Nevada recently enacted a new law regarding bank foreclosures that is bad news for REO listing agents and the banks but may be an opportunity for people considering investing in Las Vegas real estate.
AB-284 essentially makes the banks swear an affidavit that they have the deed as well accurate loan documents and appropriate signatures before they can begin the foreclosure process (a.k.a. issuing a Notice of Default or NOD). It also requires banks to list accurate payment options and debt amounts for all liens in default. Finally, it requires the bank to show proof that this information is delivered to the appropriate party, not just mail it out and assume it is received and understood.
The immediate effects of the law are that REOs processed by banks in Las Vegas has dropped to from 1500-2500/mo slightly over 50 in the last 30 days; in other words the REO (and to some unknown extent, Short Sale) pipeline feeding our supply has been cut by over 95% overnight.
Furthermore, there is currently no estimated timeline for how long it will take banks to implement systems that can effectively get all the proper documentation together and pick up where they left off in processing Notice Of Defaults (NODs).
We know that the so-called “shadow inventory” reserve of REOs that banks hold in LV currently sits at approximately 15,000 homes, so it’s not as if there won’t be any homes for sale in the immediate term. To the contrary, the selection of homes and the prices might actually be better now than they will be in any point in the short-to-medium term given what looks to follow in the coming months.
Here’s why:
Our current inventory of REOs on-the-market sits today at about 2500 homes. Given the current consumption rate of 4000 homes purchased/month by buyers in LV, and that the supply of forthcoming REO and Short Sale homes available has been stalled or altogether stopped in the last 30 days, there will be an impact – perhaps a drastic impact – on supply.
If the supply of homes available decreased (banks decide not to release shadow inventory to meet demand) and the market’s demand for purchasing 4000 homes/mo stays constant, pricing pressure on available homes would be inevitable. Given that the banks would make more if prices went up, this outcome seems possible.
If that occurred, current buyers might actually see equity appreciation in homes bought in the near-term. October was the first month in recent memory Las Vegas actually saw prices go up. We have no way of knowing what will happen with any certainty with prices, but we do know right now that the supply of bank-owned properties being processed and available for the marketplace has been immediately diminished and the timeline for returning to business as usual is indeterminate.
Find out how to take advantage of this great buying opportunity contact Stuart Sheinfeld
