Distressed and bank owned properties take center stage in Maui
There are some bargains, but you need to know what you're getting into
Na Hale O Maui is a community land trust here that carefully tracks distressed properties in Maui. Part of their mission is to acquire foreclosures and convert them to affordable housing. As I understand it, their charter allows them to buy properties once they are foreclosed, but not before, as in a short sale.
According to John Anderson, executive director, there were 483 foreclosures pending on September 1. That number has been increasing at a rapid clip since April when there were only 297 pending. According to Anderson, Maui now has one of the highest foreclosure rates in the nation.
Of the 483 headed for foreclosure, only 398 are listed as short sales. Which means the remaining owners who are in default are either trying to work something out with their lender, fighting the foreclosure or hoping it will just go away. For a lot of homeowners the foreclosure process is so stressful, they opt to do nothing rather than to be proactive.
Of the 398 short sales listed, only 60 are noted as pending, meaning under contract. One reason the number may be so low is that many listing agents take the position that the sale isn't pending until the lender gives their approval. Obtaining that approval can take months upon months. So this stat should be taken with a grain of salt.
Bank owned properties are known as REO's (real estate owned). There are 113 such properties in the MLS according to Anderson. 41 of those are listed as pending. The higher percentage of REO's pending compared to short sales is partially explained by fact that buyers and agents are dealing directly with the owner - the bank.
The final stats offered by Anderson are extremely telling and I am asked about this often. The answer is about 40%. The question is, "how much below market are properties selling for?"
According to Anderson, bank owned properties are actually going for 41% less than current assessed value. These properties are having a dramatic affect on the rest of the market here in Maui. That is demonstrated by the fact that the selling price for properties that are not REO's is 37% below their assessed value. For statistical purposes those are pretty much the same number.
Buyers can expect to see more short sales and REO's over the next few months, but do not limit your search for a great value to this group. Why? I just gave one reason; non-distressed properties are going for about the same price as distressed properties.
The most important reason though, is that buying from a private owner will likely get you a better deal than dealing with a bank. A private owner is required to provide you with disclosures about the condition of the property. You can also demand items such as CC&R's, association board minutes and other documents from the owner. And the owner may agree to make certain repairs and even pay for a termite inspection.
Banks won't do any of that. In fact when buying a bank owned property you will likely be required to sign a "bank addendum". This is usually a very one sided, if not outright onerous, document that is designed to protect the bank by rescinding most of your rights.
Maui is on sale right now. If you want a list of short sales and REO's email me and ask for the list. But if you get serious and we show you a property that isn't owned or under a lien by the bank, don't get mad, it's not a trick; it's just a good buy.
Want details? We have details. Also, check the Maui Real Estate Advisor.
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