Real Estate FAQs

Q: WHAT IS BANK FORECLOSURE?

A: When a lending institution (often a bank but not always one) takes possession of a residence and requires the owners to vacate because they failed to make payments as stipulated in their mortgage loan agreement.

Q: WHAT IS A REO?

A: It stands for real estate owned, a banking term for a piece of property owned by a lending institution after a foreclosure. Banks are not in the business of holding and managing real estate and generally want to rid themselves of REO properties in a timely manner, but they also want to get fair value for those properties.

Q: HOW LONG DOES THE FORECLOSURE PROCESS LAST FROM THE FIRST MISSED PAYMENT UNTIL THE TIME THE OWNER IS REQUIRED TO VACATE?

A: In Nevada, many mortgages allow lenders to sell a property once an owner defaults without having to file a lawsuit. A lender begins the foreclosure process by recording a notice of default with the county recorder and mailing the notice to the borrower. This usually occurs after three to six months of missed mortgage payments. A borrower or any secondary lender has 35 days from the date the default notice is recorded to pay off the default and stop the foreclosure. At least three months after recording the notice of default, the lender can schedule a foreclosure sale if the borrower has not paid off the default amount.

Q: WHAT KIND OF FORECLOSURE SCAMS ARE OUT THERE THAT PEOPLE NEED TO WATCH OUT FOR?

A: There are many scams being perpetrated as scoundrels prey on worried homeowners facing the possible loss of their house. Some are:

-- Equity skimming: A "buyer" approaches you, offering to get you out of financial trouble by promising to pay off your mortgage or give you a sum of money when the property is sold. The "buyer" may suggest that you move out quickly and deed the property to him or her. The "buyer" then collects rent for a time, does not make any mortgage payments, and allows the lender to foreclose. Remember, signing over your deed to someone else does not necessarily relieve you of your obligation on your loan.

-- Phantom help: The "rescuer" charges outrageous fees for light-duty phone calls or paperwork that the homeowner could easily do, none of which results in saving the home. This predatory scam gives homeowners a false sense of hope and prevents them from seeking qualified help.

-- The bailout: In this scam, the homeowner is deceived into signing over title with the belief that he will be able to remain in the house as a renter and eventually buy it back over time. The terms of these scams are so onerous that the buy-back becomes impossible, the homeowner loses possession and the "rescuer" walks off with most or all of the equity.

-- The bait-and-switch: In this scam, the homeowners think they are signing documents to bring the mortgage current, but instead actually surrender their ownership. They usually don't even know they've been scammed until they're evicted.

-- Phony counseling agencies. Some groups calling themselves "counseling agencies" may approach you and offer to perform certain services for a fee. These could well be services you could do for yourself for free, such as negotiating a new payment plan with your lender, or pursuing a pre-foreclosure sale.

More information on avoiding foreclosure scams is available at The Nevada Department of Business and Industry's Nevada Housing Division Web site: www.nvhousing.state.nv.us.

Q: DO I NEED A REALTOR TO BUY A FORECLOSURE?

A: Although it is not a requirement, finding an agent experienced in foreclosures is usually a good idea, and some sellers will not accept offers from unrepresented buyers.

Q: DO I NEED A REALTOR WHEN BUYING A NEW HOME?

A: Again, although not a requirement, it is probably a good idea to hire a buyer's agent to represent you. Most of the time, your agent will be paid by the seller, but sometimes the responsibility for the agent's fee is open for discussion.

Even if you have to directly pay your agent, you can probably add that fee to the sales price, and it would be worth it because a good negotiating buyer's agent can save you thousands more than the commission. Your own agent will represent you, be your fiduciary and is required to disclose the positives as well as the negatives about the transaction.

If your contract contains a contingency to sell your existing home before buying, again, hire your own seller's agent to list your home. Be aware that buying before selling is not always in your best interest because hard bargaining goes out the window when you've emotionally moved out of your home.

Q: DO I NEED AN INSPECTOR WHEN BUYING A FORECLOSURE OR A NEW HOME?

A: It is always a good idea for any prospective buyer to hire his or her own inspector(s), regardless of whether it's a foreclosure property or a new home. Some problems with any home are not readily apparent to a casual observer, making at least one home inspection advisable. A full inspection at an auction may not be possible. Make sure you find out.

Q: HOW DO I PURCHASE A HOME AT AUCTION?

A: The first step is to get preapproved for a mortgage. Have your financial package ready to go before the bidding begins. Look in the newspaper classified or under "Home Auctions" in the Yellow Pages and on Internet search engines. Call nearby real estate agents to see if they're aware of any scheduled auctions. Add your name to mailing lists from local auction houses to be alerted to upcoming opportunities. Get a list of the properties up for auction. Get as much information as possible beforehand from the auctioneer to get a feel for which properties may interest you.

Visit the properties on the block. Auctioneers generally have a preview date during which tours of the house will be given, although this isn't guaranteed. If possible, have any home in which you're interested inspected by a professional inspector. This can cost several hundred dollars but will identify any significant problems that affect the value of the home. You may need to get approval to have the home inspected as a contingency, but bear in mind that contingencies of any kind reduce the probability of the bid being accepted at the lowest price. Some auctioneers only sell properties as-is. Decide how high you're willing to go. Mentally setting your maximum bid can stop you from spending more money than might be reasonable for a property, or losing a deposit. Realize that buying at auction involves some risks. In some cases, you can't withdraw a winning bid, even if you're not able to secure financing later. Penalties for backing out of a winning bid can be steep, often as high as 25 percent of the bid amount or whatever the bid deposit may have been. Finalize your mortgage if yours is the winning bid. Contact your lender as soon as possible after the auction to wrap up your financing and paperwork. Close escrow. Typically, you will have two weeks to 30 days to do this.

Q: HOW DO I REPAIR MY CREDIT?

A: Dispute any errors in your credit report and pay off any outstanding debt. Pay all of your bills on time. Late payments (payments that are 30 days late or more) have a negative effect on your credit rating. Reduce the number of credit cards you carry. Write to your creditors to request that they close your accounts and report this status change to all three credit-reporting agencies. Avoid bankruptcies, tax liens (a lien for not paying state or federal income taxes or property taxes) and collections. Request in writing that your creditors reduce the credit limits on your accounts to lower your amount of available credit. The total amount of available credit is considered by lenders even if you owe nothing. Ask a family member or friend to co-sign on a small loan or credit card to help you re-establish credit, or get a secured credit card to help you reestablish your credit. You will have to keep a designated amount of money in an account that will be sufficient to cover your charges. Make payments on time.

Q: WHAT IS FICO?

A: The term comes from Fair Issac Corp., which began the credit scoring system in the mid '50s. It is used by many mortgage lenders to determine the risk factor of the loan. FICO scores range from 300-850, and most people score in the 600s and 700s (higher FICO scores are better). Lenders buy your FICO score from three national credit reporting agencies (also called credit bureaus): Equifax, Experian and TransUnion.

Q: WHAT IS A SHORT SALE?

A: A short sale is when you sell your home for less than you owe on your mortgage. Most people do this to avoid foreclosure. Sometimes the bank takes the loss and sometimes the lender will ask you to share in the loss. That means you sell your home and could owe a balance on the loan after the sale of the home.

Q: WHAT IS A REVERSE MORTGAGE?

A: You must own your own home and be 62 years old or older to qualify for a "reverse" mortgage. It is a loan against your home that you do not have to pay back for as long as you live there. With a reverse mortgage, you can turn the value of your home into cash without having to move or to repay the loan each month. The cash you get from a reverse mortgage can be paid to you all at once, in a single lump sum; as a regular monthly cash advance; as a "creditline" account; or as a combination of all of the above payment methods. Lenders recover their principal, plus interest, when the home is sold. The remaining value of the home goes to the homeowner or to his or her survivors. If the sales proceeds are insufficient to pay the amount owed, HUD will pay the lender the amount of the shortfall. The Federal Housing Administration, which is part of HUD, collects an insurance premium from all borrowers to provide this coverage.

Q: HOW DO I SELL MY HOUSE IN A DOWN MARKET?

A: Price your home realistically and don't expect to make a killing. Scope out other houses for sale to find out what amenities and incentives other sellers are offering. Consider paying discount points to lower the buyer's mortgage rate, paying closing costs, providing flexibility about the move-in date, or even offering a premium to the buyer's agent. Make any repairs or upgrades necessary for the new owners to assume immediate occupancy.

Q: HOW FAR HAVE LAS VEGAS HOME PRICES DROPPED?

A: According to S&P Case-Shiller home-price index, home prices in the Las Vegas Valley have dropped 26 percent from March 2007 to March 2008.

Sources: S&P Case-Shiller, Consumer Federation of America, Nevada Department of Business and Industry, Nevada Housing Division.