Las Vegas Has Repo Houses for Buyers Failed by KO Clauses
More repo houses will enter the housing market soon in Las Vegas, according to mortgage and foreclosure studies in the city, so prospective home buyers failed by KO clauses in purchase contracts need not worry about missing the low prices of repo houses.
Prospective buyers will have new inventories of repo houses to choose from, in addition to repo properties already in foreclosure listings.
According to market studies, more than 60 percent of home mortgages taken out in Las Vegas in the past several years are underwater. With the jobless rate soaring everywhere, most of these borrowers are expected to walk away from their mortgages as lenders refuse to modify loans if the borrowers are not employed.
In May, most of the houses sold were repo houses, pushing down the city’s median home price for single-family houses to $140,000, a staggering drop of nearly 41 percent from the May 2007 level.
Townhouses and condo units were sold at a median of $65,000, which is again a stunning drop of nearly 54 percent.
KO clauses refer to kick-out clauses or contingency clauses in home purchase contracts signed by buyers and sellers or agents. Under a typical contract with a KO clause, the buyer agrees to buy the house and pays a deposit, but retains the right to cancel the purchase if the condition written in the contract is not met, such as the sale of the buyer’s house or the approval of a home loan.
In the same way, the seller has the right to cancel the sale if he gets another offer and the buyer under contract is not able to meet another pre-agreed time limit in the contract.
For buyers who lose the chance to buy a house under a KO contract, either as a new buyer or as the buyer whose KO contract was canceled, there are still other home purchase opportunities in Las Vegas. They just have to look at foreclosure listings to see that there are lots of repo houses out there.
During the housing boom, home sellers did not have to be concerned about contingent contracts or KO contracts because of the easy availability of home loans.
Today, as lenders become stricter with their home loan screening, KO contracts are often used by buyers and sellers. Nevertheless, prospective buyers today have still many chances to choose from repo houses because of the expected entry of more foreclosures into the market.
