With large quantities of so-called “distressed properties” inflating the US real-estate market, tides of savvy investors are eager to chip in.   “Distressed properties” may refer to foreclosures or pre-foreclosures, short-sales or REO – properties.

Foreclosure is the process whereby the bank takes possession of the property after the property owner fails to pay their mortgage dues. “Pre-foreclosure” is a term often used by the banks to market the property   as a distressed asset.

Short Sale – selling a property for less than its mortgage amount. Banks would often prefer this option as it saves them the fees, and costs and the waste of time associated with foreclosure procedures.

REO stands for Real Estate Owned property. Once the foreclosed property fails to sell at an auction, the bank is forced to take it back into possession, maintain it and prepare it for sale. REO deals are usually the most profitable for buyers since the banks are motivated to sell the property as quickly as possible and are willing to sell for significantly reduced price.

Short Sales are preferable by some buyers because the home is still occupied and may require less maintenance and repairs than, say, foreclosed property. However, in case with a Short Sale, the seller is less pressured to sell and sometime will wait for the highest bid. Therefore, prices here are not as low as with foreclosure or REO-property. Also, Short Sale deals are often embroiled in lengthy bureaucratic processes and may literally take months to get approved.

                        With Foreclosure, there is a better chance to get a bargain, although bids from other buyers may steal your deal.  Also, foreclosure deals are more risky due to legal issues that might come up, and due to the fact that the property sells “as is”.

                        REO-properties might offer the best value as it is the last stage of the foreclosure process. The house didn’t sell as a Short Sale, it failed to sell at an auction and the bank had to repossess it, keep it and prepare it for future sale. At this stage, the bank will be most motivated to get rid of the property and will be open to substantial discounts in price.  However, the downside here is the maintenance issues. Usually, the property hasn’t been occupied for such lengthy periods of time that major maintenance and repairs are in order.

                        Each situation is specific and buyers are advised to assess all aspects of a deal before committing to it. Distressed property deals may be tricky and it is always recommended to hire an accredited professional who will help to maximize profits and minimize risks of such deal.

While purchasing a REO/foreclosure seems to be a real bargain, buyers should carefully consider all the pros and cons of buying REO  in order to make a sound decision. Too often uneducated buyers jump in on the hot deal only to be faced with not-so pleasant surprises later. However, hiring a professional realtor experienced in foreclosures/reo properties, in addition to doing your own homework can turn the deal into a highly profitable venture.

There are many advantages to purchasing a foreclosed property.  Clearly, pricing tag is much more attractive compared to a conventional sale. The seller is motivated to get rid of the property therefore is willing to significantly lower its price in order to expedite the sale. During the pre-foreclosure stage, the seller is obliged to disclose the property condition and the buyer has the right to inspect the property. While the foreclosed property being auctioned is unavailable for inspection, when buying an REO property, the buyer is able to conduct inspection of the premises.  Finally, in pre-foreclosure, the seller will sometimes will cover the closing costs.

Despite its “bargain” appeal, distressed/REO property also comes with many risks that shouldn’t be discounted. For one, low prices attract many potential buyers and that results in fierce competition. Also, the foreclosed properties sold at an auction must be fully paid at closing, right at the auction. An obvious flaw with the auctioned home is the fact that they are sold “as is” and cannot be inspected. The buyer might be faced with legal issues as evicting the tenant still residing at the properties. Legal issues are not ending there; the deal might be further encumbered by   liens, unpaid property taxes and property title issues.

The foreclosures in Las Vegas have created frenzied activity that’s been driving the injured US real estate market. Purchasing foreclosed properties, bank owned and reo properties has been luring investors incentivized by high returns. With a booming rental market, investing in properties for rental purposes has proven to be a smart choice. Las Vegas has also traditionally a popular destination for retirement residence for those who can afford buying a place. In addition to resort stay and retirement living, Las Vegas appeal extends to diverse range of outdoor recreation. All these, and its fabulous weather,   excellent quality of life, combined with low costs of living and an absence of personal income taxes have placed Vegas high on the list of best places to live. In fact it has been chosen number 1 out of 10 Top Undervalued Best Places to Live by the US News & World report.

Not surprisingly, Las Vegas also ranks high among the boom- bust cities that have been hit by recession and slowly make their comeback on the market. The inventory of Las Vegas foreclosures and reo-owned properties  is diminishing at a record pace as many are realizing the potential of investment in Las Vegas real estate. Interactions involving Las Vegas foreclosed properties, reo properties and Las Vegas  short sales have been dominating  Las Vegas real estate market, with almost half of these transactions being  cash payment purchases. Those who are hoping to invest in Las Vegas real estate are better act quickly before the inventories run out of the bargain deals.

The recent inflating of the US real estate market by distressed properties has been dubbed by realtors “Summer Clearance Sale”. According to CNN Money, home prices already reached a third of their peak prices and are expected to continue to fall through the summer. Prices are expected to dive due to several reasons: first, US property already reached their lowest price since the real estate bubble burst, therefore sellers are pressured to sell before their homes depreciate even further. Second, the inventory of homes for sale has exploded with distressed homes, including foreclosed properties, short sales and bank-owned REO properties. Finally, high unemployment and tightened credit criteria have limited housing demand driving prices even lower. All these factors are about to create the biggest yet “clearout sale” in the US real estate market this summer.

                        Inventories will continue to expand as more distressed properties go into foreclosure. Many houses have been in the foreclosure limbo as the process has been slowed down due to bureaucratic reasons. For example, Las Vegas foreclosures, REO and Las Vegas short sales have comprised nearly half of all Las Vegas real estate inventory last year. Foreclosures have also represented close to half of all sales in the states of Arizona and California. These properties are selling at phenomenally low prices, especially the REO properties(homes repossessed by the bank after they failed to sell at foreclosure auction). As a rule, REO properties are priced about 35% lower than other comparable properties and in some states even cheaper. For example, in New York State, Illinois, Ohio and Wisconsin, REO is priced close to 50% of the value of all other marketed properties.             

References: http://money.cnn.com/2011/06/01/real_estate/summer_clearance_sale/?section=money_latest

While the foreclosure activity is slowing down in the US cities hardest hit by the housing crisis, the wave of foreclosures is still crashing on the majority of the US cities. The states with the most of foreclosure activity as per last year include Florida, Nevada, Arizona and California. Once being booming real estate markets, these states are now still deep in the housing crisis since their economies were mainly dependant on the real estate and construction industries. Recently, more states are joining the foreclosure epidemic, forming the second foreclosure wave mainly caused by unemployment and stagnation rather than sub-prime mortgage crisis. Boise City, Idaho, Greely, Colorado and Atlanta, Georgia recently have joined the list.

Out of all cities, Las Vegas, Nevada, has topped the list. Last year alone, Las Vegas registered 88, 198 foreclosure listings, meaning one out of nine properties was in distress. Like most states with a record foreclosure activity, Las Vegas foreclosures have been slowing down recently.

The number of distressed properties in Las Vegas, including Las Vegas foreclosures, Las Vegas short sales and REO properties created a lucrative market for outside investors hoping to cash in on profits. Many real estate firms enlisted their services to help create and capture value in Las Vegas real estate. With such a high volume of foreclosures in Las Vegas real estate that often sell for 40% of their peak value, the city has seen tides of investors flocking in eager to scoop up the profits. Uniquely positioned as a gaming and an entertainment capital of the world, with its luxury lifestyle, low living costs and promising employment prospects, Las Vegas presents a unique opportunity for real estate investors.

References: http://blogs.forbes.com/morganbrennan/2011/01/26/the-worst-cities-for-foreclosures-in-2010/

The US real estate bubble was caused by deregulated banking practices producing easy credit and risky mortgages. After the stock market crash, or the “dot-com” crash in year 2000, and the subsequent recession, interest rates have dropped to historic lows, from 6.5% to 1%. These low interest rates, combined with easy mortgages created a compelling incentive for many to buy real estate. Also, home ownership mentality and real estate investment fever added to that incentive to buy, buy, buy. In the midst of the real estate boom, lenders promoting real estate purchase by providing risky mortgages, such as subprime mortgages, adjustable rate mortgages, interest-only mortgages and stated income loans, (which basically did not require documentation proving stated income, also dubbed ‘liar loans”).  In many regions, these non-standard mortgages comprised the majority of all loans.

                        Then, between 2004 and 2006, interest rates have risen dramatically again, eventually reaching 5.25%. This raise in mortgage interest forced many homeowners to go into delinquency and eventually lose their homes. In March 2007, the sub-prime mortgage industry collapsed due to sheer volume of the foreclosures, with 25 lenders going out of business and declaring bankruptcy. Thousands of homes were foreclosed, were sold as short sales or were repossessed as REO properties.

Now these distressed properties attract investors from US and abroad who buy the real estate in hope to profit when it appreciates in value again. Real estate interactions involving distressed property have been on the rise even as the overall house sales in the US have been decreasing. For example, the rates of foreclosures in Las Vegas have broken all records, with nearly 80, 000 homes going into foreclosure in 2009. Las Vegas foreclosures, Las Vegas short sales and REO properties last year comprised close to 40% of all real estate transactions, nearly half of them being cash purchases.

According to US Bloomberg Businessweek, US existing homes sales are on the rise due to increase in the volume of distressed property. Delinquent or foreclosed properties add to the inventory of homes for sales in the US, and push the sales figures up. Distressed properties, including foreclosures, short sales and REO comprised about 40% of all transactions this year. Many of these distressed properties were priced under $100,000 and up to 35% sales were cash transactions.  Sales of these cheap assets were on the rise comparing to last year figures, while overall sales have decreased. More homeowners are expected to lose their homes in the coming months, as homes continue depreciate in value, employment is still weak and loan rules are getting stricter. Even with the added recent activity, US housing market is still slow, home prices are expected to depreciate further and it might take long months before they reach their pre-crisis value.

As more foreclosures and bank REO properties add to the “shadow inventory”, supply of homes for sale grows more and more.  At the current pace, it will take over 8 months to sell this extra supply of homes. For the Home Building Industry, this trend translates into profit loss. The National Association of Home Builder’s confidence is at all-time low. KB Home, LA Builder company reported higher than expected losses for the last quarter, and said they don’t expect net profits for 2011.

However for those who can afford it, buying REO has never been easier. Many are lured by the opportunity to buy distressed properties that cost only a fracture of their peak value. For example, it is possible to buy a REO or foreclosure in Las Vegas for $100,000,         while the same amount is merely  a downpayment for a comparable property in Toronto.

Las Vegas real estate is on sale. Whether shopping for Las Vegas foreclosures, REO bank owned or short sales, there are plenty cheap houses for sale in Las Vegas to choose from. With diversified real estate communities – Luxury Homes, Golf Courts Communities, Retirement residences, Master Planned Communities, Las Vegas has different options for any demographic group.

 The city growth and development, along with strong employment and healthy economy classify Las Vegas as the fastest growing city in the US. According to Forbes and Price Waterhouse, Las Vegas is the fastest growing economy in the country. While its hotel and gaming industry are prominent, Las Vegas economy is diversified and has a growing high-tech sector as well.   Constant job growth and expanding quality labour pool are economy variables predicting further growth.

With so much going on, Las Vegas has been attracting influx of new residents and real estate investors. The city supply of foreclosures, short sales and REO properties has been selling at a head-spinning speed. The bargain prices have incentivized investors from all over the country, as well as abroad. Buying a REO property for own use in hope to resell it later, or buying for rental use have proved as shrewd strategies. The properties slowly start to bounce back and appreciate, and rental demand guarantees high returns for property owners who often purchase the property with cash.

When a home owner defaults on her mortgage payments, a few possible scenarios that can place:  either the lender forecloses the property, the property is offered for short sale, or if the foreclosure fails to sell at an auction, the bank/real estate firm is forced to take it back as a bank REO and keep and maintain it until the property sells.

Short Sale means that the property is sold for less that the full loan worth. Usually, when the homeowner defaults on payment, the house will go into ‘pre-foreclosure’ process (marketing term used to attract buyers). If the bank manages to sell the house before the foreclosure as a short sale, they’d prefer that option. Even though the lender will not recover the full amount of the loan, they will still save money on various fees and costs associated with the foreclosure.

Foreclosure means that the lender/bank takes possession of the property once the owner fails paying their mortgage loan obligations. The property is then auctioned off at a Trustee Sale in court. When buying a foreclosed property, it must be paid in full at the auction. Buying a foreclosed property involves several risks, such as liens, title problems, maintenance problems, etc. that might come to light only after the property is purchased. Therefore, buying a home in court is considered the most risky way to purchase real estate.

REO stands for Real Estate Owned property.  In case the foreclosed property fails to sell at an auction for whatever reasons, the distressed property becomes bank REO. The bank then needs to maintain it and upkeep it till they find a new buyer. Often banks will hire a real estate agent to help them with the sale. To facilitate and expedite the sale, banks will offer remove any liens against the REO foreclosure as they are interested to release the property as soon as possible. Therefore, buying REO offers the best opportunity to find a good deal on a distressed property.

 Las Vegas real estate market offers unique investment opportunity unparalleled by anything seen before. While the US market has experienced the deepest housing and credit market crisis in the recent history, and is still volatile and slow to recover, some states and counties show a faster recovery. Some of the traditionally popular real estate markets-in Florida, California, North and South Carolina, Nevada and Arizona show vital signs of recovery, driving the US real estate market out of recession. Las Vegas has been evaluated by some real estate firms as the most promising real estate market in current time. City development and growing employment, combined with outstanding climate, excellent quality of life and entertainment options all magnify the appeal of Las Vegas real estate investment. Las Vegas’ growing employment is increasing demand in housing which in turn guarantees the appreciation of real estate.

Due to these factors, Las Vegas real estate market has seen unprecedented surge of activity in the recent months. Its range of real estate properties, including high-rise condos, luxury homes, vacation homes, retirement residences, golf courses are now going at a speed of a forest fire. Out of thousands of properties listed, almost half have been already purchased by US and foreign investors, plenty of them for one cash payment.  Las Vegas foreclosures,    short sales and reo properties are being offered for phenomenally low prices. Those investors purchasing for their own use, either for long term holding or short-term flipping, or rental conversion are all in for substantial profits. Although there has been a debate whether the real estate in Las Vegas will appreciate again and how much rental demand will rise, statistics show high returns on recently purchased Las Vegas real estate properties.