Roxy's Top 5 Hints on Buying Foreclosures in Hawaii

Foreclosures have increased in the state of Hawaii with the Big Island having more than it's fair share.  According to Pacific Business News, Hawaii now ranks 15th in the nation. In April 2008, Hawai'i ranked 48th.  However, the number of properties going into contract is dramatically increasing with multiple offers even being brought in on choice real estate during the past few months.  The Big Island market is without question, picking up a bit in numbers being sold for the past 3 months.  The best silver lining in this cloudy real estate market, is that many homebuyers who were priced out of the market in 2005 and 2006 are now able to purchase a home.  However, it is still a tough road for many people who are struggling to hold their homes.  I think we are finally beginning to see a light at the end of the tunnel (and it isn't another freight with bad news).

I am an agent with Century 21 All Islands in Kailua-Kona Hawaii who probably carries the largest inventory of REO properties on the island.  Here are the Top 5 items I think buyers should consider when purchasing a foreclosure property after spending time in the trenches.

1)  More than likely there will be NO seller disclosure on the properties.  This translates into the BUYERS need to practice extra diligence in doing their inspections during the inspection period allowed which  may be shorter than they would like.  The listing agent is probably not a licensed building inspector or contractor and probably doesn't know the properties history.  The buyer's agent probably won't either.  This means the buyer needs to hire ALL the inspectors necessary and check out the county's history of the property.

2)  Although the banks will initially request a relatively quick closing, be prepared for delays once escrow is opened.  The transfer of title frequently has issues due to a variety of factors and the more properties going into foreclosures means that the more often a step is missed.  The bank who foreclosed and recorded title may now be under another name.  They may not have followed all the state requirements in recording the title.  Generally these can be worked out but expect it to take time as everything in a REO has to go through a SERIES of departments and frequently gets delayed in the process.  Even doing a preliminary title search during the pre listing period will not necessarily pop these issues. 

3)  Be prepared to pay for items you may have come to expect the seller to provide such as HOA documents or surveys.  I personally believe that a survey is to the buyer's benefit and is well worth the money.  $2000 is a small amount compared to a  half million dollar house that you later discover encroaches on  it's own boundaries.  The worst case scenario is discovering it sits on someone else's property.  In short, don't quibble over items that are in your best interests to have done.

4)  The properties are being sold AS IS.  This means you do the inspection and then it will be extremely unlikely the bank will pay for any of the items which come up.   Termite inspections are well worth the buyer hiring a reputable company to perform  Check out your contract and see if the Bank/Lender has inserted that they will do treatment if termites are discovered.  Your agent may wish to insert that into the purchase agreement.  The bank/lender however will probably not replace any damaged items.

5)  Please look at traditional seller properties as well.  The savvy seller now realizes that their property need to be in top notch condition to compete with foreclosures and short sales.  Frequently this means a lower BOTTOM LINE than the foreclosed property will be after the buyer takes ownership and makes the repairs.  Remember TIME is the most valuable commodity in the world and your time and stress involved in bringing these properties up  to good condition should also be considered when you consider the cost

Feel free to comment or call me with any further questions.