Vegas Crazy

Written by Jim the Realtor

October 14, 2009

Hat tip to my brother-in-law for contributing this story about the market in Vegas!

http://www.cnbc.com/id/33310096/

On the first day, Katie and her husband saw 13 homes.

Only three were anywhere close to move-in condition, despite the fact that all of the homes were built in 2005 or later. All were foreclosed properties. “People find out a year before they’re ever kicked out, so what do they do for that year?” says Katie. “Completely destroy their homes.”

I know we’ve already heard about this, as had Katie, but the destruction was even beyond her expectations. “There’s no cleaning that would help.” There was dirt rubbed on the walls, graffiti, holes in the walls and garbage deposited inside the holes. The smell? “I couldn’t get past it.” Obviously there was no hardware on the doors and no appliances, kitchen cabinets, stovetops…whatever could go went. 75 percent of the homes she went into were an instant no.

Then……

“We went to a home that had been on the market for one day, and the key was stolen out of the lock box. Our Realtor said immediately, ‘You want this home.’ She told us another Realtor had stolen the key because they wanted their client to get it. So what did my Realtor do? She broke in. And sure enough this was the home we fell in love with. It was on for $132,000 so we decided to be really aggressive and offered $160,000, plus we had government backing on our loan. Well our Realtor called that night and said, ‘You’re not going to get the home. They got 30 offers and half are cash offers, so the bank is not even going to look at you.’ The banks just want the cash to unload these places.”

 

37 Comments

  1. Rob Dawg

    Jim, how does it make you feel to see other realtors doing this? I kinda waffle between anger and resignation. It’s so wrong. It was wrong on the upside and it is wrong now. Is there hope?

  2. Jim the Realtor

    Is there hope?

    Judging by what’s happened to the market in the last 6 months, I’d say no, there is no hope, short of absolute collapse.

    This morning someone was telling me the story of their grandparents coming out of the Depression. They were so humbled by the experience that they never took another risk the rest of their life.

    But that hasn’t happened this time around, at least not yet on a mass scale. The Dow is back to 10,000 and people are buying homes like crazy.

    Specifically though, I was hoping that the last 3 years would have taken out most of the realtors, and humbled the rest.

    Yet many or most agents are still brazen and defiant about their role in the bubble, and have no qualms about participating in the abuse. I don’t run into any realtors taking the high road, except the occasional who comment here.

  3. shadash

    All thanks to TRAP

    Investors are buying properties because they know banks don’t want to flood the market. If banks weren’t given our tax dollars to stay in business and just liquidated assets this wouldn’t be happening. Deadbeats wouldn’t be living in a house they’re not paying for FOR A TRUCKING YEAR! Banks would be trying every trick in the book to get deadbeats out asap and sell the property before prices fall further.

  4. sdnerd

    Maybe I’m wrong here, but this is how I’m seeing it.

    If you are looking on the lower end if you aren’t bringing all cash then you are probably going to be buying from a flipper. Don’t kid yourself.

    If you are in the FHA limit range, up to ~700-800K you are looking at serious competition and bidding wars. Get ready to compete.

    If you are in the high end (1M plus) I’m not sure what exactly is going on, but it certainly seems there is a whole lot of inventory. I’m guessing there aren’t many flippers or bidding wars here, but clearly the price corrections haven’t been ‘right’ yet. Enjoy touring lots of nice houses.

    So what, if anything is the sweet spot?

    Is it in the just-beyond FHA limit range of $750-900? You need a serious DP here, so you aren’t competing with much funny money. Flippers are taking on some pretty serious risk in this range as well.

    The rules and game have changed, and it doesn’t appear they are going back at least anytime soon.

  5. Former RB Resident

    I’ve said it before and I’ll say it again: Foreclosure comps aren’t necessarily legit comps. When many, many, many of them are damaged or simply neglected, you get the feeling that the market is about where those comps are. But, then you get one that’s a traditional sale and it might be more, or you find the random REO that’s not torn to pieces and its a different price.

    I personally would never buy an REO, except possibly a rental that was never owner-occupied, without a big warranty, an inspection and a bunch of other conditions that I wouldn’t get.

  6. Charlene

    It’s really sad to hear people are trashing their homes prior to foreclosure. Why get mad at the bank when they got themselves into the situation? It shows very little respect for everyone – especially themselves.

    It’s interesting that the realtor in the article stopped paying her own mortgage.

  7. MB Mike

    “No cleaning that would help”.
    Are you kidding me? Tell you what….I’m thinking that dirt, grafitti, holes-in-walls and missing hardware are pretty easy fixes and there are some good deals out there.

  8. Desert Realtor

    Tech note re key stolen from key box: If the property had the GE Supra keybox installed, the pin number of any agent entering the property is registered with date and time. The culprit can be identified and slammed with a fine or if taken to the limit, charged with criminal theft. Unfortunately, many REO’s sport a combo key box that anyone can use anonymously. The banks could certainly benefit themselves by requiring Supra boxes to avoid dirty tricks and possible damage and theft.

  9. Anonymous

    JTR Realtor said: “But that hasn’t happened this time around, at least not yet on a mass scale. The Dow is back to 10,000 and people are buying homes like crazy.”

    Really? Stock market UP and REAL (NOT Obamanomics numbers) unemployment UP to Historical Depression Levels at same time gold going through the roof. Jim, as a Real estate professional guiding people through their largest purchase of their life, What does that Tell You? Ring any bells?

    Jim also said; “Specifically though, I was hoping that the last 3 years would have taken out most of the realtors, and humbled the rest. ”

    Why? With people like your paid shill buddy Yun spewing his BS cheerleading vomit relentlessly in the MSM would anyone quit? Remember, the Great Recession is Over and Happy Daze are here again. All without jobs.

    Think about it.

  10. vegas nrba

    Well- as the resident Las Vegas Reo guy on this board – let me comment:

    Most of the article is slightly exaggerated.
    Of course as per any news service who wants to sell papers or bring viewers to their websites- they just want to “highlight” the attention grabbing issues

    -I would say 80% of the REO homes are move in/fha financable in Vegas

    -Yes keys are sometimes “missing” but its maybe on 3% of the deals.

    -Agents sometimes will get in properties by other means if key is missing but rarely.

    the correct part:

    -30 offers with half cash offers with the bank accepting the cash offer rather than the financing offer. That is typical currently.

    Jims comments- correct. we had hopes that many agents would leave the market but it has been a small percentage. Most agents primary goal(unfortunately)is to put $ in their pocket regardless of their true feelings on the particuler home, market,economy etc. And by the way- most agents do not and would not be too knowledgeable on the actual marekt dynamics in the first place as their intellect forbids that.

    Former RB resident comments: not correct. If REO /distressed property was only a small percentage of all marekt activity then yes -Foreclosure comps would be negligible in most circumstances. However – In a market dominated by these transactions it is the opposite- they actually hold more weight(most of the time) than a traditional sale as it is truly -for better or worse -a true market indicator as the banks have absolutely no emotion involved as the seller.

  11. Doe is get any worse than this?

    Lawrence Yun: “Home values have overshot downward”
    October 11th, 2009 at 3:58 PM •
    In case there is any doubt about whether NAR chief “economist” Lawrence Yun is just as much of a shameless price-boosting shill as his predecessor David Lereah, I present some excerpts from a post he made on Friday regarding the inefficient, expensive, and economically stupid homebuyer tax credit: Unleashing Pent-Up Housing Demand and Sustainable Economic Recovery
    There is no delight in watching the budget deficit soar. The $1.4 trillion deficit in the completed 2009 fiscal year to September is the highest ever in the U.S. in sheer dollar figures, and the highest since the Second World War if measured in relation to the overall economic pie. It’s a huge burden to the future generation and could easily cause interest rates to rise much sooner and quite sharply. Washington needs to come out with a credible plan to reduce the deficit over time.
    However, one area where federal taxpayer dollars have effectively been utilized is in providing a homebuyer tax credit. The key to any future sustainable economic recovery lies in home values stabilizing or, better yet, a return to a historical appreciation rate of 3 to 5 percent each year. The bubble prices crash landed. All the excesses have already been removed. In fact, one could legitimately argue that home values have overshot downward.

    It would be an utter pity if the housing market, just at the cusp of self-sustaining recovery, rolls downhill again. That could indeed happen if potential buyers step back and inventory again climbs. Falling home values – independent of whether overcorrecting is happening or not – will bring back all the associated collateral damage.
    A much happier scenario would be that the buying momentum continues for few additional quarters such that inventory falls back down to the normal 5 to 7 months, a level consistent with home value stabilization. Once that is accomplished, the consumer “fear factor” of waiting and waiting for a lower price later down the road will no longer be part of home buying decision.

    For that happy scenario to play out, a time extension on the home buyer tax credit is critically needed.
    Unfortunately the full post is available only to registered members of the real estate professional’s social network ActiveRain.

  12. Chuck Ponzi

    I find the lack of confidence here surprising.

    1. We knew there was going to be a dead cat bounce.

    2. We knew it would happen 2009 or 2010.

    3. We know that fundamental valuation has only been reached in a handful of markets, none of which are in San Diego coastal.

    4. The economy isn’t getting substantially better fast enough to bail people out.

    It’ll come, just patience is the name of the game.

    And, if you’re just running a numbers game, there are some great buys deep inland that make it worth it to invest in real estate. If you gotta be “in” there are better places than Coastal Cali, and Nevada is probably one of them.

    Chuck

  13. 3clicks from da beach

    I sense a growing ‘grass is greener’ mentality on this thread – I suppose it is par for the course. Do any of you guys want to trade and be in my shoes?

    I still believe those who waited to buy will still be able to purchase at a discount, but there is not going to be a miracle and the sea is not going to part. Most would do better if they give up trying to time the bottom. The stress and toxin build up is not worth short changing your life.

  14. Mozart

    Psst… the upper end is now in overshoot territory too.

    Now back the regularly scheduled grumbling and grousing. Signing off, for good.

  15. Kingside

    OK, I guess I will say it:

    Anyone who follows this blog is probably very familiar with the NAR and JTR’s views of the NAR, but some of us are really tired of the endless repetitive slams of Yun and the NAR. My suggestion is to send those comments to your legislator and don’t post them here. Hoping to see comments on a higher level.

    OK, off the soap box now.

  16. CA renter

    From Yun’s quote:

    The key to any future sustainable economic recovery lies in home values stabilizing or, better yet, a return to a historical appreciation rate of 3 to 5 percent each year. The bubble prices crash landed. All the excesses have already been removed. In fact, one could legitimately argue that home values have overshot downward.
    —————–

    One has to wonder if he honestly believes this. High housing costs promote a sustainable economic recovery? High costs that are sustained by ever-increasing debt that is government-backed? Really?

    This guy is dangerous, because some clueless politicians are going to believe his lies.

  17. Troubled Loner

    CA Renter, even worse, clueless buyers are going to believe his lies (correction: are believing his lies), and are buying homes they cannot afford (don’t want to be left out!), thus allowing the defaults to continue for several years.

  18. DB

    I have been looking for a low end house in acceptable areas of LA and OC since March. None of the offers submitted get even a reply to my agent.
    SFR in Hacienda Heights goes on MLS in morning, one dead vegetation picture, less than minimal description, “bring your tools”, about 100k off comps. Within hours agent submits offer 100k over list, 50% down, 800 fico, sight unseen. LA says we can’t see it till they clean out possessions. Never called my agent back. Off MLS in 2 days.
    Another REO fixer goes on MLS, called LA directly, House was in shambles, even took the AC unit off roof, damaging roof in process. Offered FULL list, CASH, to listing agent! Finally got her to respond to my text 2 days later, promised she’ed call when she got out of meeting. Blew me off until 2 days later, texting me that it went into “negotiations” the day before I submitted my offer by her, to her!
    I truly can’t believe this is the way business is being done.

  19. arizonadude

    Time to pop the bubbly.Watching the tv and the crooks on wall street are telling you to buy stocks again.Man these crooks are good at swindleing the avg joe.I have to just laugh at these swindlers.There are going to be some people that once again lose all their money.You should be selling into this rally.Do not get greedy.

  20. Kwaping

    “Another REO fixer goes on MLS, called LA directly, House was in shambles, even took the AC unit off roof, damaging roof in process. Offered FULL list, CASH, to listing agent!”

    Why would you do that? Not bashing you, just curious. Is the neighborhood that desirable?

  21. Geotpf

    I swear I lucked out big time. I got an REO in Riverside for 35% below comps (which were all also REOs), and it was in acceptable shape (needed carpet and paint and minor repairs, but no mold/broken windows/holes in walls/etc.), and I was against only one other offer. It can be done, at least it could be done back in May.

  22. ewhac

    I’m thinking that dirt, grafitti, holes-in-walls and missing hardware are pretty easy fixes and there are some good deals out there.

    But in some cases you’d probably have to do all but disassemble the house down to its frame to restore it to livable condition. Are you sure they didn’t pour concrete down the toilets, or cat urine on all the carpets? How many windows did they break? Is the insulation still in the attic? Did they leave anything else in the attic?

    You’d have to have the house completely vetted; draw up a restoration plan; wait 4-8 weeks as the work gets done; budget another $50-100K for the permits, materials, and labor; and get sign-off from local building inspectors. Not impossible, certainly, but by no means cake.

  23. Genius

    Check what commodities have been doing the past few weeks, as well as where the dollar is headed. Something will break again sooner or later.

    Dead cats have a high elasticity.

  24. MountainMan

    That’s Helicopter Ben for you. Asset deflation must be stopped at all costs. What, are we at 2004 prices in most places? We all know it should be much lower, but too much money out there chasing returns…….again.

    What was the lessons kids? Doing the right thing, never pays.

  25. MB Mike

    ewhac, Since when do you need permits to clean dirt, replace carpet, repair walls and replace hardware?

  26. ewhac

    I’m just trying to visualize all the possible things that could go wrong when trying to Steal One From The Bank.

    If the house is of sufficient age and has sufficient damage, the amount of work required to repair it may trigger local building code requirements to bring the whole thing up to current code. A simple walk-through may not necessarily tell you that. All this would/should be in the disclosures, of course, but if you’re in the heat of a bidding war with 30 other people, some things may get overlooked.

    I realize I’m largely talking out my posterior here…

  27. househippie

    3clicks, item #13 – Right on! I’m with you, man!

  28. tj & the bear

    …but there is not going to be a miracle and the sea is not going to part.

    Ye have little faith. 😉

  29. tj & the bear

    p.s.: Unlike San Diego, Vegas is extremely overbuilt for its non-construction employment base. “Investors” buying up all those homes for cash will realize that to their ultimate dismay.

  30. BottomFisher

    Memo to self: do not buy a REO in Vegas this year….you do not like spaghetti in the walls…ok to throw it ON the walls to check if its done yet.

  31. Genius

    WhatsWhat – The numbers in that article weren’t in nominal terms. Adjust for inflation and I will agree with you.

  32. DKO

    Very interesting timing. I spoke to a woman at a company here in SoCal that gives investors hard money loans and also acquires properties for resale through trustee sales/bank REOs/bulk portfolios etc.

    She told me two things of interest. First they are keeping 90% of the deals they source in house because the margins are so high they don’t want to whole sell to flippers. (I.e. the company is doing the rehab/flip themselves instead of taking a whole sell fee.)

    Second, that her industry contacts tell her the bottom is in for Las Vegas as homes are receiving multiple offers.

    So, I don’t believe either of those points but what do I read by Jim on the very same day. Yes a story that LV is attracting multiple offers.

    I find it hard to believe but that is apparently the market right now.

  33. Jim the Realtor

    Mozart,

    No way man, you can’t bail now, it’s just getting exciting!

    JtR

  34. DB

    Kwaping:”Why would you do that? Not bashing you, just curious. Is the neighborhood that desirable?”

    Yes,location was nice, and with repairs it would have still been a reasaonable price. In the area we are looking at, there is a serious shortage of proprties that fit our intrest.

  35. Emma

    I can see how the people in this story were highly motivated to get into a house, any house, but in general, it seems better to wait a year until the market crashes again. And given that we are talking about unsustainable Vegas, it has to crash again.

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