Las Vegas Short Sales May Rise?
Posted by Paul Francis on Wednesday, December 28th, 2011 at 9:45pm.Las Vegas Short Sales May Rise in 2012?
Interesting article in the Las Vegas Review Journal with predictions concerning the Las Vegas Real Estate market for 2012 that you can read here with opinions all over the place.
These are just opinions so take them for what they are worth since it's pretty difficult to tell with absolute certainty exactly what's going to transpire since the new Nevada Law was passed back in October changing up the foreclosure process.
Too early to tell and this is going to be a pretty long post explaining out a lot more then what is given in the newspaper article so bear with it. By the end of this post, you'll see the opinion I'm going to somewhat lean towards after explaining it all out and taking a look at what happened in other markets when similar changes took place in their respective markets. I'm also going to throw a wrench in everything from something that was confirmed with me this past week.
I heard rumours that it was going to happen.... and I actually got to find out straight from the source that indeed these rumours do appear to be true which is going to create something that Nevada has never seen and many real estate agents / real estate brokers that have never practiced outside of Nevada are going to be completely confused.
Will Las Vegas Short Sales become a Bigger piece of the Market?
Will short sales in Las Vegas increase? Possibly but there certainly is no reason to cheer about that. Short sales in every distressed real estate market across the United States have been bogging down their markets so there is certainly no reason to get excited about them.... especially if you've been doing them for the past three years and really know what they are all about.
Just because Las Vegas short sales make up a bigger piece of the pie due to the lack of availability of Bank Owned homes available for sale, don't expect any dramatic changes to Las Vegas short sales as I posted about back in the September Las Vegas Short Sales Report.
Of these 8,668 Las Vegas short sales currently in escrow, 1,930 of them have had an accepted contract between the seller and a buyer for more then four months. Basically... one in five (22.7%) sellers and buyers have already been waiting for four plus months.... and counting.
In other words, even with all of the PR campaigns that get spread by the inexperienced short sale sources, the fact of the matter is that the time line for approval really has not improved that much. In fact, in September of 2011, the number of short sales that closed escrow in comparison to September of 2010 actually went down over 8%.
After a significant improvement in short sale closings (and avoiding Foreclosure) from September of 2009 to September of 2010, there was a decrease in year over year results from September of 2010 to September of 2011 of -8.55%.
There is also plenty of speculation going on that due to AB 284 taking effect on 10/01/2010, that home sellers who really don't want to short sale are going to take advantage of the system and delay the short sale process even longer.
Just because the Las Vegas REO inventory might temporarily dwindle down, I would not expect the big entities such as Fannie Mae or Freddie Mac that actually own the distressed home loans to really care about improving the short sale process. Read the article linked above, specifically under the heading that states "Las Vegas Short Sale Expectatiions" to see what I mean.
Nevada is Certainly not the First State to make changes to the Foreclosure Filing Process
California and Florida along with a couple of other states already changed some of the ways their foreclosure paperwork is processed due to the enlightenment of the Robo-Signing fiasco that popped up over a year ago.
You can read HERE the announcement that California had the highest rate of Scheduled Trustee sales that they've seen in 10 months this past November. More California Homes are hitting the final stages of foreclosure before the bank takes them back and turns them into Bank Owned Homes.
So, while a change of the process may have delayed foreclosures, the Foreclosures are still on the way.
From Florida, you have to read between the lines of this recent article to see what is really going on in Florida which should make anybody shudder who has any basic Economics knowledge. In fact, due to the insane headline and some of the blatant cheerleader predictions, I've got to point out the key highlights that everybody should pay attention to:
"The supply of homes for sale decreased by 40 percent to about 28,000, but the so-called shadow inventory of foreclosure homes not yet for sale ballooned to more than 200,000, thanks to a temporary slowdown in foreclosures."
"Right now we have 371,000 open foreclosure files in Florida, and you have 800,000 mortgages that are 60 days late or in default. I don’t see the market rebounding for at least two years.”
"Mortgage lenders, accused of robo-signing court foreclosure documents, slowed their repossession machines this year, leaving thousands of cases in limbo. There are more than 100,000 foreclosure cases currently pending in court, and some of them have been in litigation for several years. Those homes are part of the region’s large “shadow inventory,” which industry watchers describe as the true supply of homes once foreclosures and bank-owned properties are included. The sheer size of that shadow inventory, estimated to be as high as 200,000 in South Florida, has kept prices relatively low this year."
2012 Forecast: There’s ample evidence that the year-long foreclosure holiday will come to an end in 2012, as banks look to take back more delinquent homes. Foreclosure filings rose 52 percent in South Florida in October, with bank repossessions nearly doubling from the month before, according to real estate research firm RealtyTrac.
So bascically, Florida homeowners got to enjoy their very own foreclosure moratorium and what's left are hundreds of thousands of homes that are going to eventually be bank owned and flood the market.
For Florida homeowners that really don't want to move and are buried underwater.... they've been able to ride it out for quite some time. Precisely why some of the banks such as Bank of America were offering up to $30,000 in short sale incentives for selected Florida short sale sellers.
My opinon, but I see some major problems taking place in 2012 when it comes to the Florida Real Estate market.
A pretty good argument that if Nevada sees the same thing, then unless there are some true incentives for a homeowner that can't afford their mortgage payment, they are just going to ride it out for as long as possible and not even bother with a short sale until it comes down to the last minute.
What will be left are the homeowners that are relocating and vacating their homes as the only serious short sale sellers that will be out there.
Of course, every homeowner delinquent on their home loan needs to pay attention to the Mortgage Forgiveness Debt Relief Act of 2007 that is set to expire December 2012.
Basically... if you are a primary homeowner and you short sale or have your home foreclosed on before December 31, 2012, the amount of the loss the lender takes and reports to the IRS as income to the homeowner can be tax free.
Unless this Act is extended again, then a homeowner that short sells or has their home taken back by the bank AFTER 12/31/2012 could be stuck with a big tax bill. Pay Attention --- it's not from the point that a homeowner STOPS paying their Mortgage --- it's from the date of the actual closing of a short sale or the date the bank takes title of the home. For homeowners that just walk away and it takes the bank a year or two to foreclose, they might be in for a rude awakening.
Will the act get extended again? With the way things have been working out of Washington D.C. lately, it's probably safe to say that you are not going to know until the final days and that's a pretty big gamble to take.
Bank of America Going to the Judicial Foreclosure Process in Nevada?
I went to a Foreclosure Mediation last week with some clients to sit down with an Attorney representing Bank of America. The point of attending the mediation was to have it agreed upon for a short sale approval up front with a set price in order to avoid the wait around time to have a short sale approved once we have a buyer. The vast majority of Las Vegas short sales are cancelled by buyers because of waiting around for so long for the sellers lender to appove the short sale so whatever it takes to remove some uncertainty, I'll certainly do what it takes.
Interesting Information revealed with plenty of commentary that turned into another blog post due to it's length that you can read at my Is Bank of America Going to the Judicial Foreclosure Process in Nevada?
It could really THROW OFF any predictions of what it going to take place in 2012.
So there you have it. Another year of uncertainty of what is really going to take place for Las Vegas real estate. Take the opinions for what they are.... just opinions.
Take them for what they are because as you can see from all of the information that has been provided for you to take in, you'll see that it's pretty much impossible to see what's really going to happen until it's actually done.
Paul Francis
Prudential Americana Group, REALTORS
Las Vegas Real Estate
702.592.3058
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