Forums / Property Investing / Overseas Deals / new thread for Vegas market and foreclosure issues

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  • Profile photo of jayhinrichsjayhinrichs
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    Emma,

    With senate Bill 248 all but bringing the foreclosure activity to a halt in Nevada, this has caused a huge problem for the market.

    Ergo there is less than a month of supply of homes on the open market…20 offers plus per house,, prices rising.

    then you have 250k mortgages 30 days or late in LV alone.

    Talk shadow inventory?

    If these lenders have to go judicial it will totally bog down the system… Judical foreclosure states like NY and FL. it takes years to get through the system and they have the process in place to handle the foreclosures since this is how its been done for ever. Its one of the reasons as a hard money lender I never lent in either of those states…

    You take a Trustee state like NV.. which will have only a handful of Judcials in any one year and its a freaking nightmare that just cannot be fixed over night.

    I would think the legislative branch and the Judicial branch would literally have to create a new court system just to handle the hundreds of thousands of foreclosures that will happen in the next 1 to 3 years in NV alone.

    Very very interesting to see how this plays out.

    Keep us updated as your closer and more knowledgable about NV than I am ….

    this could be another bubble for those buying right now in NV..

    Profile photo of CheevesFinancialCheevesFinancial
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    Saw this coming.

    CheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
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    Profile photo of jayhinrichsjayhinrichs
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    clairvoyance Mr. Cheeves

    Profile photo of CheevesFinancialCheevesFinancial
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    Yep..and I foresaw the crash coming too…I just couldn't sell my properties because I had an emotional attachment with them.  Captains go down with the ship right?  So instead of selling due to my "clairvoyance", I sat tight and lost everything.  :-)  Am I liberated now??  haha. 

    CheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
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    Profile photo of brizziegirlbrizziegirl
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    Hi

    I read your thread with interest and I’d like to learn more however I can’t seem to locate information on what the senate bill 248 as it relates to NV. Could you please point me in the right direction?

    Thanks

    Profile photo of jayhinrichsjayhinrichs
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    The law that was passed:

    The jist of it is that if a bank cannot produce the wet copy of the original Promissory Note,, that the bank is not allowed to pursue a foreclosure through the power of sale in the Deed of Trust… Said sales being held by trustee's that are for profit business's Mainly attorney owned.

    In a Mortgage state or non Trust Deed state… the foreclosures must go through the Court system.. IE Florida NY and others.
    And this is very expensive and takes a great deal of time.

    Most Trust Deed states can process of foreclosure by law within 6 months… Georgia you can do them in 45 days… Mississippi 60… CA 120 days plus 21 for publication… Oregon 5 months  Washington 6 months.

    So Most banks sold their mortgages in the hey day of slice and dice mortgages… And a vast number were sold using an Alonge document instead of the air tight Assignment of Deed of Trust along with promolgating the original note to the buyer or new beneficary… Its the core transaction that my company uses to bring in our investor partners.  Along with the assignment then comes the transfer of the Title insurance..

    So anyway Many of these owners of the loans cannot produce the original Note because they do not have it or know where it is.
    And the new law in NV states no one can foreclosure without producing the original note.

    So then to foreclose the owner of the mortgage must do a judical foreclosure which the state of NV is not set up to do in any volume every state has the right to a judical foreclosure,, And the reasons they sue on the note is to get a deficancy judgement.. Texas is famous for this…

    there are 12 states and I know Oregon CA Washington and AZ are ones that no lender can get a deficancy if the loan was a pruchase money loan on owner occuppied.

    So there you go 250k mortgages are 30 days or later in Vegas alone and no way to foreclose, its a huge mess

    Emma can probably fill in the gaps better than I since she lives there.

    Profile photo of emma171emma171
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    It is Assembly Bill 284… numerically dyslexia hits us all at some point…  

    However apart from the dyslexia, Jay has pretty well nailed the gist of this – can't  add much. In October 2011, they passed this as the response to "robo signing" and what everyone will remember was the hot topic of the day – property owners suing to get their properties back from mortgage companies that did everything wrong … legislation passed on some assumption that defaulting home owners wanted their properties back and the mortgage that went with them.

    Thus the standard mechanism to go through foreclosure ground to halt as every document faced original notary tests – fascinating graphs show the effect for those interested – STILL haven't figured out how to add to thread but anyhooo.

    So – without producing every last single document for every single mortgage, judicial foreclosures are all that's left – through a court system can't afford to hire people to deal with the workload…. now consider that virtually the whole of Las Vegas has managed strategic default by now (well I sure as heck wouldn't have continued to pay on my 250k mortgage when the house next door could be bought at 60k)….  Vegas is one big community that LOVES gossiping – there is no shame at ALL in walking away from mortgages… when it first happened, you would hear people come up with excuses but now it is almost a matter of pride as to how clever they were to "cheat" the banks. Can't really blame them…

    Vegas court systems are great for such matters as tracking Elvis down….

    Flippancy aside it means that yes, there is a massive dam wall up with a wave of properties behind it – no one seems to be rushing in to pay their 250k mortgages…

    SO – SUMMARY
    there are 2 primary theories… either the dam breaks through some other legislation and the banks release the backlog at a flood … or a constant trickle of properties will be released that will equally be eaten by demand at ever increasing prices.

    I don't have a crystal ball but given that every human I know in Vegas who is a real estate agent has at least 10 investors behind them wanting at least 600 properties, I am erring on the latter. 

    Have you SEEN the mobile homes for sale in Vegas for over 100k at the moment??? If you SERIOUSLY believe there will be the flood, you would be flipping like crazy – I am not seeing a flood of flips but still… you would equally have to believe that there isn't demand for a flood and there aren't 40,000 investors out there just waiting to pounce.

    So, Vegas is dried up for now.

    Profile photo of jayhinrichsjayhinrichs
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    Emma,,

    thanks for straightening me up….

    Its a real problem…. you have people living in houses not paying the mortgage for years and years… but being thrifty americans I am sure they are putting all those mortgage paymnents they should be making into the bank to bolster their personally savings accounts… LOL

    Profile photo of emma171emma171
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    HAHAHAHAHAHHAHAHAHA….. of COURSE they are…. but wait, first I need a 52 inch screen TV! Oh, hold on, they must make them bigger……

    Oh call me cynic.. but surely the robosigning legislation was drafted by someone who realized it would now give them 3 years to save money and live for free in their house???

    Sigh… AS every one of my investors knows I haven't recommended a SINGLE property in Vegas in the past 3 months…. (actually, I lie, there have been 2 – one a 4 bedder that went off the market in 4 hours and a 3 bedder today for 50k that will need 10k which for Vegas means a virtual rebuild but actually isn't bad – it will probably go for 60k, it will rent for $900 in a churning rental area…so they are still there…

    Moral of the story

    STICK TO YOUR INVESTMENT GOALS – as Jay and Alex and I keep saying – there is a VERY VERY VERY definite point at which a property sitting in Australia or MFR leveraging or or or some other "thing"/area etc will start looking tantalizingly better when you run ALL the numbers….

    So, it may be a case of "let's wait and see" – unless rents increase dramatically in Vegas, I personally don't see Vegas as a go at the moment and as I don't see rents increasing, I am very happy to go for a swim in the pool, have a beverage and look around for "where next"… which for now actually is still finding lovely properties elsewhere!

    IF the glut occurs, I, like everyone else, will reconsider Vegas. GOD I LOVE VEGAS…. 20 minutes to drive, sick of work, go to the strip….  For all that there is about Atlanta – dear HEAVENS it needs something more to do than be in Suburbia…. sigh. Six Flags is only fun the first few times….

    I can say I have found ONE bar – sigh ONE bar, that may be the redeeming feature. Yes, I have done Stone Mountain to death. Quack Quack.

    Profile photo of jayhinrichsjayhinrichs
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    This was one of the big moral discussions I would have at cocktail parties,,, OH your buying foreclosures from these poor folks losing their home.

    I would point out… And this is when foreclosures were processed much quicker than today

    1. Average person who loses a home has not made a payment in 18 months.

    2. The owner has gotten call after call letter after letter and has just put their head in the sand.

    granted sub prime lenders and pick a payment and variable rate loans took their toll.. However so many US borrowers just did not care they were not sophisticated enough to even comprehend what happens when the mortgage readjusts… Its really embarrassing for us as a country.

    Then you have the non owner occ. foreclosures that make up almost half the foreclosure market,,, Landlord just rips the rents and keeps collecting until tenant leaves or house is sold and tenant is noticed to leave.

    Because most of the non owner occs are in tenant areas the tenants understand what the white notice posted on the front door means and they will usually start looking for some place else.

    JLH

    Profile photo of emma171emma171
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    OH So true…  look at how many of the foreclosures (not flips mind you…) foreclosures now come replete with tenant – or how many tenants we pick up who have had the cash for keys scenario.

    You glorified slumlord…… it must be so tough at those cocktail parties….

    Profile photo of jayhinrichsjayhinrichs
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    How bout drinks with my buddies…. I am a jeans and boots kind of guy

    Profile photo of emma171emma171
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    If, as glorified slumlord, I was the eternal optimist here would be one theory in which we would all love… Atlanta is bought out within the next 4 months (highly unlikely), new legislation hits Vegas and the flood gates open – every spruiker on the planet then turns their attention to my backyard but they all buy the crap (which for some reason in Vegas happens more) and the gems are left for me at lower prices.

    The only problem is that if there are 38 offers on every property now at self evidently bad returns……how many would there be if the returns improved???

    Thou protesteth too much me thinks Jay…… somehow much better to imagine the cocktail wielding dickensian slumlord explaining why the poor should eat cake while being evicted…

    Profile photo of jayhinrichsjayhinrichs
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    Emma,

    The key difference with the current market in Vegas and Pheniox is that it is not being dominated by OZ thinking investors. The new investors that are moving in are not thinking they need to make 12% or better otherwise its a poor investment.

    they are happy with brake even to 8%… some probably heaven forbid would be happy to be slightly negative Geared ( just love that expression)…

    Its like the light switch flipped back to 04… those markets are rising and there is room for the flipper to make short term gains.. Just do not be stuck holding the bag.

    JLH

    Profile photo of emma171emma171
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    Jay
    Actually not that many Oz investors in Vegas that I have come across (other than those I know who were fleeced) – we are being hit primarily interestingly enough with the Asian/Israeli/Arab contingents – South Americans pulling their weight as well. In fact I think it is why your model is less interesting (typing out loud here) for Australians because they have been sold SO heavily on the "I must get a minimum of ?? 15%?? net yield etc.  No sadly, it isn't even just the yield in Vegas – there just aren't tempting morsels.

    I think for me it gets back to this, for some, it took the absolute perfect storm to make the leap across the pond. I remember my brother talking for YEARS about the US market and of course, I have been in it as well for over a decade as well now so I sort of forgot the "wonder" of opportunities I saw as a newbie Oz import….. I remember the UTTER ELATION when I ran my numbers off my first US 4 plex…..but it comes rapidly with a HUGE dose of reality and the best I/we can do is try to ease people into what can otherwise be a little bit of a shock awakening when all the smooth talking is over and done with –

    OH i was so proud…

    0 down, 5.25% fixed loan…. $155k purchase price – rolled into the loan was 17k for rehab…. WOW…  EACH UNIT RENTED FOR $825 – EACH… I could retire!!!    Then I met US tenants, then I met US tradesmen, then I realized why NOT to EVER EVER EVER EVER EVER EVER EVER buy somewhere where there is snow, ice, melting, freezing, single utilities etc etc etc…..NEVER buy where you have to pay for heating oil etc. I didn't "lose" money but by gosh I had to learn how to slave on the darn things – every single piece of that place was personally replaced by me over the years of sweat and tears.

    Yes, now is the start of a whole new phase……. and there will at least be a lot of Australians along for the ride – in a positive way.

    Profile photo of jayhinrichsjayhinrichs
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    Well thankfully you did not start in Detroit working on the units yourself would have been hugely risky as we know

    Chinese love to gamble so I can certainly see their interest in Vegas

    As well as a lot of ca. Calif and west coast folks like me

    Profile photo of Ziv Nakajima-MagenZiv Nakajima-Magen
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    emma171 wrote:
    …interestingly enough with the Asian/Israeli/Arab contingents…

    lol being an ex-Israeli I know the type – we come in thinking we're the smartest folk in the world – "I can spot a fleecer from three continents away" – we just forget it's only the middle-eastern type fleecers we've been exposed to.
    I'll never forget the first time I was in Thailand, keeping my Hebrew mouth shut (and I don't look Israeli), got a price for something, then saw a group of loud Israelis approaching, loud and clear – all the vendors immediately started quoting prices 100% higher, then "gave in" to the oh-so-clever Israelis and deducted 20%. Works every time.

    Ziv Nakajima-Magen | Nippon Tradings International (NTI)
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    Profile photo of FreckleFreckle
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    I think this particular problem is symptomatic of the whole housing/property market in the US but not the real problem at the moment. What I see happening is an oversupply of hot money distorting the market. (International vultures picking over the carcass of the US RE market)

    National and global economic fundamentals do not support the recovering RE market hypothesis. In fact quite the contrary. I see small positives as negatives because they don’t jive with the economic narrative. In other words they’re abberations in the market that mislead investors. What PI’s should be looking at is the ability of renters to stay in the market and from what I’m seeing that is becoming more challenging. That suggest that rental pressure is likely to be down for some time. I don’t see any real opportunity for rental yields to rise in the short to medium term certainly nothing that could keep pace with rising property prices.

    If hot money pushes up prices then it squeezes yields. Upward price pressure from hot money is not sustainable in my opinion. When we hit the wall again I expect to see this whole RE market collapse thing start a new lap but it’s going to be even messier I’m thinking.

    From where I’m sitting the US RE market is moving more towards a speculative (gamblers) market rather than an investment market.

    Emma I’d luv to meet you one day but I think I’d throw a rod trying to keep up ;-) Luv your posts LOL

    Profile photo of emma171emma171
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    Aaaaah My Fickleness…. I actually concur – ergo why I am NOT recommending a vast investment in the States at the moment purely for the point of leaping on the capital growth/fake yield bandwagon… the morsels are there and I will snap them up like anyone but unless the underlying fundamentals of the purpose for investing are there for the individual (whatever they may be) – ie yield meets expectations taking all factors into consideration etc. There comes a VERY finite point where the game, like any economic cycle changes and you thrive on the new challenge…

    A US economy and housing market supported purely by foreign investors does not a sound economy make. The base fundamentals are and always will be humans requiring housing at x cost. Try to avoid that and convince yourself of anything else and you are in speculation and that is a risk I don't go with…. no CG guesstimations this end from me. There is a VERY real likelihood that rents in many areas a year from now go down as first time foreign owners are scared by vacancy rates and first time vacancies and start a downward spiral in rents….

    HOWEVER, what equally gets me is that this is one HUGE market and the nuances are vast – right now – or at least dwindlingly so – there was a fabulous opportunity in SFR's but the US market (granted with all it's issues – and NOT helped by the newbies trying to sell the gold rush without a clue), is just a stepping stone to fast tracking a real estate existence that is the most amazing thing anyone can be involved with. 

    Dream of developments – yep, you can. Love MFR's leveraged to the max… go for it…. 3/4 fit off flips… yep……   ha, even swamp infested trailer park homes… yep…. if you watch The Block and wished you were on it… come over here for your annual vacation and do it all including property purchase for under 70k.

    THAT my fine fickleness is what people are missing – the US market affords many things that a real estate addict could NOT afford in Australia…… and those joys are there in EVERY level and phase of the US cycle…. the danger is those who can only see the benefits of something that may no longer be there next year….. not in this fashion.

    With what is a seeming pittance by Australian investment standards and the same amount that you would be lucky in your lifetime to buy ONE property with a massive mortgage, you really CAN do something tangible, you CAN take control of your own investment goals and you CAN do it in less than a decade and achieve something…. JUST DON'T BE FLEECED ON THE WAY….

    Profile photo of Ziv Nakajima-MagenZiv Nakajima-Magen
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    Aye, concur. Buy safe and stable, be realistic, learn from local expertise then carry on yourself if you really want to.
    No blind opportunistic gold-rushing, just safe and sane cash flow, and your investment will live to tell the tale wherever on the cycle you may be. And that’s usually one step ahead of the masses anyway.

    Ziv Nakajima-Magen | Nippon Tradings International (NTI)
    http://www.nippontradings.com
    Email Me | Phone Me

    Ziv Nakajima-Magen - Partner & Executive Manager, Asia-Pacific @ NTI - Japan Real-Estate Investment Property

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