Foreclosure auctions - not what they are cracked up to be!

Like any other prospective buyer, I was elated at the deals being offered at some of the "auctions" being held on Las Vegas foreclosures the past couple of weeks. The starting bids were unbelievable - at those prices I could easily buy and flip properties in a heartbeat! I have been down to the courthouse steps many times, and I know how the process works there. But there I am up against other professionals that buy foreclosure properties for a living and you have to have cash the day of the sale for the full purchase price. Here they will actually allow financing and you have up to 21 days to close. This should be a breeze! Most of the bidders are first time home buyers or beginning investors.

Should I start with a small fixer upper in the southeast with over 1300 square feet with a minimum bid of $69,000? Or imagine, the minimum bid on a 2846 square foot home in Lake Las Vegas was only $299,000! Or I could perhaps go for the 4144 square foot home in Seven Hills, minimum bid only $359,000.

And I always wanted one of those gorgeous Las Vegas high rise condos in Turnbury Towers. One with 2809 square feet is going for a minimum bid of only $499,000 and I have seen them sell at over a million!

As a matter of fact there are over 300 absolute STEALS going on this next weekend during a two day auction of bank owned properties with prices ranging literally from the high $30,000 mark to about $600,000. Surely I can pick up at least one or two properties with my real estate savvy gleaned from more than 24 years of experience.

For two days I spend 12 hours at a stretch on my computer, feverishly running comparables for all 300+ properties, sorting the really good deals from the spectacular ones and establishing the maximum bid I will make on any one property. I even add in the 5% "buyer's fee" being charged by the auctioneers and adjust my final figures. After all, I am a professional and I won't get sucked up into a bidding war on any home or condo. This is strictly a business proposition for me.

I drive around and make sure the homes are in one piece and not backing up to a major arterial or gravel pit. I go to the bank and grab my cashier's checks. I think optimistically and get five checks figuring I might get really lucky and even pick up five properties. I have my auction book marked and ready to go. The auction is tomorrow and I have all the information I need to make intelligent choices.

So why am I not excited anymore?!! I have done all my homework thoroughly and I am much more experienced than 99% of the other buyers who will be bidding on the homes.

I am not excited because I found out there is a real "catch" to these low low prices. I found out by reading the "fine print" that even though I might have the winning bid on a property, that doesn't mean I will be able to buy it for that price. The banks have pre-established reserves on each home, and if that reserve has not been met by my bid, the bank doesn't have to sell it to me. After the auction, the banks will most likely counter offer the winning bids

In an "auction" conducted last August, 87 Las Vegas homes and condos were auctioned off. Only 38 closed escrow at an average of only 12% below market value. The rest went back on the market and actually ended up being listed lower - at about 21% below market value. And on top of that, the inexperienced buyers were charged the 5% buyer's premium. They probably could have waited three or four weeks and gotten the same homes for less money and had full agent representation.

"Bidder acknowledges that seller and auctioneer and their employees, agents, affiliates and associates reserve the right to place bids on properties up to the seller's reserve price, if desired, at their sole discretion." This is the other little glitch in the fine print. The auctioneers and banks actually have the right to bid against you during the auction process to drive up prices.

Last weekend there was an auction in Lake Las Vegas on another 200 homes and condos. Auctioneers quickly whipped the crowds up into a bidding frenzy. (They are even more effective with huge crowds where the enthusiasm is contagious.) Likely there will be a higher percentage accepted by the banks from that auction as more properties probably hit their reserve prices. But the buyers weren't the ones getting the deals.

These are not auctions - they are just glorified bidding wars and the real winner is the auction houses and the banks, not the unsuspecting buyers.

Am I going to go to this weekend's auctions? Yes, I am absolutely. I am going to see the bidding war in action and to hand out business cards to those who quickly become disillusioned with the process. Maybe they will perk up when I tell them to wait, that most of these properties will be on the market again in a few weeks. And that I can get them a better deal than they can get bidding against 2000 other buyers AND the banks themselves! Las Vegas real estate can be a tricky game, but there ARE ways to profit, in any market.

Las Vegas New Homes

Cancellations on Las Vegas new homes are rising around the Valley. Home Builders Research released statistics showing that the cancellation rate on purchases of new homes in the Valley jumped to 53 percent in August.

The rate had been closer to 30 percent two months ago before lenders starting tightening credit. Lenders are requiring higher credit scores, and those who don't have good credit are required to put down a greater down payment or pay higher interest rates. Even people with good credit are finding it harder to get jumbo loans of $417,000 and above. Those who can't document their income are also having difficulty getting loans.

"Buyers are certainly not canceling because they are changing their minds," said Dennis Smith, president of Home Builders Research. "They are canceling because something has changed in their monthly payments."

The good news for patient buyers who were waiting for the Las Vegas homes market to bottom out is that builders have drastically lowered their prices and are offering incredible incentives in order to move inventory. And a few top real estate agents are negotiating even better deals for their buyers than the tracts are initially offering based on the volume of buyers they are able to bring to the tract.

Smith reports Meritage Homes lowered prices in some of their subdivisions by $50,000. And Rhodes Homes is selling homes for $125 to $130 per square foot, way below 2005 levels.
But despite current soft market conditions, Las Vegas is continuing to grow at a rapid pace, and reports say recovery is likely to come faster here than in any other city in the country. A large shortage in labor and a retiring baby boomer generation spell a large population increase in the imminent future which should effectively eliminate the housing surplus and return the market to balanced buying and selling conditions. In order to take advantage of the existing builder discounts, contact our office at 702-985-7654 and ask to speak to one of our new homes specialists.

Three Simple Ways to Raise Your Credit Score

In these challenging times when credit requirements are being tightened up at all the major lending institutions, good credit is more important than ever for home buyers. Las Vegas mortgage lenders have all but eliminated 100% financing and those with 5% down need to have great credit scores to obtain financing. Below are three techniques for raising credit scores substantially within 30 to 60 days.

DEBT to CREDIT RATIO: Carrying the proper debt to credit ratio will boost your score faster than paying off your bills in full each month. If you have $10,000 in total unsecured revolving credit accounts and you're currently in debt $2500, then your debt to credit ratio is 25%. If you have $1000 in unsecured credit and you owe $500, then your debt to credit ratio is 50% and you will score lower even though you owe considerably less money!

So how can you bring your ratios down without selling everything you own? The answer sub prime merchandise cards. A sub-prime merchandise card is nothing more than a card attached to a line of credit which allows you to buy merchandise from a specific vendor. The merchandise (in most cases) will be purchased through a catalog or online mall. Here's how it works: the company approves anyone with a pulse (literally) and gives them a card for $2,500 to $12,500 with NO credit check and NO cosigner. However, the card is only good for merchandise through their website or catalogs and the consumer is required to put down a deposit on whatever they purchase. After the deposit is paid, the remaining balance is financed on the card. With a legitimate Sub-Prime Merchandise Card your credit line WILL be reported to at least one major credit bureau (or more).

This means if you get a $5,000 card and you finance $500, on your credit report it will look like any other credit card and will do three extremely important things for you. 1.) It will increase your current "High Credit Limit" by $5,000 almost overnight as the account "looks" like any other unsecured evolving account. 2.) By carrying a small outstanding balance it will positively impact your credit report by building and showing potential lenders your credit worthiness. 3.) With a good payment history you are virtually guaranteed to receive "legitimate" pre-approved credit offers in the future due to other lenders renting your name from the credit bureaus.

PIGGYBACKING: Piggybacking is easy, effective, and extremely fast. Almost every credit card or credit account will allow the primary account holder to add on (at a later date) what's known as an "Authorized User" or "Secondary Account Holder". In most cases, when this is done, the entire account history(retroactively) gets posted to the authorized users credit report regardless of their current age or credit history. This strategy is usually only used by parents and their children or between other relatives. In recent years, due to its' effectiveness, this technique has led individuals with excellent credit scores to "rent out" authorized user accounts on one or even multiple credit cards in return for a fee.

DISPUTING COLLECTIONS AND BAD DEBTS: Often collections and bad debts that appear on a credit report can be removed simply by disputing them. The collection company has 30 days to respond to a dispute and often never does. At that point the credit company is required to remove the item from the credit report thus raising the score.

To find out more about financing Las Vegas homes, please call us at 702-985-7654.