Why the Supreme Court Decision on HOA Foreclosures Is Good News for Everyone

Lenders and investors are squaring off in Las Vegas over the recent Supreme Court ruling that stated that Homeowners Associations (HOAs) have the authority to foreclose on properties and sell them at auctions to recuperate delinquent dues without needing to go to court for permission. The Supreme Court ruled that the super priority lien that the HOA holds on the property for unpaid assessments trumps the first trust deeds held by mortgage lenders. The HOAs are allowed to sell these delinquent properties to recuperate unpaid dues. These properties are often listed for sale at the auctions at prices equal to the total amount of dues owed to the HOA plus collection costs and late fees, which usually equals only a couple thousand dollars.

This means that investors at these HOA auctions can purchase these delinquent homes for a fraction of the cost of their real value, making these properties an excellent investment opportunity. After purchase the property is transferred over to the investors via a quit claim deed or a foreclosure deed which gives them title to the property and allows them to live in, resell, or rent (depending on HOA rental restrictions) the properties. According to the recent supreme court of Nevada ruling the first trust deed held by the mortgagee (the bank) is completely wiped out.

The super priority lien held by the HOAs allows the associations to foreclose on the properties and any delinquent dues to the HOA are paid back.  Any overage from this sale will go in lien priority, with the bank being next in line in most cases, to recover any overage from the HOA foreclosure sale.  This September 18th 2014 ruling has, of course, put many lenders in an uproar as lenders now potentially can lose their security to the property if they choose not to foreclose themselves before the HOA does or if they choose not to pay the back HOA dues to prevent an HOA foreclosure.

The Nevada Supreme Court and the HOAs have no sympathy, however, for the lenders. Since the bank foreclosure process has been taking a very long time (sometimes years!).  HOAs are often left with empty homes and delinquent dues with no possibility of re-payment through the existing owners. Lenders are given the opportunity to pay for the HOA liens to prevent the property from being foreclosed upon by the HOA, but if lenders choose to not pay the liens they run the risk of losing out on possession of the properties that they could foreclose on themselves.

Some lenders claim to be unaware of HOA liens on the property or state that the HOA will not allow banks to pay the liens. In this case the issue of timeliness comes into play. If lenders foreclosed on properties quicker there is less of a chance of the properties remaining vacant for so long and thus acquiring further delinquent dues. If a new owner was allowed to move in quicker the current dues could be consistently paid preventing the HOA from needing to foreclose on the property in the first place.

There has been a definite shift in the real estate market with this new Supreme Court ruling, and some agents are already beginning to notice the difference in how short sales and foreclosures are being handled. Some agents are reporting short sales that are being approved in less than a month, a process that usually drags on for months or even a year or longer in the recent past. Why the sudden quick decision from banks regarding short sale approvals? Banks and lenders are trying to recuperate their losses before the HOAs foreclose first and thus prevent them from losing their security against the homes.

It will be interesting to see how the lenders handle the new ruling and whether it will affect mortgage rates or the ability to get a loan in Nevada. While the banks have stated that HOA foreclosures may be bad news for them in reality it is a great situation for the banks.  The delinquent properties sold at HOA auctions are selling at about 70% of retail value and will actually get the bank their money faster than if they waited to foreclose themselves. Remember that any overage of the HOA auction is paid to the bank.  This is the same way it works with a normal trustee sale.

This decision is also good news for real estate agents and short sale buyers and sellers who may see quicker short sale approvals and re-listing of foreclosed and short sold properties. Residents who live in HOA communities will also benefit as the HOAs will be better able to service and maintain their associations with the recuperated dues.

Local Las Vegas Investors will reap the most rewards, however, especially those who took advantage of the HOA foreclosures prior to the Supreme Court decision. Millions of dollars of equity was created with the Supreme Court ruling and investors who purchased many of these properties are now sitting on a real estate gold mine.

For more information on HOA foreclosures and how you can still take advantage of this investment opportunity contact Glenn Plantone today!

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Nevada Supreme Court Rules in Favor of Investors

On September 18th, 2014 the Nevada Supreme Court delivered an unexpected ruling in favor of the savvy and adventurous Investors in Las Vegas who had taken a gamble and purchased properties through HOA Foreclosure auctions. The Nevada Supreme Court ruled that the bank’s first lien position had been completely wiped out, which means that all of the Investors who purchased HOA Foreclosure properties (sometimes for as little as thirty cents on the dollar!) now own the properties with no loans against them. The gamble that these Investors took has now paid off as millions of dollars in equity was created in a single day.

The majority of these properties are now completely rehabbed and rented out through property management programs with all liens cleared and all HOA dues and taxes up to date. These properties are insured, managed, and hold a steady cash flow with excellent rates of return. Some of these properties remain un-rehabbed, presenting an excellent equity position for the Investor who wishes to experience the fix and flip opportunity, or for the new buyer who wishes to fix up the home on his or her own to their exact liking. While these properties now contain clear title, please keep in mind that some of these properties are in owner occupied or rental restricted communities, and the new owners will have to abide by all rules and regulations of the existing HOAs.

If you were not one of the Investors who took the gamble before the Nevada Supreme Court ruling passed, fret not. An opportunity exists for you to still purchase these HOA foreclosure properties for less than retail value. VIP Realty Group is presenting an exclusive opportunity for Investors to purchase these properties at 67% of retail value. This is still a tremendous discount from their true value! Why would anyone part with these properties at only 67% of their value instead of full retail price? This is because even though the banks no longer have first positions on these properties there still may be some legal (attorney) wrangling needed to clear title fully and to get these properties in a position that allows them to be re-sold with clear and marketable title.

Every investment has its risks but the risk involved with these HOA foreclosure properties has significantly dropped. Even if purchased at 67% of their retail value these properties present an excellent opportunity for real estate Investors to earn instant equity in great properties!

For more information on how to invest in one of these great properties contact Glenn Plantone, Broker/Owner of VIP Realty Group and local HOA Foreclosure expert, today!

Glenn Plantone     (702) 656-3264

For more information please read: http://www.reviewjournal.com/business/housing/court-ruling-seen-clarification-foreclosures-market

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The Advantages of Investing In HOA Foreclosure Properties

We are all familiar with banks foreclosing on properties, but did you know that Homeowner Associations (HOAs) can also foreclose on homes? HOA Foreclosures have increased over the past year, and in doing so have created an excellent opportunity for investors to pick up discounted properties in the Las Vegas market, sometimes for a little as $.20 on the dollar!

As a Las Vegas Investor, I have personally taken advantage of this opportunity, and have had particular success buying HOA Foreclosure properties through auctions rather than receivables. Auctions take place as trustee sales or private attorney auctions where investors can purchase HOA delinquent receivables for homes, townhouses, and condos. These properties have already been foreclosed on, which makes it easier for the investor. The other option is to buy the delinquent properties directly through the HOA and foreclose on the properties yourselves, but this method is far more complicated, especially since HOA boards are extremely difficult to deal with in Las Vegas.

By purchasing at an HOA Foreclosure auction, the investor is essentially purchasing the foreclosure deed for the property. This deed is then recorded and grants the investor legal possession of the property. Due to the current Nevada super priority lien law, the investor who owns the foreclosure deed has ownership rights superior to those of the bank that holds a note on the property.

Once the property is purchased the investor has many options. If the home is vacant, the property can be renovated and rehabbed so that it can be rented out for a steady cash flow. While this is being done, the investor can hire an attorney to negotiate directly with the bank to go after Quiet Title of the property or to purchase the property from the bank for a discounted price of the current market value. If successful, the investor can own the property free and clear, having purchased what could be a $100,000+ property for $35,000 or less!

If the property is occupied with a renter at the time the foreclosure deed is purchased, the investor can take over the management of the property by having the tenant sign a new lease and have rent paid directly to the investor (now functioning as the new owner). If the tenant refuses to pay rent, the investor can proceed like with any other rental and evict the tenant.

Things are a little trickier if the property is occupied with the former owner at the time the foreclosure deed is purchased. There are three options the former owner can choose: stay in the property, sign a new lease, and pay rent as any other tenant would do; stay without paying rent and ultimately get evicted (unlawful detainer) by the new owner in about a two month period; or the former owner can move out voluntarily, in which case the new owner can rehab the home and get it rented with a new tenant as soon as possible.

Gaining possession of the home is very important as it allows the investor to control the rental and management aspect of the property; however, the investor does not possess a home with free and clear title, so he/she cannot sell the house with title insurance in place. This does not mean that the house could not be sold, but rather the new buyer would not receive free and clear title, and as such could not get title insurance on the home, just like the investor when the property was purchased at the HOA foreclosure auction.

So why would anybody purchase a property that did not have clear title and would be difficult to re-sell? Simply because the benefits outweigh the risks. Yes there may be more work involved than with a traditional property, but investors can purchase homes with great equity for staggering low prices, and if they are successful at winning free and clear title, they walk away with a great investment. Every investment comes with some amount of risk, and HOA Foreclosure properties are no exception. With a myriad of ways for the investor to procure free and clear title, the chances are in his/her favor of succeeding. Even if the investor is unable to achieve free and clear title, he/she can hire an attorney to negotiate a deal with the bank to recover as much of the investor’s investment as possible. While this is happening, the investor can continue to hold on to the property and take in rental income which reduces the investor’s risk every month.

Bottom line HOA Foreclosure properties present a new form of investing that provide investors an opportunity to purchase a great property with huge equity for incredibly low prices. This investment opportunity has a tremendous upside and very little downside based on the current legislation and history that I have witnessed as a Las Vegas Investor. I have personally purchased and sold about 70 of these HOA foreclosure properties and aided about 100 other investors in this process.

If you are interested in learning more about how to take advantage of the HOA foreclosure auctions, or if you would like to purchase an HOA foreclosure home, feel free to give me a call directly. I can answer any and all questions and describe in detail how I have been able to partner with investors to purchase the HOA foreclosure homes for 20-30 cents on the dollar and manage them effectively while getting the maximum return.

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Shrinking Inventory Necessitates New Buying Strategies

The Las Vegas real estate market has endured an amazing roller coaster ride in the last ten years. Homeowners in the Las Vegas valley saw very modest price appreciation throughout the 90’s and the early part of this decade. In 2003, sales began to pick up and by 2004 Las Vegas was the hottest market in the United States. Prices shot up to astronomical new heights only to come crashing down a few years later. The 2007 and 2008 season saw the Las Vegas real estate market become as cold as ice as both prices and closings plummeted and foreclosures soared. But all things come full circle and since the summer of 2008, the Vegas market has been picking up steam and has in fact enjoyed record sales going into the summer of 2009. In fact, there were more sales in June and July of this year than during any previous month on record…including the heyday back in 2004. The continued bad news, is that after 18 months of price drops the huge gains in appreciation that we saw from 2003 to 2006 have not only been erased, but we have receded to levels of a decade ago. The average median home price in Las Vegas has settled near $130,000. Virtually everyone that purchased in Las Vegas after 1998 is now upside down in their home. It does not make a lot of sense to most Las Vegans as homes are now selling well below builder’s replacement costs.

This drastic decrease in prices has brought droves of investors back into the Las Vegas real estate market. 80% of closings in the last several months have been on REO or post-foreclosure bank owned homes. Cash buyers have been dominating the market and getting great properties for around $40 to $70 per square foot. Unfortunately, the inventory of bank owned homes is now at an all time low of under 2000 units. This represents less than a two week supply of inventory based on the fact that the majority of the 4702 and 4602 closings in June and July were REOs. Even though Las Vegas is the “foreclosure capital of the world”, we are continuing to see foreclosure inventory shrink on a monthly basis. June and July saw nearly 3300 homes per month revert to the banks through foreclosure, but this pales in comparison to the over 3700 REO sales per month that we saw at the same time. This disparity means that we are loosing nearly 400 homes per month from the inventory of bank owned homes.

The low inventory is causing heavy competition for the homes that are available. REOs coming on to the market today are creating bidding wars as investors try to snatch up cash flowing properties at great, low prices. Both owner occupants and investors looking to take advantage of great buying conditions are finding that they are having serious difficulty getting homes under contract. This excess of demand is beginning to drive prices up on bank owned homes.

For months, I have touted the benefits of buying REOs directly from the banks. The process is simply and easy, and, until recently, investors could use this method to acquire great properties at great prices. But those days appear to be coming to a close, at least for the time being. There has been talk for over six months, since the moratorium on foreclosures ended in March of this year, that the banks have a surplus of inventory they are holding back. The problem seems to be that no one knows when or if this rumored inventory will be released. Until or unless that day comes, I am now advocating that investors change their strategy for acquiring properties in Las Vegas. Plan B is to buy homes at the trustee’s sale. After the notice of default (giving a late paying home owner 90 days to cure the late payment) and the notice of sale (giving them another 21 days) a home is sold at the trustees sale. At this sale, the property will either be bought by a third party (you or I) or it goes back to the bank and will eventually become a bank owned, MLS listed REO foreclosure property.

Previously, I have not advocated buying at the trustee sale because there are many restrictions and hassles involved in this method of purchase. Not the lease of which is that properties cannot be financed…cash must be paid at the time of sale. However, with the inventory of REO homes tightening so drastically, I am now finding that trustee sales are offering opportunities to purchase homes at 20-30% below the price that would be paid once the home becomes an REO. Buying at the trustee sale also eliminates the competition of multiple offers. This is where the true investor can now turn to get great wholesale deals. Investors must continue to adapt in order to profit in today’s real estate market. I believe trustee sales in Las Vegas are the next step in this evolution.

Anyone interested in getting involved and finding great homes at the best prices with the least amount of competition feel free to get in touch with me for more information.

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Will Cash Flow For Cash

Over the last five years I have sold a lot of real estate in many different markets nationwide. In 2003, droves of investors came into the Las Vegas market and purchased single family homes and condos. In 2004, the scene repeated itself in the Phoenix market. In 2005, towns like Albuquerque and Austin saw investors moving in to snatch up large quantities of new construction homes. Finally, in 2006, the Carolinas became hot and certain areas on the Gulf Coast enjoyed profitable buying conditions.

I was on the move throughout this time period, visiting all of these markets and helping my investors find deals there. All the while, I was sitting on the sidelines at home. After 2003, home prices in the Las Vegas valley became too high to cash flow and purchasing here no longer made sense to investors. Of course, that all began to change in the summer of 2008 as the real estate bubble burst abruptly and prices began free-falling throughout much of the West. As home prices plummeted, Las Vegas began to make sense again for investors because the point of cash flow was once again reached. The “point of cash flow” is a simple equation in which the amount of money an investor can make from renting a home exceeds his/her costs of ownership. These costs of ownership include the mortgage, taxes, insurance, repairs, and property management. With a 20% down payment (or in many cases less), positive cash flow can now be achieved in the Las Vegas market for the first time in several years. This is due primarily to the rock bottom prices of the foreclosures that have been flooding the market. Not only has Las Vegas lead the nation in foreclosures for well over a year, but the amount of foreclosures coming on the market now are near triple the amount from just a year ago. Currently, in the Las Vegas valley, nearly one home in 40 is in some stage of the foreclosure process. The median home price has come down approximately $10,000 per month, every month for the last year and a half from a high of near $300,000 to a new median price of only $140,000. These drastic price reductions have created a new buying boom.

Local newspaper articles and analysts talk about a 30% declines in home values here in Las Vegas. But as a full time investor myself and a licensed Realtor, I can tell you the reality is that we are seeing prices that are being discounted 50-70% off of where they were just two years ago. Many of my deals over the last couple of months have been coming in at well below 50% of older, higher values from 2006. I recently sold a one bedroom condo at $31,000 that sold for $148,000 two years ago. That is nearly 20 cents on the dollar! Three bedroom homes, only two years old, that sold new as high as $300,000 are now priced under $120,000. I recently closed on a three bedroom, 1300 square foot home for $75,000. This same home sold for $244,000 just three years ago. Deals like these are typical of what I have been getting for my investors.

These incredible prices open the door for virtually anybody to step back into the Las Vegas market and begin buying once again. Utilizing the government’s Housing Recovery Foreclosure Bill, 1st time buyers have a $8000 tax credit to take advantage of and Baby Boomers and retirees looking to relocate to a warmer weather destination do not have to head south of the border as the Southwest has become affordable once again. The vacation capital of the world now makes sense for second home and vacation home buyers, and, of course, investors are delighted to be able to cash flow on their investments in Las Vegas once again. All of these groups will also benefit from price appreciation over the next several years as the market continues its recovery.

The only bad news, as we all know, is that lending guidelines have tightened up considerably over the last year. But, to offset this, prices are ½ of where they were two years ago. If you have a good job, and good credit, it is a great time to be buying a home. Interest rates are at historic lows and now is a great time to lock in a good rate on a 30 year fully amortized note, rates literally have no place to go but up. Current reports show that nearly 85% of closings in this market are being financed through a lender. So it is clearly still possible to get a loan. However, of the nearly 50 deals I have closed this year, only five of them were financed. Nearly 90% of my deals have been all cash. Not only am I getting more deals accepted, but I am getting them at or near list price in most cases and getting them pushed through rapidly. I just had a lender for a bank owned property countact me stating that they were willing to accept our lower than list price offer as long as we could close in 10 days with all cash (as we had stated). They had two other offers on the table for more money but banks do not want to fool around with financing either. They want to take the sure cash sale even if it is at a huge discount. This just goes to show that even though financing is available, cash is still king right now in this market.

June and July of 2009 have seen record sales in Las Vegas with 4702 and 4602 closes in each of the last two months. After 18 months of declines we have seen 3 months of holding steady on pricing. Investors have sensed the bottom has been reached and are coming in droves to pick up homes and condos at the bottom of the market. So, folks, if you have been able to save some money, or if you still have a line of credit open, I suggest you come back into the Las Vegas market and start looking around for some real bargains. The banks are ready to deal and the timing to buy a great foreclosure is as good as it gets.

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Nevada Law Makes Foreclosure Process a Little Less Painful for Las Vegas Renters

In February of this year, I wrote an article addressing the plight of renters in the Las Vegas valley. The Las Vegas Sun had run an article detailing how many renters were facing the need to immediately vacate their homes, which had gone into foreclosure without their knowledge. (Click here to read my article.) In most cases, the renters had no idea that the owners of the property were in trouble until the Sheriff arrived on their doorstep to serve eviction papers.

A new law, passed May 20th and entitled the “Helping Families Save Their Homes Act of 2009”, provides safeguards for renters in the event that an owner allows a property to enter foreclosure. This protection comes in two forms. First, if the renters have a lease, the new owners of the property must honor the lease, allowing renters to stay in the property until the end of the term provided they remain in good standing. The only case in which this statute does not apply is in states where state law allows leases to be terminated at any time upon notice. Even in that case, the new owner of the property must intend to occupy the property as a primary residence in order to evict the tenants before the end of the lease. The second safeguard extends to renters who are on a month-to-month agreement. In this case, the new owner of the property (whether it be a bank or a private individual) must provide 90 days written notice to the tenants in order for them to vacate the property.

Many states already have laws protecting tenants in the case of foreclosure. In those states, the new Federal law will still supercede the state law, unless the protection afforded to the tenants under the state law is greater.

Of course there are conditions that must be met in order for the Helping Families Act to apply. The most notable are:

1. The tenants must have a written contract to rent or lease the property
2. The lease must be a result of an “arms length transaction.”
3. The rent must not be substantially less than current fair market rent for the property.

All things considered, I believe that this law represents a fair and equitable solution to the unfair situation in which many renters have found themselves since the foreclosure boom began.

If you are a renter, and you want to know if your landlords are current on their mortgage, you can often find that information on the County Assessor’s website. In the case of Las Vegas residents, the site would be www.accessclarkcounty.com/assessor. Once you are on the site, click on “record searches” then “addresses.” You will need to enter the full property address as requested. Once you have done this, you will receive a parcel number. Jot this parcel number down and then visit this site: www.accessclarkcounty.com/depts/recorder. Click on “search records” and then click on the “advanced search” tab. You will need to enter the parcel number (without any dashes) and hit “search.” The search will show you the name of the registered owner of the property and whether or not there are any documents filed against the property, such as a notice of default or a notice of sale.

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