With all the usual caveats (I'm not a lawyer, and I don't know Las Vegas real estate, except by reputation and word-of-mouth), my suggestion: Hold on to the property. It's a long shot, but there's a chance the market will improve sufficiently that you'll only take a minor hit when you sell. In the meantime, you preserve your good credit, which comes into play not just in buying a home, but also in obtaining credit cards, cars, etc.

I'm very familiar with the strategy that Scott is proposing, and it's a pretty good one. If you really want to sell, that approach can preserve your credit and deal with the overencumbrance.

A short sale should be your last resort--only if you absolutely need to sell (which you don't today) and if you absolutely can't make up the overencumbrance. Hold off on that.

Hope that helps.

Mon May 12 2008, 08:58

I buy over encumbered homes with out attempting any type of short sale. I would love to make you an offer.
I have been picking up many homes in Las Vegas.

Email me!

Mon May 12 2008, 08:35

Emily,
You DO have a 30 YEAR loan right?
YOU thought your home was worth 240k when you bought it.
Now you THINK it is worth 100k less.
You have only the mortgage payments invested, with ZERO down.
Your lenders aren't telling you to come up with 100k so stop stressin'.
Have you had your home appraised in the current market?
You have ONLY LOST MONEY ON PAPER.
You still have a home.
This market is crazy. It could boom again.
Wait and see. You COULD recoup the 100k in three or four years.
At that point, you can come out even, or ahead !
Have a little faith.

Sun May 11 2008, 13:00

If you can get out and rent it for a bit. You will get the rental. Maybe do a lease option. Because if you keep the house and buy another at a great low price. Did you know that your taxes would be almost nothing because if you have an investment property you can write a ton off on taxes.

Lori Vegas

Thu May 8 2008, 16:19

Ya know Phil, it would be nice if every Realtor knew how to do a short sale. That way there would be more approved short sales instead of foreclosures. But that's not the case. Actually, most Realtors can't handle them properly due to them being time consuming and very aggravating.

I am not sure where you heard that you don't need a Realtor to do a short sale. I can bet you that if you were in foreclosure and you tried to contact the bank as the homeowner doing your own short sale, the first question the bank would ask you is, "Do you have it listed with an agent?" In most cases, the bank never wants to talk to the homeowner. They know by listing the property with a professional, it will get sold closer to fair market value.

Thu May 8 2008, 10:25

You don't even need a Realtor to do a short sale .You can do it by your self by calling your bank.By now every Realtor should know how to do short sales

Wed May 7 2008, 19:49

I specialize in short sales. If you are thinking about doing a short sale on your home, please let me know. I will discuss everything about short sales with you and let you know how they work. There is a lot involved, but in many situations, it is worth it.

Like someone already stated below, banks are getting multiple offers on many of their properties. This is due to the banks lowering the list price less than fair market value. This strategy works to get buyers in the door and create interest. Many times these properties are getting sold way above the list price.

In the last 5 days I have put out 7 offers for my buyers. About 5 or 6 of them ended up having multiple offers.

Wed May 7 2008, 19:37

You can do a short sale on the property and sell the home for the current market value.What the heck is a short sale??.That is almost the same thing that credit card companies have been doing for years when you fall back in payments,negotiate with you and settle with a lower amount then your full balance.Banks do not need any extra inventory right now .Getting the house sold is better for the bank then having it sit vacant where it may become trashed,vandalized or maybe even stripped of copper in these days.My opinion is to start the short sale procedure, if you are upside down on your home.If you need help or questions feel free to contact me

Wed May 7 2008, 18:42

If you have up to three years, then just wait to list your home.
The market is turning around in Vegas as we speak. Prices started up in March in some areas of Vegas.
Within the last two weeks our team has written 10 offers, and half of those homes already have multiple offers.
Based upon the number of people moving into Vegas (over 6000 per month) and the shortage of applications for building permits buy the builders, the odds of the prices continuing to rise is very good.
In three years, your home should be worth more than when you bought it.

Wed May 7 2008, 10:49

Rent your home thus using it as an investment. Walking away and/or waiting for foreclosure is costly. Way more costly than what it would be for you to come up with new capital to relocate where ever you are headed in 3 years. By costly I mean in terms of damage to your credit and the nastiness of having poor credit in everything else you try to do. Ask me how I know.....been there done that, and just finally peeking my head out of that hole. I think the economy is in one of its natural down turns and will rebound eventually albeit 3 - 5 years. Just my 2 cents, I'm no expert, just a living witness :).

Sun May 4 2008, 18:08

Hi Rob,

I read your reply and understand that you may be thinking about renting your current home out and purchasing an REO property soon. Let me know if you would like my help with renting out your house and helping you find a nice REO property in your area. My office is actually located in Green Valley and I personally live in Green Valley. So I am very close to you. I have dealt with plenty of REO and short sale properties for buyers and sellers. With the education and experience I have, I am sure I can do a great job working for you. My contact info is below if you decide to look into those options. I appreciate any time you take to speak with me.

Len McGuirk
Prudential Americana Group
(702) 203-6688

Thu Apr 24 2008, 00:47

Hi Emily

I am in the exact same situation. We bought for 342000 in 2006 and now the comps in the area are 240000. We are stuck too. However, we are looking at possibly renting ours out probably for less than our mortgage. We have the cash and credit to buy one of the REO's more along the lines of what we want.

Yes, we lose a couple hundred a month, but sooner or later, the market goes back up and we reclaim our equity and break even on the current house and make money on the 2nd house to offset the loss. Not the best strategy for everyone though.

If you bought for 240K, your payments are probably around 1600/month is you did a 30 year fixed at 100% financing, so you should have around 5K paid off. If you add more to your payments, you could lower your balance owed substantially and get your home to break even status in a couple of years.

I would suspect the homes going for 140K are Repo's. Those will work their way out of the system over the next couple of years, then we will be back to normal sales of resale homes. The Repo's are dragging the prices down everywhere. In Green Valley, a home bought in 2004 for 450K is now selling for 250K as a repo. The resales in the area are about 350K. So once you clear out the repo's things will look a little bit better.

If you get foreclosed on, then you are part of the problem to begin with. I have heard of this strategy all over the city and frankly I think it sucks and should be made illegal. It just further complicates this mess. All that will happen is those who do this will get foreclosed on a 2nd time in a couple of years. If that happens, you should be put in jail for fraud.

Wed Apr 23 2008, 23:18

I've truly enjoyed reading each response to my situation. Some comments have been very educational and I thank you for taking your time to help me. I'm not sure what we'll do but I now have some other things to consider. I wanted to let you all know that foreclosure or short sale has never been a serious option for us. We do believe in honoring our word. I was just feeling very frustrated and wanted to know what other options I had. What gets me the most is that when we were looking for a home two years ago every single Realtor I talked to told me to not wait, to buy ASAP. What bad advice, even worse I listened. Well at least I've learned a lot and hope to never make the same mistake. If anyone else has anymore advice please don't hesitate to share. Thanks again!

Wed Apr 2 2008, 21:07

Hi Emily,

A few things about your situation and would agree with some other things mentioned here. Using listing prices in today's market isn't necessarily an accurate way to determine property value. You should use actual sales. There are many short sale listings priced below market that either may not be accepted, or have sales above listing price. There are also REO's in the mix that may also come in above asking, or in need of repairs that keep them below market. Obviously these properties have an effect on those that absolutely need to sell today, but that doesn't seem to be your situation.

The question is... how many of those homes will be on the market in 3 years? There's no crystal ball to specifically answer that, just as many others that purchased didn't imagine there would be a drop in home values 2 years ago. There are those analysts that are predicting a housing shortage in Las Vegas by 2009, due to all the hirings from the $30 billion construction boom, just in hospitality.

http://www.inbusinesslasvegas.com/2007/12/14/realdev.html

For you to do a short sale you would have to provide a Hardship Letter to your lender along with your financials. From what you've stated here, it doesn't appear that you can't afford your payments, have a job loss, or need to transfer. I don't believe the bank will accept your property value estimate or any loss in value as a hardship. I know of some short sales similar to your financial situation, where banks are willing to accept a short sale offer if the owner pays the difference in the form of another loan for the amount of forgiveness.

For you to purchase another home, you would have to have enough income to support both properties, need money down and pay a higher interest rate. You may have heard that mortgage standards have been tightened, lenders under much more scrutiny, and more resources being applied to investigate mortgage fraud. It wouldn't surprise me that applying for a second / investment home in the same city, while owning a home with negative equity, might generate a Suspicious Activity Report from your application. With those that have committed mortgage fraud and have contributed to most every homeowner losing equity in their property, it would seem that those doing as you suggest and buying a second property, followed by an intentional foreclosure, are just adding to the problem and may be the next wave on investigations. I would strongly suggest seeking legal advise before proceeding. There could be more consequences than just a severe hit to your credit.

Since it appears you're not under any immediate need to sell, I wouldn't suggest any hasty decisions. You may want to check refinancing options to see if your current payments could be reduced. Not only for any savings it could provide, but may open up rental options in the future.

Wed Apr 2 2008, 17:00

Emily, don't panic yet. While no one can predict the future, I personally think the housing market is going to come back a lot in the next three years. They are actually predicting a housing shortage again by 2010 after all the new mega resorts open. It is expected that opening MGM City Center, Fountainblue and Echelon is going to put over 100,000 new jobs in the city! This is a link to a blog article I wrote in early February of this year quoting the owner of Focus Group that there will be another boom.

http://las-vegas-real-estate-experts.blogspot.com/2008/02/bu…

Since that time, two major residential developments, Inspirada and Kyle Canyon, have been experiencing difficulties in financing and may not be nearly as built out as as anticipated. With all those jobs being created, there will be a pent up demand for housing that will hopefully alleviate the worst of the depreciation you have seen on your home.

In the mean time, your most valuable asset is your excellent credit rating and fortunately affordability does not seem to be an issue with your current mortgage payments. (That alone would disqualify you for a short sale. You have to prove you cannot afford the payments, that you have no other assets at all, and that circumstances beyond your control put you in this situation. A declining market does not count as a circumstance beyond your control.) If you do go through a foreclosure, not only will that affect your borrowing power in future years, the banks, if they think you have the assets, have the right to go after you for a deficiency judgement to repay the money .

Personally I would tell you to stick it out, hope the market recovers quite a bit, and save some money in case you need to make up a short fall. While this is not an attractive short term option, I feel it is the best one in the long term, and that 10 years from now you will be VERY glad you chose that course of action rather than go through a foreclosure that could conceivably haunt you for the rest of your life. If you have extra assets that would allow you to purchase a property, why not buy one of the ones in your neighborhood if they are going that cheaply?! That way you could rent it out without having a negative cash flow and still take advantage of the future appreciation. (Actually if you live in a neighborhood where the houses of your size are going for $140k and renting for $1200, I would love to know where that is so I can buy a few!)

A question, have you actually had an experienced agent run the comparables in your neighborhood rather than just relying on an online search? While fun to look at, those are not truly accurate. If you go to http://www.greatlasvegashomes.com you can register for a free market analysis that will give you better information.

Wed Apr 2 2008, 09:20

Hi's right.

I'll be honest, though. I just don't understand your underlying logic. You bought a house at the top of the market for $240,000 and now it's worth $140,000. You "want" to move out of Vegas within 3 years. You and your husband have excellent credit. But you're concerned that when you sell that you'll still be upside down. So you want to "bite the bullet" now, rather than later. Is that about right?

But then you go on and say: "Good thing about foreclosing on our home and buying a new one is we could get a lot more house for a lot less money and have a hope of earning equity on our home." Just as the old commercial on TV went ("I'm not a doctor but I play one on TV"), I'm not a judge, but let me play Judge Judy for a moment: Accept some responsibility. Be an adult. You made a dumb move buying in one of the most overheated markets at the top of the bubble. And now it's time to pay up. And apparently you and your husband can do that without great difficulty. You just stay there, pay your mortgage on time, just like you promised you would. You don't lose the house. You don't injure your credit. You don't make the lender pay for your mistake. Do NOT stick the lender with a $100,000 loss, then try to rebuild your equity on another property. I don't like Vegas and I'm not keen on gambling, but I've seen too many people on a losing streak figure that the next hand of blackjack, or the next roll of the dice, is going their way. You tell me: What's the usual outcome?

So, worst case scenario: You stay in your property. You make your payments. You live up to your obligations. And in 3 years you're still upside down. Probably by not as much. That's better than deciding after the fact that you made an unwise decision in your purchase, and walking away from it.

The alternative is to wreck your credit for 10 years. You said you wanted to move in 3 years. How'd you feel about being stuck in Vegas with lousy credit for another 7 years after that? Not a pretty picture.

Someone mentioned renting, and you presented numbers regarding the negative cash flow. There are ways to close that gap. You could do a tax lease, or use a land trust to accomplish the same thing as "rent to own." In both cases, you'd be able to pass the tax benefits on to the resident beneficiary. Thus, depending on their tax bracket, you might be able to charge $1,800 a month, and their net cost (after tax benefit) is only $1,200.

There are a number of ways to deal with your situation. Walking away is not one of them.

Mon Mar 31 2008, 15:28