Nevada leads the nation with the highest percentage of negative equity properties according to the First American Core Logic 4th Quarter 2009 Negative Equity Data Report released 2-23-10. More than 70% of mortgaged properties in Nevada are in a negative or near-negative equity position.
Negative Equity (“underwater or upside down”) refers to the fact that the borrower owes more on their mortgage than the current value of the property. Negative equity occurs due to a decline in value, an increase in mortgage debt or a combination of both.
The following chart shows the five hardest hit states (Nevada, Arizona, Florida, California, and Michigan). The average “underwater” mortgage in Nevada is over 50% negative equity.
Here’s an excerpt from the report:
Negative equity continues to be concentrated in five states: Nevada, which had the highest percentage negative equity with 70 percent of all of its mortgaged properties underwater, followed by Arizona (51 percent), Florida (48 percent), Michigan (39 percent) and California (35 percent). Among the top five states, the average negative
equity share was 42 percent, compared to 15 percent for the remaining 45 states. In numerical terms, California (2.4 million) and Florida (2.2 million) had the largest number of negative equity mortgages accounting for 4.6 million, or 41 percent, of all negative equity loans.The rise in negative equity is closely tied to increases in pre-foreclosure activity and is a major factor in changing homeowners’ default behavior. Once negative equity exceeds 25 percent, or the mortgage balance is $70,000 higher than the current property values, owners begin to default with the same propensity as investors.
Of the over 47 million homeowners with a mortgage, the average loan to value ratio (LTV) is 70 percent. More than 23 million, or 49 percent of all homeowners with a mortgage, have at least 25 percent equity in their home and over 12 million have at least 50 percent equity in their home.
Here is a real-world example illustrates the severity in Las Vegas, Clark County. Borrower / homeowner owes a total of $325,000 on a first and second lien and property is currently valued at $160,000.
If you are a Las Vegas area homeowner facing a potential short sale of foreclosure,
contact Kathryn Bovard today for a no obligation consultation to discuss your options.
702-348-7191
The Las Vegas Real Estate Market Condition Report for January 2010, courtesy of Nevada Title Company with chart breakdowns of short sale and REO (Bank-owned) closings is presented here for your review.
The trend continues to show an increase in successful short sale closings. In January 2010, short sales accounted for 22% of all closings (539 of 2,450 single family residential closings were short sales).
Overall, the supply count remained steady while demand backed off 10% from the previous month. Although supply is relatively tight, especially for REO (58% of demand/17% of supply), prices continue to show weakness for both Short Sale and Standard offerings (42% of demand/83% of supply). While median price remains soft and continues to decline, average price has stabilized and is increasing marginally. In the preceding 60 days, 32 properties closed at greater than $800K.
This implies the sale of higher priced properties is occurring with increasing frequency.
Declines in demand may be associated with the holiday cycle, however, uncertainty about the demand schedule is warranted by the simultaneous end of favorable government programs, low consumer confidence, persistent decline in REO inventories, and entry into the spring cycle.
January 2010’s total is a 17.3% increase over January 2009, and a remarkable 165% increase over January 2008’s total SFR units of 983.
Are you a Las Vegas Homeowner facing a possible foreclosure or considering a short sale?
The Serra Group is here for your confidential, no obligation consultation
regarding your options – there are solutions! Call Kathryn at 702-348-7191.
Tip #1 – Your Short Sale Exit Strategy: Organize the Basics
Let’s face it, one of the main emotional reasons why a homeowner decides to sell their home as a short sale is to get closure. Initially, the financially tangible reasons are more obvious to them – drastic and permanent home equity loss, ballooning mortgage payments, decreased income, complete job loss, costly health issues, job transfer, and divorce to name the most common. Such plainly obvious life events are the root causes and motivation for a homeowner to pursue a short sale as a proactive means to an end. It is how they will find closure from an unexpected and difficult burden so they can get on with their lives.
All homeowners who choose to sell their home and are faced with a short sale must actively organize basic resources.
- Create a short sale file…or box or tote or bin.
- Any real estate transaction requires a lot of documentation and a short sale is no exception. In fact, a short sale demands additional paperwork that must be organized and accessible. You need to treat this documentation with as much reverence as your tax documents. You should know where the file is at all times and it should remain easily accessible even after you sell your home and move. You will need this file when filing for future taxes and potential legal matters that may need to be handled long after the sale. Save yourself unnecessary heart burn and late night anxiety attacks with some basic organization.
- Assemble a team of trusted advisors…including a REALTOR®, attorney(s), and accountant.
- Sellers need an experienced REALTOR® or team of real estate agents that are experienced in understanding contracts, negotiations, and disclosures related to short sales. Of course, that’s not all, they also need to be great communicators with buyer’s agents, the seller’s banks, naturally persistent, and possess a lot of intestinal fortitude. In addition, sellers need to have a trusted tax advisor and an attorney (or two) experienced in short sale/foreclosure law, real estate law, and possibly bankruptcy law. Each type of professional has their own unique expertise in helping a homeowner navigate the short sale process before and after the home is sold. There are specific laws and potential liabilities associated with short sales so having a qualified team of advisors is imperative to guide a homeowner through this very dynamic and life changing action.
In future short sale tips I will outline what documents must be maintained in a short sale file and how REALTORS®, attorneys, and accountants support a homeowner in the short sale process.
Are you a Las Vegas Homeowner facing a possible foreclosure or considering a short sale? The Serra Group is here for your confidential, no obligation consultation.
Contact Stephanie at 497-7705 or stephanie@realtyaccess.net to proactively discuss options for your future.
Are we starting to see signs of recovery in the local Las Vegas housing market?
The Greater Las Vegas Association of Realtors (GLVAR) released its local housing statistics for December 2009 with some interesting findings for the year. To read the full report, download this PDF file: GLVAR_December2009_Housing Report (released 1-8-10)
According to GLVAR, sales of existing homes in Las Vegas were up 64% in 2009. GLVAR reported 46,879 local housing sales in 2009. That represents a huge spike from 28,618 total sales in 2008 and trails only the 71,963 homes sold during the record year of 2004. The increasing sales continue to be driven by low prices. GLVAR reports that the average single family home sold in the area in December 2008 was $204,000 in December 2008. By December of 2009, that number had fallen to $165,000.
December, 2009 saw a 9% increase in sales compared to November. 4,196 housing units sold in December alone compared to 3,843 sales in November.
One statistic that particularly stands out the in the report is that 67 percent of all current pending sales in Las Vegas are short sales – 8,935 out of 13,406.
Other recent press on the Las Vegas Real Estate Market:
Las Vegas Real Estate Posts 2009 Positives Despite Recession (1-11-10/ DSNews.com)
Las Vegas Home Sales Improve in 2009 (1-8-10 /LasVegasNow.com)
December 2009 Las Vegas Market & Short Sale Report
By · CommentsThis Market Condition Report is courtesy of Nevada Title Company:
Overall Months Supply is 2.8 and rising at a very slow rate. The market continues “tight” overall with most of the supply/demand constriction centered in REO with 59% of demand and only 20% of supply. The percentage of the market taken by REO is declining at an average rate of about 1.8% per month. Overall, supply remains unchanged while demand declined slightly.
Prices, which were holding steady, have resumed their decline. Expect closings to remain rather steady in the current range. As far as overall prices are concerned, continued weakness is the most likely outcome. In all categories (REO, Short and Standard), current pending price is less than current closing price signaling impending price declines in the near term. The reader should take note that current Months Supply is tight, thus it is reasonable to expect rising prices. The current negative trend in price, which is running counter to supply/demand, is likely due to conservative standards applied by appraisers versus current market realities.
As a note, 34% of all closings are cash, suggesting a high level of investor participation in the current market.
Short Sale supply exceeds Short Sale demand by a factor of 6.8 (see Months Supply). Months Supply is declining in very small stepson a monthly basis. Market Speed is slow and Percent Selling depressed, while escrow inventory remains at high levels. Observe that CDOM is elevated when compared to REO/Standard. These factors continue to support anecdotal reports of an inefficient closing process. Short Sale prices are currently steady, however, future price declines are expected (see Median In Escrow Price).
On November 30, 2009, the Treasury Department released guidelines and forms for its new Home Affordable Foreclosure Alternatives Program (HAFA). HAFA is part of the Home Affordable Modification Program (HAMP).
Let’s discuss some of the key points outlined in these new guidelines and try to clear up misconceptions:
- Not all Loan Servicers have to follow these guidelines! In fact, it applies only to Servicers who have signed agreements to participate in HAMP are also required to comply with HAFA. A list of servicers participating in HAMP is available at MakingHomeAffordable.gov.
- HAFA applies to loans not owned or guaranteed by Fannie Mae or Freddie Mac, which will issue their own versions of HAFA in coming weeks.
- Complements HAMP by providing a viable alternative for borrowers (the current homeowners) who are HAMP eligible but nevertheless unable to keep their home. Visit MakingHomeAffordable.gov to find out if you may be eligible for a HAMP loan modification. Basic eligibility criteria:
- The property is the borrower’s principal residence
- The mortgage loan is a first lien mortgage originated on of before January 1, 2009
- The mortgage is delinquent or default is reasonably foreseeable
- The current unpaid principal balance is equal to or less than $729,750
- The borrower’s total monthly mortgage payment (principle, interest, taxes, insurance and HOA fee) exceeds 31 percent of the borrower’s gross income
- Uses borrower financial and hardship information already collected in connection with consideration of a loan modification.
- Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds). Hopefully this will speed up the lengthy process everyone has been experiencing for final short sale approval.
- Requires borrowers to be fully released from future liability for the first mortgage debt (no cash contribution, promissory note, or deficiency judgment is allowed). This would be some of the best news for Nevada Homeowners!
- Uses standard processes, documents, and timeframes/deadlines. We have not seen the forms / standards as of yet…
- Provides financial incentives: $1,500 for borrower relocation assistance; $1,000 for servicers to cover administrative and processing costs; and up to $1,000 for investors for allowing a total of up to $3,000 in short sale proceeds to be distributed to subordinate lien holders (on a one-for-three matching basis).
- The program does not take effect until April 5, 2010, but servicers may implement it before then if they meet certain requirements. The program sunsets on December 31, 2012. To read the entire Supplemental Directive 09-09 – Introduction to Home Affordable Foreclsoure Alternatives
Are you a Las Vegas Homeowner facing a possible foreclosure or considering a short sale?
The Serra Group is here for your confidential, no obligation consultation
regarding your options – there are solutions! Call Kathryn at 702-348-7191.
What is a Short Sale?
- A Short Sale is when the home sold for less than the debt against the property and the lender(s) agree to accept a discounted payoff. The lender agrees to accept less than what is actually owed on the mortgage.
- A Foreclosure is when the lender seizes the home that the loan is secured by through the foreclosure process, which is notice of acceleration of note, notice of default, notice of sale, and then actual forced sale of the home known as a ‘trustee sale.’
What are the tax consequences?
- Short Sale & Foreclosure….all debt forgiven results in 1099C debt. Whether it is a primary or rental property makes a difference as to how much tax you may pay. Simply stated, if you get released from debt the IRS sees that as income to you, just like you got a pay check. See this publication from the IRS http://www.irs.gov/pub/irs-pdf/p4681.pdf on “Canceled Debts Foreclosures Repossessions and Abandonments.”
- You may qualify for an exemption under the Mortgage Forgiveness Debt Relief Act – visit this IRS article for more information: http://www.irs.gov/individuals/article/0,,id=179414,00.html
What are the Credit Issues?
- Foreclosures and Short Sales will appear on your credit history and affect you for up to 10 years. This may affect a.) employment or b.) security clearance, etc. Rumor is that a short sale is better than foreclosure for these items? There is no evidence to back this up. Arguments on both sides are out there. We do know that there is a specific spot on the credit reports for foreclosure, whereas short sales are reported differently. We have also seen examples of the credit score being impacted based on the total number of missed payments.
What is the liability for the Debt AFTER the foreclosure or short sale?
6 Months
- Foreclosure – The foreclosing lender has the right to sue the home owner after the foreclosure for the difference between the amount gained at the ‘trustee sale’ discussed above and the balance of debt owed. The lender has only 180 days (six months) from trustee sale to file, after that the owner is no longer liable.
6 Years
- Foreclosure 2nd Deeds – All deeds that are junior to the foreclosing lender have different rights than the foreclosing bank. These lenders are called ‘sold off junior lien holders’ and they have six (6) years to recoup their debt. That means you get foreclosed on November 12, 2009, these junior lien holders have until November 12, 2015 to sue you.
- Short Sale – All lenders that agree to a discounted payoff and ‘release the lien’ from the property to allow the short sale are no longer ‘secured lenders’ and are now ‘sold off junior lien holders’ as described above and have six (6) years to sue you. UNLESS, the short sale is negotiated so the lender releases the homeowner from any future liability as to the forgiven debt. Many lenders are taking a hard stance on this issue and NOT fully releasing and satisfying the forgiven debt.
Each short sale has it’s unique considerations and situation. That is why it is so critical for homeowners to work with an experienced and knowledgeable short sale real estate professional.
Are you a Las Vegas Homeowner facing a possible foreclosure or considering a short sale?
Darren Welsh, corporate attorney for Prudential Americana Group Realtors, recently posted on his Nevada Residential Real Property Law blog advice on the specific language regarding release and full satisfaction of the forgiven debt in a short sale. The Serra Group is experienced in the listing and successful closing of short sales. We strive to negotiate a full release and forgiveness of debt on your behalf and advise consulting with a qualified attorney if necessary. We also structure the purchase agreement in such away that you will have the opportunity to weigh your options and should a full release and satisfaction not be possible, to allow you to cancel the sale without further recourse from the buyer.
Here is a re-posting of Attorney Welsh’s blog regarding release language in a short sale:
Advise the seller to seek legal counsel. Nevada is a deficiency judgment state, which means a seller can be sued after they have been foreclosed upon. A second can pursue a foreclosed owner for six years. By performing a short sale, instead of foreclosure, the one-action rule and the deficiency protections are no longer applicable. The Seller in a short sale will have a tax consequence. Sellers in a short sale may also be sued by the lender for breach of non payment of a contractual obligation. The statute of limitations in Nevada for breach of contract is six (6) years.
The following are some examples of language used by the lenders to deal with debt. Some are good, some not so good, some BAD.
Example 1 – Not GOOD
In this one, the lender states, “may pursue a deficiency…” The seller may be sued for up to six (6) years.
BAC Home Loans Servicing, LP and/or its investors may pursue a deficiency judgment for the difference in the payment received and the total balance due, unless agreed otherwise or prohibited by law, if the short sale closes on the loan referenced above. In addition, if this loan is covered by mortgage insurance, the mortgage insurance company may reserve the right to pursue the seller for the deiciency based on the terms of the mortgage insurance policy.
Example 2 – GOOD
In this one, the lender states, “settle your account…”
This letter is to inform you that Chase Home Finance LLC has agreed to your request for a Short Sale, and will accept a minimum of $$$$$ to settle your account and release the lien(s) on the above-referenced Property.
Example 3 – GOOD
In this one, the lender states, “will be charged off and no additional payment will be required…”
Our Customer(s) agrees that upon the posting of the agreed upon Short Sale amount, the remaining loan balance, if any, will be charged off and no additional payment will be required. Please note a $0.00 balance will appear on the Customer’s file with the credit bureau as “Account legally paid in full for less than the full balance.”
Example 4 – GOOD
In this one, the lender states, “full and final satisfaction on the first mortgage …”
This letter will confirm our acceptance of the short payoff on the above referenced property. We agree to accept the proceeds generated by the $$$$ “as is condition” purchase as full and final satisfaction on the first mortgage indebtedness on the above referenced property.
Are you a Las Vegas Homeowner facing a possible foreclosure or considering a short sale?
This is the latest Las Vegas Real Estate Market Report from www.NARREIA.com (National Association of Residential Real Estate Investment Advisors). For the week of December 2, 2009, data is obtained from the Greater Las Vegas Association of Realtors MLS.
Single Family Residence (SFR)
- Available – 8,478 (-110 , Last Week 8,588)
- Under Contract – 11,436 (-223 , Last Week 11,659)
- Days of Supply – 22 (+0 , Last Week 22)
- Short Sales – 10,704 (+8 , Last Week 10,696)
Condominiums and Town Homes (CONDO/TH)
- Available – 1,943 (-19 , Last Week 1,962)
- Under Contract – 2,702 (-89 , Last Week 2,791)
- Days of Supply – 22 (+1 , Last Week 21)
- Short Sales – 2,645 (-19 , Last Week 2,664)
Combined SFR + CONDO/TH
- Available – 10,421 (-129 , Last Week 10,550)
- Under Contract – 14,138 (-312 , Last Week 14,450)
- Days of Supply – 22 (+0 , Last Week 22)
- Short Sales – 13,349 (-11 , Last Week 13,360)
Here is the latest Las Vegas Real Estate Market Report from www.NARREIA.com (National Association of Residential Real Estate Investment Advisors). For the week of November 18, 2009, data is obtained from the Greater Las Vegas Association of Realtors MLS.
Single Family Residence (SFR)
Available – 8,470 (+143 , Last Week 8,327)
Under Contract – 11,812 (+12 , Last Week 11,800)
Days of Supply – 22 (+1 , Last Week 21)
Short Sales – 10,649 (+117 , Last Week 10,532)
Condominiums and Town Homes (CONDO/TH)
Available – 1,970 (-4 , Last Week 1,974)
Under Contract – 2,790 (-16 , Last Week 2,806)
Days of Supply – 21 (+0 , Last Week 21)
Short Sales – 2,643 (+2 , Last Week 2,641)
Combined SFR + CONDO/TH
Available – 10,440 (+139 , Last Week 10,301)
Under Contract – 14,602 (-4 , Last Week 14,606)
Days of Supply – 21 (+0 , Last Week 21)
Short Sales – 13,292 (+119 , Last Week 13,173)
