Real Estate Contracts are Serious Business

I’ve been working with wonderful buyers that had their hearts broken recently when I advised them NOT to place an offer on the home of their dreams that they FELL IN LOVE WITH, was in their price range, met all their criteria, and could have been theirs.

It was a difficult decision all around.  We spent a great deal of time at the property and I could see and feel how much they wanted this house.  The listing agent gave me all indications that an offer from my client would be highly considered by the seller.  My clients were, to say the least, ECSTATIC.

It was late in the day, so they went home to think about their price, and I went to the office to review the listing information and a short sale addendum that was required for submitting offers to this listing agent.

That’s when my heart sank.  I knew I couldn’t let my buyers write an offer after reading the addendum that was required.

The listing agent was stepping outside the parameters of our standard contracts and was asking the buyers to sign an addendum that benefited the seller, and took away most of my buyer’s rights.  Since the agreement required a $10,000 earnest money deposit, I knew that this was NOT something I could allow my buyers to sign, and I confirmed this by seeking advice from my broker (as well as several other agents in my office.)

We all agreed and I went back to my buyers and discussed the addendum in detail, as well as the potential consequences of signing such a lopsided document.  Of course, the decision was theirs, and I recommended they consult an attorney if they elected to take the risk.  They chose to pass on the property, as much as they loved the house.

When the Las Vegas real estate market was at its height a few years back and prices skyrocketed, buyers signed documents that were not always in their best interest.  Now that the market is reversed, and we have low inventory,  buyers and sellers need to carefully review all documents before signing, and question those that may ask for fees or require that rights are waived.

When in doubt, seek the advice of a licensed attorney.

Las Vegas Home Inventory Continues to Decline

They say that sometimes things have to get worse before they get better. That’s what we’re seeing in the Las Vegas home market right now.

Available homes continue to decline and the number is at a historic low, with less than 5,700 single family homes, townhomes and condominiums in the Las Vegas, Henderson and North Las Vegas areas.  Where are the rest of the homes?  There are actually over 21,000 ‘on the market’ in Las Vegas, and 74% of these are UNDER CONTRACT!  Once under contract, you can still submit an offer on a home, but the odds of actually buying it are slim because someone else is first in line.  You’re a backup offer at that point, with zero guarantee of getting the home.  Do you want to write offers on these properties?  Probably not.

Unfortunately, the homes that are available are causing buyers to scramble, making offers sight unseen.  Multiple offers is the norm, and I mean MULTIPLE – 20, 30, 40 offers PER HOME.

My advice to buyers is simple. Stop. Breathe. Think before you make that offer.

No one ever absolutely, 100% needs to buy a home right now, this minute.  Yes, you want to buy one, and you want to buy a good one, and you want to beat out Mr. Smith and be the offer that is accepted.  It’s called competition, and we all love competition.

And we want to win.

Buying a home in Las Vegas is not a competition.  It’s a financial and family decision that needs to be thought through.  Before you write that offer on that house, be sure it makes sense for you.  Don’t allow current market conditions to make you compete, and possibly settle, for something that you may not really want.

Your real estate agent should be setting you up with searches for Las Vegas homes that meet your criteria.  When they come on the market, you will need to move fast.  But if you don’t get your offer in, and you don’t get that house, then be patient and try again.

There will always be more homes in Las Vegas to buy.  Even though there aren’t that many right now, it will change, as it always does.

Visit my Keller Williams website to search for homes.  You can call or email me for more information on the current market.

Yes, You Can Buy a Home in Las Vegas so Stop Renting!

Even if you don’t have enough for a down payment right now, and your credit isn’t the greatest, why aren’t you considering buying a home in Las Vegas?  There are ways to improve your credit, and there are programs available for down payment assistance.

Here is an example of a client that worked with me to buy a home, who had good credit, but very little down payment.

We found a cute two bedroom, two bath home with a one car garage in the Southwest area of Las Vegas.  The buyer offered $85,000 for the home, and the offer was accepted by the bank.

The buyer had qualified with a lender, who was able to offer her a Nevada DOWN PAYMENT ASSISTANCE program of $4,500 (paid back over 20 years at less than $35/month).  The buyer also received an FHA loan at 3.5% interest, as part of the program.

The offer included that the bank would pay 3% toward the buyer’s closing costs, which helped lower the amount out of pocket the buyer needed to come up with.  After all costs were included, the buyer paid LESS THAN $2,000 out of pocket to purchase the property.

The buyer’s monthly payment, INCLUDING PRINCIPAL, INTEREST, TAXES, INSURANCE, THE BOND PAYMENT AND HOMEOWNERS ASSOCIATION FEE is …

Wait for it …

Wait for it …

Ding, ding – $650/month

Of course, every case is different, and only a lender can review your information and determine if you are eligible.  If you can meet the following requirements, you may be eligible:

  • Minimum credit score of 620
  • Maximum income of $78,000 for one or two people
  • Must be a first-time home buyer (cannot have owned a home in the last three years)

Even if you don’t qualify under this program, you could be able to purchase sooner than you think.  It doesn’t hurt to ask and I’m here to help if you would like to consider buying instead of renting.

Visit my website to look for homes for sale in Las Vegas

Let’s Write an Offer and THEN See it, Okay?

This last weekend, I was working with a buyer that wanted to see a bank-owned home that recently came on the market.

The clients were there before me, peeking in the windows (wouldn’t you?).  I went over to the electronic lockbox, pointed my key at it, and retrieved the door key.

That didn’t work.  In any of the doors.

It was Saturday.  I needed to let my clients see the inside of the house, so I called the listing agent, only to get a receptionist that couldn’t help.  She told me the key couldn’t be updated until Monday. I really didn’t expect anyone to run right out and open the door, so I was fine with that, and my buyers understood.

The interesting part was that there were MULTIPLE OFFERS on this property that had only been on the market a couple of days.  Wait – so either someone stole and/or replaced the REAL key, or people are writing offers on properties SIGHT UNSEEN?

Yeah, let’s go with option #2.

Of course they are silly!  That is the latest ‘game’ we get to deal with in the Las Vegas real estate market (previously used during the big price boom).  Agents don’t show properties – they write offers on properties and show them AFTER their offers are accepted.

Duh.

I’m not a fan of this practice, because I think you should actually take your clients to look at what they may be plunking their hard earned dollars on.

But do they have anything to lose?

Not really.

The current lack of inventory is causing some to play the numbers in a new way.  It’s easier to sit down and write 10 offers than it is to drive around and show 10 houses, of which many may be under contract before you get to the office to write the offer to begin with.

Of course, some offers that are accepted using this technique end up cancelling because the buyer then goes to see the property and doesn’t like it.

I personally think it is better to have a buyer excited about their offer being accepted on a house they’ve ALREADY SEEN, than one where they are excited and then disappointed afterwards by a house they SHOULD HAVE SEEN FIRST.

Nuff said.

Las Vegas Homes for Sale Drops Nearly 50% Since November, 2011

As of today, there are just over 6,400 homes that are not under contract and available for sale in the Las Vegas real estate market. Back in late November, we had over 12,000.

That drop is significant and is causing a lot of frustrations for buyers looking for properties. They are encountering multiple offer situations on all the best homes and are having to run out immediately when a property comes on the market to have the best chance of getting the home they want.

Reviewing the market conditions, there are two situations that I see that are causing this drop in available homes:

  • Nevada legislators passed AB 284 that went into effect in October, 2011, forcing banks to produce original documents before they could file notices of default and foreclose on properties in Nevada. Banks have taken a few months to figure out how to work through this, and are just now getting back up to speed. Bank filings during the last few months have decreased well over 90%, reducing the number of available bank-owned homes on the market.
  • As bank properties became less available, Las Vegas short sale homes became the focus.  However, since the properties can take time to actually sell, buyers have been placing offers on more than one and ‘locking up’ several properties per buyer.  I believe this has caused a temporary reduction in inventory that will change as the time to process short sales with banks decreases.

In the meantime, inventory is low and buyers are panicking.  In my opinion, this will change over the next several months and we will see more inventory.  Educating Las Vegas home buyers is essential to ensure they understand how to buy in this market.

If you or someone you know is interested in purchasing a home in Las Vegas, it is a great time to buy, a little patience is necessary, and I’m here to help.

Visit my real estate site to search for homes.

Las Vegas Real Estate Market Report – March 28, 2012 – Buyer Frustration

“It’s already under contract.” Those four words are used frequently in our Las Vegas real estate market now.

That’s because 69% of all homes that are listed in our Multiple Listing Service (MLS) are just that, under contract. Yes, there are nearly 22,000 homes ON THE MARKET, but less than 6,700 are actually AVAILABLE.

As a buyer in this market, finding the right home isn’t easy for several reasons:

  • Many properties end up with multiple offers, and the best properties have offers the very first day they hit the market.
  • 60% of the Las Vegas homes for sale are short sales, which take a significant amount of time to purchase. Because of this, many real estate agents tend to ‘lock up’ two or three homes for one buyer, placing the property in ‘contingent’ status and making it no longer available. This is done because it is difficult to tell what may happen when the banks review the offers on these homes, or how long each home may take to get processed.
  • In October, the Nevada Legislature passed AB284, which is a bill that forced banks to have proper documentation in order to file notices of default and foreclose on homes. This dried up the foreclosure market temporarily, which is why there are so few bank-owned homes for sale in Las Vegas now. In the last several weeks however, the banks have started their filings again, so this should change soon.

Las Vegas is heading toward the busy season for home buyers and therefore the competition is going to be high. Though the number of available homes is small now, it should increase over the next several months as banks begin foreclosing again and some of the short sales get released back into the market, giving buyers more choices.

If you, or anyone you know, is considering purchasing a home in Las Vegas, I’m here to help.

Which Websites Accurately List Las Vegas Homes for Sale?

The majority of individuals and families that are looking for homes for sale in Las Vegas (and elsewhere of course) start on the Internet. They search places like realtor.com or zillow or trulia, and many other websites. Or they’ll do a Google search for something like “Las Vegas homes for sale” or “Las Vegas bank homes” and so forth.

Once they settle into a site, they peruse it for a while, looking at all the great photos and details on the properties. If they find something they like, they might call, or visit a website for a real estate agent to get more details.

And then they find out the Las Vegas home they are looking at is ‘contingent’ or ‘pending’ and they can’t actually buy it.

Initially, it’s not a big deal.

Until this happens over and over.

And over.

Why?

The answer is simple. The media tell us that Las Vegas has a lot of homes for sale. What they fail to mention is that most of those are already under contract! So of the 22,000 or so homes in Las Vegas for sale, only about 35% of those are really available (as of this writing).

So how do you figure out which ones you can actually put an offer on and potentially BUY? The best thing to do is visit a website where you KNOW the properties are actually AVAILABLE as of the day that you are there. Most sites do not do this.

As an example, I visited each of these sites as I wrote this article, and compared the listings to our Multiple Listing Service, where I have access to REAL-TIME data that tells me the status of a property. Here is what happened:

Realtor.com – You get all homes that are on the market, and once they sell and the deal is CLOSED, they no longer show up on here. However, you do see all homes, including contingent and pending properties. There is a lag time of 24-48 hours from the time a change in status happens to a property before it shows up here.

To determine which ones are available, when you select a property, below the photo you will find a bunch of tabs including ‘overview,’ ‘photos,’ ‘maps,’ etc. In the ‘overview’ tab, scroll down to where it lists Property Features and the first item shows ‘Status.’ That is where it tells you if there are any offers on the property. If it says ‘Active-Exclusive Right’ it is probably available. Anything else, such as ‘Pending Offer’ indicates that either the property is already under contract, or you will be competing with others with your offer. This is your BEST site choice of the large real estate websites. However, it is not as accurate as some sites currently offered by local real estate agents.

Zillow.com – Unfortunately, after going through all the details on homes listed for sale, this site does not tell you if a property is already under contract. The first few homes I found were either under contract or already sold. This is because agents can post their own listings, and if they don’t update them independently, you never know if it is still available. Though I know many people like to use the ‘Zestimate’ for comparison purposes, the site itself does not give you a realistic look at what you can buy.

Trulia.com – Another site that has lots of fun information, but fails to let you know if a property is really available. After clicking around a bit, getting pop ups and being directed to other sites for some properties, the frustration level definitely increases.

homes.com – The very first listing I pulled up on this site was ‘expired’ – meaning it wasn’t even on the market and never sold when it was. Again, I wasn’t able to locate anything that showed me the ‘status’ of a property. Serious buyers are not going to get the information they need on current properties very easily here.

karolsellslasvegashomes.com – of course I am going to showcase my site at this point. Wouldn’t you if you were writing a blog about real estate in Las Vegas and were also a Realtor?

My site does require that you register at some point in order to see the properties and the addresses. HOWEVER, the most important point to note on my site is that it ONLY SHOWS AVAILABLE HOMES. It is updated daily and REMOVES properties that go under contract, expire or are withdrawn. That means you are seeing ONLY HOMES YOU CAN BUY!

Isn’t that what you’re looking for?

Thank you for reading my blog. If you, or someone you know, is looking to purchase a home in Las Vegas, North Las Vegas, Henderson or Boulder City, please contact me for more information about our current market. I’m here to help.

Las Vegas Homes search

Las Vegas Homes search

Market Data Report – March 11, 2012

As of March 11, 2012, there are 21,903 properties for sale in the Multiple Listing Service (MLS).  This includes single family homes, condominiums and townhomes in the Greater Las Vegas area, North Las Vegas and Henderson.  This includes traditional equity sales, Las Vegas short sales and bank-owned/foreclosed homes.

65% of those listings are ‘under contract,’ leaving only 7,614 properties that are available.

MLS
Active Listings by Price
Single Family, Condos, Townhomes – Area 101-702
March
11, 2012

UNDER
CONTRACT
Total

Available

%
Under
Price
All
Types
Listings
Contingent
Pending
Contract

$0-$50K


2261

617

1328

316
73%
$50K-$100K

6879

1936

4203

740
72%
$100K-$150K

5476

1702

3270

504
69%
$150K-$200K

2966

1058

1637

271
64%
$200K-$250K

1488

623

740

125
58%
$250K-$300K

391

361

64

816
52%
$300K-$350K

485

238

213

34
51%
$350K-$400K

314

175

110

29
44%
$400K-$450K

225

133

81

11
41%
$450K-$500K

150

94

47

9
37%
$500K-$600K

186

128

51

7
31%
$600K-$700K

116

78

36

2
33%
$700K-$800K

83

57

21

5
31%
$800K-$900K

76

55

21

0
28%
$900K-$1M

54

40

12

2
26%
$1M
& Up

328

289

30

9
12%
Total

21903

7614

12161

2128
65%
Information
compiled by Karol Lucan from GLVAR MLS service. Deemed accurate but not
guaranteed.

What the numbers mean to you as a buyer?

The statistical data shows that the MAJORITY of the market is NOT AVAILABLE TO BUYERS.  Once a home is ‘under contract’ it means that someone else is attempting to buy it and the seller and buyer have agreed to specific terms.  Being ‘contingent’ means that there are still things that need to happen before the property can be sold, such as inspection, an approval from the bank on a short sale, or the buyer getting fully approved for financing, among other things.  A ‘pending’ property means that all the contingencies are over, and it’s just a matter of time until the property officially sells.

As a buyer, you only want to see the homes that you can actually buy, right?  So, why would you want to waste your time looking at contingent or pending homes?  You wouldn’t.  But you are doing this every time you search for property on your own, and you very likely don’t know this.

Properties that you may be searching for on other websites, such as Zillow, Trulia, even realtor.com will INCLUDE the contingent and pending homes!  You will want to check the ‘status’ section of each individual listing.  The process can be tedious, and as a buyer, I’m sure you’d rather be looking at the photos and making appointments to see the properties.

Your solution?  Contact me and I will create a search that will send you ONLY homes that are listed as available! 

Because of the current market conditions, here’s what you’ll want to be sure to do and know when buying a home:

  • If you are going to need financing, you MUST get pre-approved from a lender BEFORE you can place an offer on a home.  Check my list of partners for several great lenders, or call/email me and I’ll be happy to send you a list.
  • DO NOT make any large purchases after your pre-approval, as this can affect your loan application
  • Have your real estate agent explain the entire buying process to you BEFORE you start looking for a home.
  • Once you find a home that you like, review the comparable area sales with your real estate agent and make a fair offer.  In many cases, you may be competing against other buyers for the same property.
  • Be patient when purchasing a short sale.  They take time and if you are in a hurry, you may be better off looking for a traditional sale or bank-owned property

These are just some of the basics.  Call or email me so we can schedule your buyer consultation soon.

Visit my website to search all Las Vegas, North Las Vegas and Henderson homes for sale

My Real Estate Absorption Rate Formula

The standard calculation for absorption rate takes the number of homes that are available and divides that by the number of homes sold over a period of time to determine how long it takes the market to ‘absorb’ (sell) all the properties.  That part sounds fine and makes perfect sense.

To explain it – if we sell 100 homes per month and there are 1,200 homes on the market, it would take 12 months to sell all of those homes.

Of course you are wondering why I would even bother bringing this up and arguing a standard method of calculation.  If you look around and read the explanations of absorption rate, one of the key phrases that you will read frequently is that ‘absorption rate is not an exact science.’  That’s why I’m challenging the methodology of determining the calculation.

The part that concerns me is the definition of the ‘available’ homes, which is why I’m writing this blog. I don’t agree that a home is ‘available’ if it isn’t sold.  Homes that are ‘contingent’ and ‘pending’ are under contract and at various stages of the sale process.  No, those aren’t sold, but they technically aren’t available either. My belief is that these homes don’t fit in either category.  If they sell, they count toward sales.  If the deal falls apart, they go back into available inventory.  So, they don’t count while in limbo.

As a real estate professional, I do not take my clients out and show them homes that are currently under contract.  I would venture to guess that most agents feel the same way.  Why waste the time of the client, and possibly show them a home that they fall in love with, only to tell them that it is under contract and they can’t have it unless the other buyer backs out?  Yes, in some cases this does happen, but it isn’t significant enough to consider these properties available for sale.  Don’t you agree?

The homes that are under contract exist, and there are many statistics that we refer to these properties for – but absorption rate should put these properties in a neutral category, where they don’t count for either side of the equation.

As of this writing, there are approximately 25,000 homes in Las Vegas that are available, contingent and pending.  Of those, only 12,000 are not under contract.

Those 12,000 are the ones I’m showing my clients, and the ones that my sellers are competing against for offers. When I’m out with my buyers and they tell me they want to make a ‘low’ offer on a property to get a ‘deal’ – that is when the fictional absorption rate distorts what I need to tell them.  With 25,000 homes on the market, they believe they can offer 10-20% below list price right?  That’s a lot of homes and that is what the media is telling them.  Yet they can really only choose from 12,000 if they want to get an accepted offer and be under contract to get to a closing.

In the Las Vegas real estate home market right now, homes are selling for 96-99% of list price and it is a Seller’s Market, if you use my calculation and leave out the contingent and pending homes.  If you include the under contract properties, it’s somewhat of a neutral market.  Yet when we look at the final sales prices of homes, closing at 96-99% of list price, it supports the Seller’s market theory, which I determine based on absorption rate using only available homes.

The skewed absorption rate and ‘available’ homes information that the media reports makes it challenging to explain to my buyers that the Las Vegas home market isn’t what they think and that the offers they submit must be reasonable.

Those ‘25,000 homes on the market’ stick in their head.

For a while.

Then they find a great little house, write an offer, and what happens next – we get a notice that the property is in a ‘multiple offer’ situation.  Reality finally sinks in after a few of these situations.

This is what is ACTUALLY HAPPENING, and I have many buyers that can confirm that this is what they are experiencing.

Bottom line – there are only 12,000 homes available, in my opinion.  That is the number I work with every, single day.  That is the number that is important to my buyers and sellers.  That is the number that determines where my sellers price their properties, and how much my buyers are willing to offer. It doesn’t matter that there are another 13,000 homes out there that are under contract because my buyers can’t have them.

Therefore, my absorption rate calculation will leave all those Little Houses in Limbo where they belong, until they either sell or come back on the market.