Checking out the foreclosure auction in Honolulu

We have a listing in Makiki/Punchbowl that's a short sale.  The property went on the market a little more than two weeks prior to the scheduled foreclosure auction.  We felt the property was priced well at $750,000 for a five bedroom three bath house in Honolulu.  The buying public did not agree and we dropped the price to $550,000 to get offers on it.  And the offers rolled in, nine within a week!

I contacted the owner's bank and was instructed to send in the highest offers.  We did so and they said the offers weren't good enough, the property was going to be sold at auction.  I called again on the day of the foreclosure auction and they said there would be no postponement of the auction.

Attending the auction

Foreclosure auctions are held in front of the State of Hawaii Courthouse, located at 777 Punchbowl Street in downtown Honolulu.  Auctions normally begin at noon.

Fellow realtors have described the auction process to me. This was the first time I attended an auction to see what happens first hand. 

When I arrived, an auctioneer was posting auction property sheets on a wall for the public to view.  I did not see my listing.  I asked the auctioneer about it.  He said he is only here for the properties he posted, other auctioneers might arrive later. 

The auctioneer announced the properties and asked if there were interested bidders.  He specified the minimum bids and nobody was interested in the five or so properties he had.  He packed his documents up and we waited.

A short time later another auctioneer arrived with more property sheets.  This lady had a sheet for my listing.  After a few minutes she announced the properties and asked if there were interested bidders.  Once person who had submitted an offer on my listing said he was interested.  For an unexplained reason, she said the auction of this property was postponed for a month.  The bidder was disappointed and left.

One property sold that day

As the auctioneer continued, she postponed nearly every auction (of approximately 10 that she had scheduled).  Finally there was a property ready for sale and a buyer ready to bid.  The buyer showed the auctioneer his cashier's check (which must be at least 10% of his intended bid amount) and the auction began.  The lender's opening bid was $232,500.  The buyer bid $232,501 and there were no other bids.  The buyer won the auction.  There were no other properties to auction and the buyer sat down with the auctioneer to fill out the required paperwork.

I waited a few minutes more to see if anything else was going to happen.  The buyers left and that was it for the day.  I called the owner of our listed property, he was happy to hear that the auction was postponed.  When I got home, I called the bank and was told we can continue seeking higher offers and submit them for lender approval.

The property sold - did the buyer get a good deal?

I went home and checked the Oahu MLS listings.  Similar properties had sold or were on the market in the $280,000 range.  Sounds good - possibly saving $45,000.

Other considerations:

- Did he get to see the interior of the condo?  Significant damage or neglect could cost tens of thousands of dollars in additional repairs.

- Is the property owner or tenant occupied?  If yes, it will be the new owner's responsibility to get the occupants out of this condo.

- The contingencies in a normal purchase contract (home inspection, termite inspection, obtaining financing) don't apply in a foreclosure purchase.  Once the buyer gives the auctioneer his 10% down cashier's check, it is gone.  If he can't obtain financing or has any other problems, tough luck.

- If the buyer wants help or doesn't understand the documents and purchase process, he must hire someone for help.  In a normal purchase process, the buyer's realtor is compensated by the seller and the buyer incurs no additional charges.

Take a chance and buy a Hawaii foreclosure?

There's a safer way to do it.  Visit our Hawaii Foreclosures webpage and view the list of properties on the MLS.  These foreclosures can be purchased using the standard purchase contract and buyers have the usual contingencies.  When an offer is accepted, a buyer can conduct a home inspection and decide if the property is worth buying.  If not, he can cancel and the deposit will be refunded.

For answers to your questions about Hawaii foreclosures, please see our webpage or contact Mike Bates for more info.

Aloha!

Makiki preforeclosure listing