Davids’ Big Island Mauna Lani Real Estate

October 24, 2009

Foreclosures in Hawaiian Paradise; What are the risks?

Filed under: Luxury Investment Big Island Real Estate — David C. Swanson @ 12:48 pm

Why should you or shouldn’t you buy a foreclosure?   Pros & cons  exist.  No matter what buyer category (2nd home, investor, rental income, etc.)  deals on foreclosures  can be found in the Mauna Lani Resort and other Big Island districts and resort areas.  Prices are discounted but there is risk.

It is essential to understand the pros and cons before making a purchase.  Good advise can be obtained from professionals who know the facts.  Consult those who have the knowledge and not what you have heard from a friend or associate.

Foreclosure 101:  There are several types of properties know as “foreclosures”. Pre-foreclosure (also know as short sales), the homeowner defaults on loan obligation & wants to sell to avoid going into full foreclosure (referred as REO).  Foreclosures  becomes property of the bank/lender.  Deed is surrendered & property is now REO (real esatae owned) by note holder. 

Pros: Lender & seller agree in terms to sell in a hurry with listing price reduction.  Buyer is at advantage.  Lender does not want to be in the real estate business and are often willing to  offer discounts; the longer they hold these properties, the more it costs in terms of taxes, maintenance, etc.  All sorts of price points are available & a buyer can find equity, appreciation and cash flow in a foreclosure purchase.

Cons:  Buyer can find aggressive competition from other buyers.  Critical to know what you are getting involved with the purchase.  A pre -foreclosure can be misleading.  Property could be priced higher than actual  worth to satisfy both homeowner (pay offs), and bank (recoup debt).  

The key is to work with an agent or broker who has distressed property experience.  Ask the right questions.  What happens if property is auctioned?  Do I have to buy with  all cash or will a lender offer a loan for distressed property? 

Foreclosured sales have a “laundry list” of problems or issues that a buyer must be aware of and prepared to absorb other costs.  Costly repairs, liens attached for property tax, association dues, legal fees to evict tenants/owners etc. can add up to substantial numbers. 

In general, this is blog post is only the tip of the iceburg in being a foreclosure pro.  If you have the reason to own a piece of paradise to live your dream, OK, get your feet wet.  In my opinion, it is the best time to own Hawaiian real estate.  Prices are down, mortgage rates very competitive, property taxes  lowered and the question remains, “Why not now?”

You say it is the time.  You need to do your research.   Go online to reputable websites to begin your step to buy real estatein the foreclosure marketplace.    Talk to people who have bought foreclosured properties.   Find the facts.  Get an agent with experience and a track record in closings in foreclosures and short sales.   Have your list of questions handy. 

Be prepared and ready to take advantage of real estate deals  in this current declining Hawaiian market.

Purchasing  foreclosures in paradise can be lengthy and time consuming process that’s full of red tape.  It is essential (mandatory) to understand the pros and cons of buying foreclosure before getting in over your head.