably tried to sell the thing at auction, but got nowhere. The bank isn’t at all pleased with the situation. As the OREO designation indicates, it’s not directly connected with the bank’s banking. Like a cat trying to shake the water off its paw, the bank wants to get rid of it…be done with it…lose it! Enter the essence of a Las Vegas REO opportunity. It’s a home with an owner who wants to sell; is motivated to sell! Then again…the essence of what the bank does best is to make money. It lent some to the former owners, and now it’s taking in zero from the monthly payments that aren’t happening. So although, like the cat with the wet paw, they’d like to shake the whole thing off, they’d also like to get back as much money as possible. Enter the essence of the hitch in the REO opportunity. If you are a potential home buyer, who is a true bargain hunter, one of the Las Vegas REO properties could be of interest. You have to find one. You can try contacting lenders and asking them for a list of their REO properties, but sometimes that is a time-waster. Working with a real estate agent is usually more reliable. Then you have to be prepared for today’s REO realities. Gone are the scads of REOs that flooded the market after the financial meltdown. Today, banks are likely to have established an asking price that is reasonable rather than spectacularly low. Your agent will help assemble comparable property prices to aid evaluation. Too, because buying an REO is an “as is” transaction, you will benefit from working with a team of experts (REALTOR®, lawyer, perhaps a contractor) who can work to protect your interests (for instance, by building in an escape clause in your offer letter in case unforeseen property damage turns up later). Las Vegas REO opportunities can be terrific finds—and so can others that involve less complication. There is one sure way to investigate the values that are out there: call me!
WHICH WAY FOR LAS VEGAS MORTGAGE INTEREST RATES
WHICH WAY FOR LAS VEGAS MORTGAGE INTEREST RATES If you begin a search for a new home by going online to check out the Las Vegas listings, it’s likely that one of the first search criteria you enter will be the price range. After all, unless you are a virtual looky-loo who is just checking out how the other half lives, your budget will dictate which homes you seriously consider. If you are one of the more than two-thirds of us who will be counting on a loan to help finance that home purchase, the monthly payment amount is really what matters. That’s why you don’t have to be a dedicated number-cruncher to be keenly interested in the direction Las Vegas mortgage interest rates are going to head. In fact, if you aren’t one of those whose idea of a good time includes working out spreadsheet calculations, it probably came as a shock the first time you realized how big a deal it is when Las Vegas mortgage interest rates notch up or down even a single percentage point. If you’ve never sat down to look at the numbers, please sit down before continuing… For a quick example, suppose you were Average American Homebuyer taking advantage of an average American home purchase just this past July. Your family income was a bit higher than the median of $55,000—say, $60,000—so if you went with the lenders’ standard rule that 28% of income is the most a housing budget should allow, that meant $1,400 would be your maximum mortgage payment. You found a terrific buy—a brand new home at exactly the median U.S. new home price, $286,000. You had saved up diligently, so the 20% down payment was available. That made enough of a dent in the sales price to qualify for the median mortgage interest rate, which was July’s 4.05%. Your annual taxes and bank-required insurance came to an annual $3,000, which added $250 a month). The whole situation made you more than median-ly happy because it meant that your monthly mortgage payment on the home’s 30-year fixed rate mortgage came to only $1,350. That provides $50 of breathing room… But remember, this quick example is one that required you to sit down. Sooooo — what’s the problem? It’s this talk about the Federal Reserve wanting to raise the federal funds target rate. That would have to trigger rises in the mortgage interest rates in Las Vegas (and everywhere else). In our quick example, taxes and insurance costs stay the same; but suppose the mortgage interest rate notches up one little percentage point, to just 5.05%? That’s still below the historical average, yet the same home—and the same loan except for that one percent raise—now requires a monthly $1,486 payment. That crosses the budget recommendations—and although some lenders would likely consider other factors that might make the loan possible, that single percentage point rise does wind up costing Average American Homebuyer more than $1,630 a year (and nearly $50,000 over the life of the loan). The reality is that prudent home shoppers are currently able to consider properties at higher price ranges than will be the case after mortgage interest rates rise. For them, the market is wider than it will become later. A further note: August saw Las Vegas mortgage interest rates fall below even July’s 4.05%. Another very good reason to give me a call!
DECIDING IF AN LAS VEGAS FIXER UPPER IS THE RIGHT DEAL FOR YOU
The Las Vegas fixer-uppers: You know them when you see them—especially when going through the Las Vegas listings, where their photos probably lack quite the allure of the others. You can also spot them by some cautiously-phrased tipoff language. They are “handyman specials” that are offered “as-is” or that “need attention.” A perplexingly low asking price is a dead giveaway, too. Most often, if, considering the features listed, the number is too good to be true, you’re looking at a fixer-upper. If you are house hunting, are they worth looking into? Or if you own one, should you do the fixing-up? How do you make a rational decision? First, about whether to get to work before you offer your own Las Vegas fixer-upper to the world: It’s true that a fixer-upper can be a serious magnet for prospective buyers, particularly when those buyers aren’t averse to putting in some old-fashioned elbow grease. If you can accept the kind of low sales price that will make yours a standout from competitors, it’s bound to attract a lot of interest from budget-minded householders—as well as professional house-flippers and contractors who work on their own account. The rule of thumb for owners readying a property for sale is to investigate whether smaller replacement projects—the kind that add curb appeal and/or kitchen glamor—are likely to boost value above the cost of the undertaking. Most reports on the subject find that large-scale projects seldom return even 80% of their cost, although when chosen strategically, per the NAR® “…they can improve the market position of the property in relation to the competition.” (Translation: move it out of the ‘fixer-upper’ category). From a non-professional buyer’s point of view, though, the question is whether the fixer-upper route is a better choice than the costlier entries. If you have little interest in extensive DIY projects or decorating overhauls, you already know the answer: skip the Las Vegas fixer-uppers. You have to be enthusiastic to make one of those worth the undertaking. You needn’t bother with any of the super bargains with listings that admit “needs some TLC.” If you are on the fence, the answer may well lie in a careful appraisal of what will be needed to bring the candidate up to neighborhood standards. If you are an experienced DIYer, there are software packages available that can help you estimate expenses. If not, our Las Vegas contractors will be able to provide an itemized ballpark estimate for such a project. If the combined cost of purchase and upgrades still creates an attractive package—and you are prepared for some dislocation as major work is being done—a fixer-upper in Las Vegas is worth serious consideration. This fall, the Las Vegas market has offerings with real value in every category. Call me to get the complete low-down on any and all that pique your interest!
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