New FHA Guidelines for Las Vegas Home Buyers

Buyers of Las Vegas homes need to be aware of several proposed changes to FHA guidelines that may soon be implemented buy the Federal Department of Housing and Urban Development which will impact their purchasing power. It is estimated that more than 71% of FHA’s losses over the next five years will come from existing loans, prompting HUD to re-evaluate criteria for new loans in an effort to minimize further losses.

Proposed changes to the current guidelines could include:

* Reduce the maximum seller contribution towards buyer closing costs from 6% of the purchase price to 3%. The current level exposes the FHA to excess risk by creating incentives to inflate the appraised value to cover costs paid by the seller.

* Raise the minimum FICO score for new FHA borrowers.

* Increase the down payment that a borrower has to bring to the table for an FHA-backed loan to make sure that FHA buyers have more “skin in the game” and a stronger equity position in their loans. Currently FHA minimum down payment is only 3.5% of the purchase price.

* Increase the mortgage insurance premiums currently charged. This could be in the form of an up front payment or an increase to the annual premiums paid as part of the monthly mortgage payment.

* Require lenders to indemnify the FHA fund for their own failures to meet FHA requirements, and holding lenders accountable for any improper activities. This would ensure that lenders assume all responsibility for any losses associated with loans not underwritten to FHA standards.

Greater down payment requirements and higher FICO scores will certainly impact the Las Vegas real estate market, especially for first time homebuyers trying to take advantage of the extended first time homebuyer tax credit and all time low prices. Even under current guidelines they are already in competition with all cash investors for the limited supply of affordably priced Las Vegas foreclosures, and stricter lending requirements could nix the dream of American home ownership for many. Buyers that have even been thinking about purchasing a property with an FHA loan should be aware of these impending changes and act quickly before they are put in place.

Happy Ending for Las Vegas Home Inspection

A few days ago I posted a letter on this blog from one our Las Vegas real estate inspectors, Spectrum Inspections. The letter addressed the responsibility of the listing agents to disclose known defects on Las Vegas foreclosures they were handling, despite the fact that the properties were being sold "as is, where is." In this particular case, the inspector was aware that the listing agent had ordered mold remediation done on the property prior to placing it on the market, though there was no disclosure about the remediation to the subsequent buyers. The inspector's quandary was whether or not to let the listing agent know about their potential liability to the buyer, since Las Vegas real estate agents are required to disclose all known material defects about a property, even though the property is being sold "as is, where is."


Below are excerpts from the inspector's follow up letter detailing the resolution that resulted from alerting the listing agent to the issues.


Dear Diann,

I would like to thank the many people who responded to my request for guidance and provided me with input. Most of the guidance and direction recommendations that I received were very similar. However there were a wide array of suggestions that ranged from, "Do nothing; you're just the home inspector," to "you must take this issue to the state legislature to ensure this type of thing never happens again." Some people thought we were over stepping our boundaries as home inspectors, while others complimented our involvement. During my twenty-one years in the military one lesson I learned was that the proper initial course of action is always to try and resolve problems at the lowest level. This is what I did.

When I called the Listing Agent and spoke about the potential liability he may be incurring by not disclosing material information that he should disclose in accordance with the "Duties Owed" he was very grateful and receptive. He went on at great length about how he is buried with REO listings and appreciated me bringing this issue to his attention. He is a good guy, trying to do the right thing, and did not need to be either reprimanded or incarcerated.


He sent an addendum to the Selling agent disclosing that the home was plumbed with Kitec. He also sent the Selling Agent copies of all the repair orders, documentation of the repairs that were accomplished, and even forwarded the results of the post mold remediation testing that was performed. It appears that his actions to address the damage and the mold were done by the book. The buyers were very grateful that nothing seemed to be glossed over and now feel that they received the level of disclosure they were entitled to receive.


We also suggested the Listing Agent contact the Asset Manager, request that the Kitec replumb be accomplished prior to title transfer at the bank / current homeowners expense, and to have the prospective buyer sign an agreement that assigns any remuneration from the class action lawsuit to the bank that paid to have the replumb accomplished. Everyone involved thought it was a good path of resolution that created a win/win situation. The buyers are willing to move forward with the transaction once the replumb is accomplished, and will have a better than expected 25 year warranty on the plumbing system. All the repairs the Listing Agent had performed were professionally accomplished and this was confirmed during the course of our inspection. The buyers are now looking forward to spending the Christmas holidays in their new Las Vegas home.

A great home inspection will not only uncover all the significant problems with the home, but will provide you with a course of action or path of resolution for addressing the issues. Both agents in the transaction were delighted at the level of involvement we provided. Don't you love a happy ending?


Paul J. Donohue, RHI, RREI, CREI
President, Spectrum Inspection Group Inc.
8345 Coyado StreetLas Vegas, NV 89123
Phone: (702) 269-6716

Have a question about homes for sale in Las Vegas? Contact us at 702-985-7654!

Las Vegas Real Estate Market Stats from September

Below are some interesting statistics comparing September of 2008 to September of 2009 for the Las Vegas real estate housing market:

While prices are markedly down 30 to 40%, sales volume has actually increased significantly and inventory has dried up, especially in the starting price ranges.

In September of this year Las Vegas foreclosure sales were 67.1% of the month’s resales, down from 68.4% in August, while absentee buyers accounted for a record 40.4% of September's sales, up from 40.2% in August. 53.8% of mortgage-financed purchases used FHA mortgages, up from 52% in August. The average median sales price for the same time period in 2006 was just slightly over $300,000.