With foreclosures, it’s a (patient) buyer’s market

By Jeremy Twitchell

Monday, Feb. 16, 2009 | 6:05 p.m.

House inventories are increasing, prices are plummeting and Realtors are running ragged.

If there's a silver lining to be found in Southern Nevada's ongoing foreclosure epidemic, it's that those who are looking for a home couldn't ask for a better time.

As banks have lowered prices to get foreclosed homes off their books, the median home price in the Las Vegas Valley has fallen from a high of more than $300,000 in 2006 to $175,000 in December.

"This is such a phenomenal time for first-time homebuyers," said Robyn Yates, a corporate broker for Windermere Prestige Properties in Henderson. "That's the good side of what's happening, is that there is so much affordable housing available right now."

But as the sales of foreclosed homes rise, banks that are selling foreclosed homes or lending to homebuyers often become bogged down, meaning that buying a home will likely take several weeks, if not months.

"Time is probably the thing (homebuyers) need to prepare themselves for the most," Yates said.

Foreclosures once composed about 5 percent of her office's business, Yates said. Now they represent 80 percent of its listings.

Given the number of homes a home buyer will likely need to look at and the extensive approvals process required before a bank can accept an offer on a home, she said, homebuyers should give themselves three to four months from the time they start looking to the time they can expect to close.

But delays in the lending and purchasing processes are just one obstacle potential buyers of foreclosed homes should be prepared to face.

For starters, obtaining a loan has become a more stringent process, Yates said. Banks are requiring extensive documentation, and in addition to being approved by their lender of choice, buyers will likely be asked to qualify for a loan with the bank that is selling the home as an added measure of precaution.

"Underwriting is very strict right now, because of everything that went on with people not being able to make their payments," Yates said.

Homebuyers should also expect a number of expenses in addition to their down payment. Though most banks are agreeing to pay the closing costs, Yates said, buyers will need to pay for a home inspection, which generally runs from $250 to $750, based on the size of the home.

Depending on the outcome of the home inspection, buyers may need to pay for a mold or pest inspection. They often will need to pay for an appraisal and homeowners association documents.

Then, depending on the condition of the home, there may be additional expenses for repair, cleaning, painting, appliances, light fixtures and window coverings.

The condition of foreclosed homes varies wildly, Yates said. She's seen some that were left in pristine conditions and others that were ravaged. In one luxury home her company recently listed, the previous owner took all of the cabinets, the light fixtures and appliances, then poured cement down the toilets and drains.

Though banks generally have insurance policies on the home, Yates said, they will usually sell a home as-is in order to get rid of it.

Gorden Chu, a radiologist who last fall bought a foreclosed home in Seven Hills, saw his fair share of damaged homes while he and his wife, Ming, were looking.

The home they ultimately settled on was in very good condition. The previous owners took the light fixtures but otherwise left the house untouched. Still, getting the home ready for his family was a big project, Chu said.

"You buy the house and you don't realize how many little things you have to do until you're in," he said.

Chu said homebuyers should take their time. He and his wife took nearly two years to choose their home, during which time they were able to better understand the process and know what to look for.

"We just looked at all the houses and realized what we wanted, so that when we found the right one, we knew," he said.

And while Chu said it helps to work with a Realtor, that is a decision that homebuyers should also make carefully. The home his family bought wasn't their favorite while they were looking, but they chose it because they felt the Realtor was more sincere and easier to work with, he said.

"It's important because it's a lot of money," he said. "That's the bottom line. As long as (the Realtor) is ethical, that's what really matters."

Chu said he has many friends who are waiting to see if home values will continue to drop before they buy. He disagrees with that strategy.

"This is the time to buy," he said. "As long as you like the neighborhood and you like the area where you'd be living. … You might lose some money right off the bat, but if you're going to be living in the house even for just five to 10 years, you're going to see that money back."

Jeremy Twitchell can be reached at 990-8928 or [email protected].