Vegasagent’s Weblog

Today’s blog is bits and pieces of things that are currently going on in the Las Vegas real estate market.

Clark County commissioners have given final approval to plans for the $6 billion Las Vegas Plaza Hotel and Casino Resort (modeled after The Plaza Hotel in New York) to be built on the site of the former Frontier Hotel and Casino. Despite earlier rumors that the project was stalling due to a shaky credit market, Elad chief Miki Naftali said the project was “forging ahead as planned.” Elad also owns The Plaza in New York and a Las Vegas spokesman for the group says groundbreaking could take place later this year on the 3,500-room Las Vegas Strip project which is slated to open in 2011.

Deutsche Bank announced that it was going to be commencing foreclosure proceedings on the Cosmopolitan Resort Hotel and Casino on the Las Vegas Strip. According to Deutsche Bank, they have made arrangements with the contractor to continue with construction. And sales are still being made out of the sales center in anticipation that developer Bruce Eichner will either find additional financing or will be bought out of the project. The Las Vegas luxury condos are already more than 80% sold out and the Cosmopolitan’s location is the best on the Strip, making it desirable to potential purchasers or partners, and Eichner expects to reach an agreement before long.

Two major Las Vegas residential projects, Inspirada and Kyle Canyon Gateway, are having difficulties meeting their mortgage obligations. Inspirada, a 2,000-acre project, was supposed to give rise to as many as 13,500 homes. There have been about only about 162 homes sold so far, according to Focus Group, master developer. And some of the smaller partners that are joint venturing in the project are unable to meet their commitments, leaving the larger partners to either take on their portion of the debt and put more money in, or decide to walk away entirely. With existing Las Vegas new homes builders getting low on inventory, putting these two large projects on indefinite hold would certainly help stabilize prices.

The FBI is currently carrying out a number of investigations in the Las Vegas area, uncovering fraudulent schemes involving 14 financial institutions. Some of the schemes under scrutiny include artificially inflating home values and placing low income buyers and/or beginner investors into adjustable rate mortgages that they can’t afford when the rates reset and forcing them into foreclosure.

Currently Las Vegas foreclosures are among the highest in the nation and foreclosed inventory on the market has driven down prices in the city substantially from all time highs in 2005. Investment buyers are returning to the city to pick up great buys and benefit from the strong local rental market, while first time buyers are taking advantage of affordable housing. Lower priced single family homes under $250k are even receiving multiple offers, lending strength to the belief that the price decline may have bottomed out.

It is happening all over the country - unsuspecting tenants are returning home from work to find an eviction notice on the front door. The bank has aquired the property through foreclosure and the tenant has to get out of their current home within 30 days. The tenant almost never is able to recoup any of the rent money paid or get the security deposit back.

And in a market rife with vacant homes for sale, Las Vegas has more than its fair share of deadbeat landlords and unscrupulous property managers. Almost half of the 19,000 homes currently listed are Las Vegas foreclosures and many of them are Las Vegas new homes that were purchased by investors and have never been lived in.

One recent incident came to our attention:

A real estate agent who was renting a luxury 4500 square foot Las Vegas homes, came back to find the eviction notice on the front door. Immediately he called the property manager whose phone was all of a sudden disconnected. Doing some detective work he was able to track down the home’s owner who lived in South America and contact him by phone. Turns out that the “property manager” was an unlicensed friend of the owner. The owner had had half a dozen properties his “friend” was “managing,” and the “friend” was supposed to be paying the mortgages on them from the rental proceeds. (In Nevada, by law you must have a property management license to manage rentals that belong to someone other than yourself.)

Unfortunately, the “friend” never made a mortgage payment and absconded with the hefty security deposits and monthly rental fees being paid by the tenants. It also turned out that the owner had never even signed the rental agreement on this particular property. His signature had been forged and the “friend” had told him that this property had remained unrented.

The real estate agent’s chances of recouping his $4500 security deposit is almost nil. He has to find another home to rent and move his wife, three kids and brother plus assorted pets in a very short time. The owner’s home is already foreclosed upon and he lost all his equity to the bank.

How can tenants protect themselves from this happening to them?In Las Vegas, Noble Title Company is offering a $200 service for tenants called a “Request for Notice.” The service identifies the legal owner of the property and whether or not the property is currently in foreclosure. If the landlord is not in foreclosure, the Request for Notice requires the bank to notify the renter should the home go into foreclosure, which would give the tenant at least four months to pack up and move before the bank repossesses the home.

At least with this service, if the tenant receives a notice that the property is in foreclosure, they could opt NOT to pay rent to recoup some of their expenses and their potentially lost security deposit. And they wouldn’t be quite so jammed for time to find a new place to live. (The real estate agent mentioned above had a real problem. He already had his kids in specific Las Vegas schools, and there were no other large properties in that area for rent. He was not only forced to move his family to a different home, his kids had to move schools as well.)

So tenants beware! Even though you are only renting a home, you still need to do your due diligence to make sure you aren’t unexpectedly out on the street and out of pocket as well.

I just read this great article by Scott Burns, and thought I would like to share it with my readers! Makes great sense amid all the media hullaballoo. And for those with savvy, right now is a terrific time to buy Las Vegas real estate!

Sure, there are pockets of pain around the US, but it’s not as if most Americans are losing their homes. More than 99% of homes aren’t in foreclosure. By Scott Burns scott@scottburns.com

A recent list of year-end mortgage foreclosure rates in 100 top metropolitan areas drew a lot of attention. Released by RealtyTrac, a company that compiles data on home foreclosures, the list showed the number of foreclosure filings in each metro area, the percentage of homes being foreclosed and the percentage change from the previous year. Though the report had some dismal news — such as the nearly 4.9% foreclosure rate in the Stockton, Calif., area — a close look at the data also provides some reassuring information. It tells me, for instance, that the foreclosure crisis is a regional problem, not a systemic one. It could become a systemic problem, of course, but we’re a long way from that now.

This news will disappoint the gloom-and-doom crew and all those seeking the excitement of financial upheaval. But it may be time to temper our worry and take a closer look at some of the year-over-year foreclosure statistics: Though the national rate of foreclosure increased by a whopping 79% between December 2006 and December 2007, the rate was still only 1.033%. Because about 30% of all homes are owned mortgage-free, this means that for all the noise about a crisis, only seven-tenths of 1% of all homes were in foreclosure.

In the top 100 housing markets, the average foreclosure rate was somewhat higher — 1.38% — and it was up 78% over the previous year. (Even in the Valley, where the Las Vegas foreclosures at at 4.23%, most of those are investment properties bought in the heat of the boom.) But if you rank-ordered the list of the top 100 areas, only 34 had foreclosure rates above the group average. Fifty-one areas had rates of 1% or less. Foreclosure rates actually fell in 14 of the 100 areas. More important, many of the areas with the highest increases in foreclosure rates were rising off rates that were tiny. The Bethesda, Md., area, to offer the most extreme case, saw foreclosures rise 1,288% — to a rate of 0.682%. In other words, foreclosures there were virtually nonexistent the year before. Today they are still well below the national average. The same can be said for the Albany, N.Y., area (up 638% to 0.25%), the Baltimore area (up 544% to 0.73%) and the Providence, R.I., area (up 354% to 0.41%).

Another pattern emerges if you cross the foreclosure rates with the Office of Federal Housing Enterprise Oversight (OFHEO) index of home prices. It shows that the top 10 foreclosure areas in America are areas of extreme price change — changes far from the national average of 46.92% over the past five years. Seven of the top 10 foreclosure areas had experienced major price spikes in the past five years. Three of the top 10 foreclosure areas had experienced price increases that were dramatically lower than the national average.

That pattern continues when you examine the top 25 foreclosure areas. The seven areas with the top price appreciation for the past five years averaged a stunning 91.6% increase, nearly double the national average. The national average, in turn, was about triple the inflation rate for the period. (Las Vegas homes increased 88.3% over the past five years.) Small wonder the foreclosure rate is booming as well. Anyone who bought in the past few years with a 5% or 10% down payment has a good chance of being upside down as froth comes off the market. In those areas the problem is about irrational price spikes and the hazards they bring to homeownership.

Some would call this “a Cadillac problem” — a great problem to have, like having more boats than you have water-skiers. Though 5% of the homeowners may be losing their homes, most of the other 95% probably feel significantly richer.

Las Vegas new homes builders are running out of inventory and lower priced housing is starting to get multiple offers again. 2008 is going to be a better year for the Las Vegas market, for sure!

It never fails, there is always someone who figures out a brilliant scheme to beat the system. But instead of leaving while the going is good, they get too greedy and end up with their hand caught in the cookie jar. Some of these schemes are so brilliant and simple, you wonder why the perpetrators are not CEOs of major companies - or maybe some of them are!

Several years ago one such enterprising soul went around town and broke into over 40 HUD repos. These are Las Vegas foreclosures that are usually vacant, and it may take HUD a while to get around to processing them through the system. He then proceeded to replace the HUD sign with a “for rent” sign, rented out the properties and collected hefty security deposits as well as the first month’s rent.

But not content to take the money and run, this guy stuck around for over six months amassing additional rent. Until one day HUD wised up and the Feds showed up to arrest him as he was making his monthly collections. A couple who later became one of our clients was a tenant of this fellow who they said could not have been nicer. The had chosen the home because it was near the Las Vegas schools they wanted their children to attend.

Now a Las Vegas real estate broker and her husband are facing federal charges they made millions of dollars orchestrating a mortgage fraud scheme during the crazy days of sub prime lending.

U.S. Attorney for Nevada Gregory Brower says Eve Mazzarella, 30, and her husband, Steven Grimm, 45, were indicted Wednesday on bank fraud, money laundering and aiding and abetting charges.

According to the report, Mazzarella and her husband have been charged in connection with a scheme in which they fraudulently obtained mortgages on hundreds of Las Vegas homes here in the Valley. The feds say the couple submitted or arranged to have straw buyers submit loan applications which they knew contained false information and kept most if not all of the money for themselves.

“These schemers have contributed significantly to the demise of the real estate market in Las Vegas,” FBI Special Agent Steven Martinez said. “This type of fraud scheme impacts the real estate market generally. It’s like credit card fraud. We all pay a little bit more in terms of our credit card bills because of fraud. The same thing is true with mortgage fraud. We’re all victims

Grimm was arrested Thursday in Las Vegas and is due to appear Friday in U.S. District Court in Las Vegas. Brower says Mazzarella is being sought. If convicted, each could face decades in prison and millions of dollars in fines.

The government alleges Mazzarella and Grimm bought more than 200 properties at inflated values using limited liability companies and more than 400 straw buyers to make purchase offers.

The couple allegedly controlled transactions worth more than $100 million.

They allegedly defaulted on mortgage payments on many of the loans, causing at least 118 properties to be sold in foreclosure.