Foreclosures

I. Introduction to Foreclosures in Hawaii

II. To Bid or Not to Bid at the Foreclosure Auction?

III. How to Find Foreclosures

IV. Buying Bank Owned Properties (REO's)

November 2010:  You've probably heard about the foreclosure mess with the "robosigners" moving against home owners without a proper review of the paper work.  Most of that has been cleared up although some investigations into the matter are still going on.  For the future it appears that foreclosures will continue.

The way it's been working is that in order to not flood the market and drive prices even further down, the lenders are releasing foreclosed properties only as those listed for sale sell and only in that price range.  So, if the bank is holding 10 homes under $400K and another 10 between $400K and $750K and 2 homes sell at $375K, the lender would release 2 more homes in the under $400K price range onto the market but not any in the $400K to $750K range until one of those sells.

The "shadow inventory", those properties being held back by the lenders, is rumored to be between 2 million and 7 million homes.  If that's the case, we'll be seeing foreclosures on the market and driving market price for at least another year, more like two years.  As long as you make sure that you can get Title Insurance on your purchase buying a foreclosure should not be a problem.

Foreclosures in Hawaii are becoming everyday events.  As more people are unable to make mortgage payments and unable to sell their property because they owe more than the current value of the property, foreclosures come into play.  We have judicial and non-judicial foreclosures here.  For an owner, the biggest difference is that with a judicial foreclosure, the lender can not come back to the past owner and demand money to make up the difference between what was owed and what it sold for known as a deficiency judgement.  There really is no difference for a buyer of foreclosed property.

Typically, foreclosure proceedings begin when a party falls 90 days behind on their payments.  The owners are given notice and many times offered counselling or loan modification programs if they qualify.  Banks do not want to own any more property and in a foreclosure, any second mortgages on the property don't get paid so holders of seconds don't want to foreclose either.

Should it get to the point of foreclosure an attorney is assigned in a judicial foreclosure who offers times to view the property, keeps it in the paper for a set number of weeks then takes it to auction.  Auctions in West Hawaii are normally held on the steps at Hale Halawai in town.  The bank will usually make the first bid at the amount owed on the property, usually more than it's worth.  If they prevail at that point, they will take title to the property and turn it over to a broker they work with to sell the property.

If an individual wants the property, they can bid against the bank and must have 10% of the winning bid price available at that time.  The remainder of the financing must be procurred within 30 days.

To Bid or Not to Bid is not usually a question in this market.  In almost every case the bank will bid whatever is owed because since they are owed that amount, that dollar figure is considered their collateral, it doesn't cost them any money if they bid the amount owed.  When foreclosed prices are closer to owed amounts, bidding may net you a good deal.  Today, the banks will usually walk away with the title then put it on the market at a much lower price.  Why, because now they want to sell it and it won't sell above market value. 

This is the time when a foreclosure can be a good deal.  Bank of America/Countrywide are known to put properties on the market well below market value just to get multiple bids that result in competitive bidding and getting more for the property than they might have otherwise gotten by listing it at market price.  They also generate activity is a slow market by having a very low price knowing they don't have to accept any offer made.

How to Find Foreclosures, simple, fill out the form below and you'll receive a weekly list of foreclosures on the market or click here for a list of foreclosures that I try to update weekly.  The other way is to go through all MLS listings and look in the remarks box for the words "Foreclosure".  Having the list sent to you along with corresponding MLS numbers may be the easier way to go.  If you're concerned about your contact information, please read our Privacy Policy and rest assured that the only reason we want your e-mail address is to forward information you specifically request.

Buying Bank Owned Property (REO's) is just like buying anyother property only different.  REO stands for Real Estate Owned and refers to bank owned property.  It's just like other purchases in that you will normally submit a standard forms Purchase Contract with your offer.  In return, should your offer be accepted by the bank, you will receive, if you're working with Bank of America (our largest foreclosure company today) a 14 page addendum that lays out their terms.  As you may guess, this document is heavily weighted in favor of the banks.  Either you go along with it or no deal.  It's a reasonably fair document when you consider they are dealing with hundreds of thousands of properties.  They will not normally do a staking or make any repairs or give any type of disclosure on the property.  It never hurts to ask for some of these things and occasionaly they do come through but you do have to ask.

Using Bank of America or whomever holds title will usually result in lesser fees and a faster close.  Not only do you save on bank fees but since the bank is normally working with one title company, you may also save money in escrow by using their recommended company.  Closing is typically between 45 and 60 days, just like a standard closing and it all depends on financing.

For additional information on foreclosures, please return the contact form below.