Short Sale Process Actually Becomes Shorter!

RealtyTraq, which measures real estate activity across the country, just released a very interesting article with the latest statistics on the time it takes banks to process a short sale, and which banks have the fastest response time. Not surprisingly, Freddie Mac, Fannie Mae and FHA had the shortest timelines from the beginning of the process to the final closing, posting an average of 193 days in January 2012, down from 248 days on average a year ago. View the complete article here

But the most interesting part of the article was the fact that Bank of America has announced that it's new policy is to provide a decision within 20 days of a short sale offer with a completed seller package. In Las Vegas, almost 60% of short sales are serviced by Bank of America, so this is GREAT news for Las Vegas homebuyers that can't wait five or six months to find out if they can actually buy the home of their dreams.

In fact, as a matter of course, many prospective owner occupants have been instructing their real estate agents to exclude short sales from their home search because they can't wait and/or don't want the typical hassles associated with a short sale even if they could get a better price on a short sale home. This means they are not even looking at half the market inventory they could possibly buy. And especially now, with Las Vegas real estate inventory levels so low and Las Vegas back to being a seller's market, this will give buyers more choices and potentially a better bang for their buck.

For sellers too, this means less hassle and stress waiting to see if their short sale will be approved and if they will be able to take advantage of the tax benefits on deficiencies currently in place until the end of 2012. Hopefully other banks will soon follow B of A's example and set a strict policy on response time.

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Las Vegas Shadow Inventory - Foreclosure Fact or Fiction?

"Where have all the homes gone?!" In the Las Vegas real estate market it's like the clock has suddenly been turned back to the year 2004. Within hours there are multiple offers on everything listed under $250k, often sight unseen, and most accepted contracts are going above list price. New home builders are warning real estate agents about imminent price increases.

At the beginning of November there were approximately 11,500 single family homes actively on the market that were not yet under contract. Today, less than 6 months later, there are only 5,074 active single family listings in the Las Vegas MLS. That's about a six week supply at the current rate of absorption.

This is a direct result of Assembly Bill 284, which effectively stopped the non judicial foreclosure process in Nevada. Before AB 284 became law, lenders were filing around 5,000 Notices of Default per month. Now that figure is down to about 300 a month. Actual foreclosures are down to about 800 per month, and even that figure is dwindling rapidly. REO teams are downsizing staff and services, as there doesn't seem to be an end to the drought any time in the near future.

So where is the "shadow inventory" we keep seeing in the news? Since Nevada lien holders can no longer foreclose on properties non-judically, they have gotten much more aggressive about encouraging and approving short sales. Many owner occupants with true hardships that don't qualify for loan modifications are receiving cash incentives from $3k up to a whopping $30k for cooperating in a short sale.

Lienholders are also modifying many borderline loans, often unsolicited. I had a call from one of my clients last week. He had been trying to refinance his home through a new lender. (He was just barely upside down and had excellent credit.) Out of nowhere, he got a call from his existing mortgage lender, Bank of America, offering an interest rate reduction that saved him more than the refinance would have, at no cost, and without extending the life of the loan!

So in the foreseeable future, the "shadow inventory" in Nevada is a myth. And with the Las Vegas economy recovering, by the time AB 284 expires, many Nevada homeowners will be able to achieve a work out solution with their lien holders.

For more news on Nevada's improving economic situation and rapidly shrinking inventory, check out this week's recent news articles:
Single Family Homes Down to Six Week Supply
Las Vegas is a Seller's Market Again

And don't forget, legalized medical marijuana is also coming to Las Vegas. That will mean quite a few people moving to the state (especially the ones that don't like the cold in Colorado!) to take advantage of the new laws shrinking inventory even further. For the latest on the marijuana situation, go to our new site at Las Vegas Marijuana Real Estate today.

Beware Home Owners - Judicial Foreclosures Coming to Las Vegas!

Nevada has always been a non-judicial foreclosure state. If a borrower was past due, all the mortgage holder had to do was produce copies of the appropriate documents and file foreclosure notices, and within approximately 5 months the foreclosure sale took place at the county steps. There was no right of redemption for the borrower, and the new purchaser took possession immediately.

But in the wake of the robo signing scandals, the Nevada legislature passed a new amendment, AB 284, which included the requirement that an authorized representative of the current lien holder had to complete and sign an affidavit indicating they had “personal knowledge” of all previous transfers of interest in the note. Most notes are sold by the originating lender within weeks of the initial closing, and often they are sold several times during the life of the loan.

Since there is absolutely no way any authorized representative of the current lien holder would ever be able to affirm personal knowledge that each previous lien transfer was done correctly, no lien holder would ever be willing to sign the new affidavit. Because of this, foreclosure filings have almost ground to a complete halt in Nevada, active inventory on the real estate market has shrunk to less than a two month’s supply, and properties priced at less than $200k are receiving multiple offers in droves.

Past due borrowers, many of whom have been sitting comfortably in their homes for up to two years while not making any payments, celebrated the new amendment. No more new foreclosure filings meant they might be able to stay another couple of years “rent free,” right?

Well, that celebration is about to come to a screaming halt. Banks, sitting on large inventories of non-income producing assets, have started to “wise up,” and they are pursuing the judicial foreclosure process instead. A judicial foreclosure does not require signing off on the AB 284 affidavit.

This has serious ramifications for past due homeowners. A judicial foreclosure entails an actual lawsuit filed against the borrower. The filings include the entire amount of the past due note, all past due interest, and the lien holder’s attorney fees. In addition, the borrower will have to hire their own attorney to represent them in court.

Best case scenario: the borrower files bankruptcy to wipe out the debt, keeping in mind that any assets they have accrued will be used to reimburse the bankruptcy creditors. And they will still have to pay attorney fees for the both the court case and the bankruptcy out of pocket. And with both a foreclosure and a bankruptcy on their credit, it will be a long number of years before they will be able to qualify for home ownership again.

A much better alternative for the homeowner AND the bank is a short sale. Benefits for the borrower: in almost 99% of short sales any loan deficiencies are “forgiven” and in a few years the borrower can re-establish their credit and purchase another home. (In some cases owner occupants can even receive a credit from the short sale proceeds for moving expenses.) Benefits for the banks: a judicial foreclosure means the borrower has a one year right of redemption. So the banks would have to rent out and maintain the property for at least a year before putting it up for sale to recoup some of their losses. A short sale is less costly and gets the asset off their books much more quickly.

So, Las Vegas homeowners, unless the sheriff is already at the door changing the locks, call us immediately to find out about listing your home as a short sale. The banks WANT to accommodate short sales now. They will still make you jump through paperwork hoops to get an approval, but their ultimate goal is to make it happen. As long as you have a little bit of patience for the process, you will soon be able to put this house behind you and start fresh again.