If you follow the news, you’ve heard that Apple sold over 3 million iPads in the first four days of releasing their updated device. Just as a comparison, they sold 15 million in all of 2010 and just under 40 million more in 2011.
While the numbers are staggering, you may still believe you can walk into a store, give them $600 and get your iPad. The reality hits you as you approach an Apple store and see a wall of people waiting in line, standing three and four deep, trying to get close to a sales table.
The very opposite is true with Las Vegas real estate. There are no long lines forming outside homes for sale here. There are no visible signs of demand to give you a clue of what you’re up against. When someone tells you it’s hard to buy a home without competing against multiple offers and paying over list price, you’d certainly be skeptical.
After being bombarded with stories for years that Nevada is the number one state for foreclosures, most people are under the impression we’re lucky they’re here to buy. The headlines talk about low prices and people buying homes for $25,000.
That leaves me to tell you the truth, if I’m going to help you become a new homeowner or investor. You might be surprised at the amount of people who don’t believe me, though. Some people think I’m trying to pull a fast one on them. Maybe to create a sense of urgency or bump up the sales price for my own gain? Of course, none of that is true.
While every iPad is essentially the same, every piece of real estate is different – location, price, condition, amenities, return on investment – all these elements make a property unique. You can guarantee if you’re looking for something specific, there are other buyers competing against you for the same thing.
I invite you to learn the truth about buying real estate in Las Vegas, whether you’re looking for an investment or a home to live in, even if you have bad credit, I’ll cover it all. Are you ready? Can you handle the truth?
Too many buyers are not based in reality and this causes them a lot of frustration. I hope to dispel some of the myths about today’s Las Vegas real estate market.
Inventory and paying over list price
Our supply of homes is very low. When a new home comes on the market, within days we have multiple offers and requests for “highest and best” offers. The first time you’re told this, you’re not going to believe it and will likely submit a list price or lower than list price offer.
Sellers are looking for the highest “net” offer. This means the buyer who doesn’t ask the seller to pay for closing costs, a home warranty or repairs and offers over list price is in a better position to have their offer accepted.
What else helps you get a winning offer? Cash. If you have to finance, sellers are now asking that you waive your appraisal contingency. This means if you offer $150,000 and the home appraises for $130,000 – you’ll pay the extra $20,000 out of pocket instead of asking the seller to lower the price. That’s a big pill to swallow, yet we have buyers agree to this every day. Why? Because they keep losing out on homes and they need to move right now.
When you lose an offer on the home you really want, you’ll think the process is rigged and that the listing agent made some special deal with the buyer’s agent. It’s just not true.
Once the sale records, we find out that nine times out of ten, the winning offer was really better than yours. Sometimes buyers lose a deal over $400, sometimes $2,000. I always hear the same thing – I would have paid that! Learn from other buyer’s mistakes – if you really want the house, go all in and offer what you can truly afford with no regrets afterwards if your offer wasn’t accepted.
There is no foreseeable change in upcoming inventory over the next few months. It’s only going to get harder to find a home. If you’re out shopping and see a home you love, be prepared to write your offer immediately and put all your cards on the table.
Buy a new home from a builder
Drive down any street and new home communities are popping up everywhere. After years of intense competition from foreclosed homes, new construction is basking in the sun again. With amenities focused on energy savings and optimized floor plans, don’t overlook some great opportunities. Remember, you want to take us with you on your first visit to any model home community, otherwise we can’t represent you.
As I discussed in an earlier issue, the on-site agents (no matter how sweet they are) always represent the builder – they do not and cannot represent you or your best interests. It costs you nothing to have us represent you and negotiate on your behalf with a new home builder.
Realistic return on investment
If you’re an investor and you want to buy a rental property in today’s market, there are opportunities to achieve a return on investment (ROI) of 10% or more. Every week we identify the best choices throughout the valley – click HERE to see this week’s report.
The majority of rental properties have an ROI of 6-7% – which is terrific compared to putting your money in a savings account, money market or the stock market.
To get the highest returns, you’ll usually have to compromise in your choice of location and age of the home. We can help you find properties that offer a balanced approach to best fulfill your objectives and comfort level.
Properties owned by Fannie Mae (Homepath.com) and Freddie Mac (Homesteps.com) won’t accept offers from investors for the first 30 days they’re listed. Don’t waste time looking at these properties when they come on the market, most will be gone before you can put in an offer.
Get creative as the inventory disappears
For investors, consider 2 bedroom homes. Once the 3 bedrooms are gone, two bedrooms are a great option. They’re better than a condo because you’ve got an attached garage and usually a front yard, back yard and lower HOA fees than condos. Many two bedroom homes also have a den, which can be used as a bedroom or computer room. A two bedroom home in a prime location equals a three bedroom home in a remote part of town.
It’s cheaper to own than rent
Las Vegas is still one of the best places to buy instead of rent, click HERE for the study. This is great news for buyers – if you have good credit and a down payment. How cheap is it? For a $100,000 home with 3.5% down ($3,500) and paying your own closing costs ($3,500) – your monthly payment including principal, interest, taxes, insurance and HOA is usually $650/month. That’s for a 3 bedroom, 2.5 bath home built in 2005 or newer, in the Southwest. You can barely find a two bedroom condo to rent for $650/month today.
Financing available for bad credit
Buyers with stellar credit are able to get an owner-occupied loan for under 5%. 2nd home buyers and investors with stellar credit can get a loan for just over 5%.
We work with the one lender who can give you a mortgage after a short sale or foreclosure (if you qualify.) If you’ve had a short sale or foreclosure, you have to pay for that “event” to get a new mortgage. Lenders will require you to put down at least 20% or 25% and your interest rate will be closer to 10%.
The truth is there is nothing worse than a foreclosure, as it’s considered a complete disregard for the last mortgage you agreed to pay. If you want a new mortgage shortly after, the price you’ll pay is heavy. The good news is that after a few years, you can refinance to a “regular” rate and in the meantime can take advantage of today’s prices and the peace of mind that you own instead of being a renter. The alternative? Wait 7 years after your foreclosure to get a mortgage.
While you only have to wait 3 years (on average) after a short sale, many people want to buy now. This second chance financing is a terrific option for buyers who have the down payment to take advantage of the program.
If you bought a $200,000 home with excellent credit, with 20% down, you’d pay approximately $811 just for your mortgage principal and interest. The same house, still 20% down, one day after a foreclosure or short sale, your payment (principal and interest) will be approximately $1,404.
That’s a difference of less than $600/month for the ability to own a home immediately. The mortgage interest is tax-deductible and you can refinance in a few years. We’re lucky to have a local lender who is making this program available.
Waiving a home inspection
I urge each and every one of our clients to have any potential purchase inspected by a licensed home inspector. I’m asked, “If the home is being purchased as-is, what’s the point?” To discover potential safety risks, especially for your major systems – plumbing, electrical, structural (foundation and roof) and mechanical (heating, A/C, water heater). I have never had a buyer regret inspecting a home and rarely cancel a transaction due to the findings. On the other hand, I’ve watched buyers do their own inspection – turning on the water faucets and flushing the toilets. It’s the equivalent of playing the radio during the test drive of a used car and saying, “I’ll take it!”
Not buying a home warranty
I am truly amazed when someone says they’re not getting a home warranty. If you’re buying a pre-owned vacant or occupied property – for less than $550, you have one year of coverage to minimize your expenses for repairs that could add up to thousands of dollars. I have yet to have a client that did not use their coverage during the first year, which more than covers the cost of the warranty.
If you’re an investor, the home warranty company becomes part of your team, to help you efficiently manage any unexpected repairs and expenses related to your tenant’s occupancy. I can’t stress the importance of this coverage enough.
Mark Karten writes a weekly newsletter every Sunday. Sign up for your free subscription at TKGLasVegas.com.