The housing crisis has dropped home values all over the country, yielding some attractive deals for home buyers. But nowhere have prices fallen farther than in the so-called sand states: Arizona, Florida, California and Nevada. Take Henderson, Nevada for example. Here’s a place where you can buy a bank-owned home that was formerly worth a million dollars for less than $500,000.
At the time this article was published, there were nearly 2,200 bank-owned homes in Henderson, Nevada. Most of these homes are priced well below the peak values we saw five years ago. For anyone planning to buy a home in the Las Vegas metro area, they represent an excellent investment opportunity.
As part of the Las Vegas Metropolitan area, Henderson was also one of the cities hardest hit by the foreclosure crisis. That, combined with soaring unemployment, is what accounts for the high number of bank owned homes in Henderson, Nevada.
What’s a Bank-Owned Home, Anyway?
If you’re not familiar with bank-owned homes, here’s a quick primer. There are three basic stages of the foreclosure process. The first stage is referred to as pre-foreclosure. This is when the homeowner has defaulted on a mortgage loan, but the lender has not yet foreclosed on the property. When you buy a pre-foreclosure home (through a short sale, perhaps), your offer must be accepted by both the homeowner and the lender.
After the lender foreclose on the home, they usually try to sell it through an auction. This is the second stage in the foreclosure process. Buying a home at an auction is a good way to save money, but it’s also better left to the experienced investors. If you are not familiar with the auction process, you could end up paying too much for a home that needs a lot of work.
Then we have the bank-owned homes. If the home does not sell at an auction, it will go back on the market as a bank-owned home. Sometimes the lender will skip the auction process altogether, if they feel it’s not warranted. In either case, that property is now designated as a bank-owned home (also referred to as REO, or real estate owned).
The benefit of buying a bank-owned home is that you’re only dealing with the lender. The homeowner has been removed from the equation altogether. Price-wise, these homes typically fall in between regular listings and auctions. They are usually cheaper than the former but more expensive than the latter. In other words,buying a bank-owned home in Henderson, Nevada (or anywhere else) is a way to pay less than market value. But you won’t get as good a deal as you would through an auction or a pre-foreclosure sale. Granted, there are exceptions to every rule. But this is generally how it works in the foreclosure world.
How much cheaper are they? It has a lot to do with how long the home has been on the market. “You can buy foreclosures for as cheap as 30% or 40% below market,” said John T. Reed, editor of Real Estate Investor’s Monthly. “But most foreclosures sell for 5% below market.”
For the novice home buyer, most experts recommend buying a bank-owned home over an auction or pre-foreclosure property. According to an article on Bankrate.com: “Bank-owned properties offer the safest deal for inexperienced foreclosure buyers … There’s no risk. There are no taxes, no liens, no tenants to evict.”
A Lot of House for the Money
I look at foreclosure data day in and day out, as part of my job. But the numbers don’t always tell the full story. So I went on to Realtor.com, Trulia.com, and several other real estate websites to see what you could get for the money in Henderson, Nevada. While there are plenty of good deals to be found, some of the best deals were the bank-owned homes in Henderson.
Consider the following example. I found one bank-owned property for less than $500,000 that probably would’ve been worth $1.5 million at the height of housing boom. The tax assessment was significantly lower than the listing price, so you could probably make an offer for less and still get the bank’s attention. This home had five bedrooms and four bathrooms, with a combined total of 4,000 square feet. It had a custom-built swimming pool, and is sat on nearly an acre. Granted, there aren’t that many home buyers in Henderson, Nevada now. But for the few who are qualified to get a mortgage loan, it’s like being a kid in a candy store.
The Bottom Line
There are plenty of bank-owned homes available in Henderson, Nevada. Buyers can generally get these homes for less than their true market value. You might not get them as cheap as you would through an auction, but the process is typically safer. When the property is owned by the bank, you can be reasonably sure that the title is clear (robo-signing aside). You can also get title insurance to protect your investment. And you’ll have the opportunity to do a home inspection when buying a bank-owned home, which is not always possible when buying at an auction.