So you want to buy a Foreclosure because you hear in the Media how great a market is for that property? And how easy it is to fix and flip? And you’ll make a ton of moolah?
*Snort* (Excuse me, that was the sound of me spitting out my coffee…)
Do you have a lot of cash, time, patience and a strong stomach? Because at the bare minimum, those are what you are going to need to succeed.
HEY! A Fixer-upper Foreclosure to Flip!
First of all, let me explain the foreclosure process here in Hawaii. Don’t know what it is elsewhere, but this is where my Real Estate license hangs. Talk to a Realtor in your area if you don’t live here.In Hawaii, there are two ways a foreclosure occurs: either a judicial or non-judicial foreclosure process.
The judicial process of foreclosure involves the filing a lawsuit by the holder of the mortgage or deed of trust to obtain a court order to foreclose. This is used when no power of sale is present in the mortgage or deed of trust. The court declares a foreclosure and the property is auctioned off to the highest bidder. You will go to the auction with a cashiers check for 10% of the sale price and have to cough up the balance in cash at the end of the day if you are the highest bidder. These are usually held on the Courthouse Steps and can be called “Sheriff’s Auctions” here in Honolulu.
The non-judicial process of foreclosure is used when a power of sale clause exists in a mortgage or deed of trust. This states that the borrower pre-authorizes the sale of property to pay off the balance on a loan in the event of the their default. The lender or their representative, typically referred to as the trustee, may execute the sale.
There are all sorts of notices and time frames that have to occur in a non-judicial foreclosure, I’m not going to go into that here. Speak to an Attorney, Grasshopper…
Up until three days before the sale, the borrower may stop the sale by paying the lien debt, costs and attorney’s fees. Also, even if your sale goes through and you are the proud owner of a foreclosed property, in Hawaii if the property was sold because of outstanding taxes, the seller has up to one year to get current with the taxes and they get the house back. And YOU, lovely buyer, are out of your money.
I have done quite a few “BPO”s (Broker Price Opinions) for banks looking to do a Short Sale (more on that next post) prior to foreclosure of a property. This consists of me personally going out to the house to place an opinion of sale price on the property for the bank. The home may be in pretty good shape at the time I assess it. And then I have gone back to those same properties after the foreclosure and the occupants have been evicted.
To say these properties have been trashed would be like saying Katrina was a Spring Shower. Plumbing ripped out, copper wiring ripped out, Appliances removed or destroyed, walls smashed in and bathtubs used as toilets. And those are some of the clean ones! Vindictive former owners will destroy a property as a “Get even” with the evil bank that talked them into a big loan they could not afford. Yep, it’s always the Lender and the Real Estate Agents fault, no personal responsibility there! I will be the first to admit there were quite a few lenders and agents that were crooked and went into a transaction just to make money, but don’t tell me there were not any greedy buyers involved. If you believe that I have a nice Bridge in Brooklyn for sale…
I’m not going to outline the process here, if you still want to buy a foreclosure you should probably saddle up with a good Real Estate Attorney. And I’m not going to help you buy a foreclosure. I have more fun things to do like Root Canal Surgery…
Some agents are in favor of pre-sale home inspections and some are not. I am in favor of them in this market because it will set you apart from your competition for several reasons.
You are demonstrating to buyers that you have nothing to hide and that you are going the extra mile to provide full disclosure of the property condition. Buyers are less likely to come back and cause issues stating that you concealed known defects when a home inspection report is provided prior to sale.
This also enables you to do any repair work prior to the sale. You can repair everything, or you can repair some things and disclose the rest, leaving it up to the buyer how they want to structure their offer.
I'm going to the beach!
Buyers are often willing to accept defects that are disclosed at the outset of the transaction. If defects come up in their home inspection they are more likely to demand the seller address those issues as a deal breaker. As an agent, I would insist the buyer to also do their own inspection to show that the seller’s report is not biased.
Keep in mind it is not part of the inspector’s report to suggest methods, materials, or costs of corrections for any deficiencies. Keep those suggestions to a neutral, third party licensed contractor.
Short and to the point, it’s too nice a day here in beautiful Hawaii for me to be indoors on a computer!
Over on the Commercial leasing side office vacancy continues to rise Downtown to around 10%. Any time you have a vacancy rate close to 10% and up you have a tenants market. And the tenants are certainly calling the shots these days! Depending on the building, I’m seeing free rent, build out allowances and all sorts of goodies tenants were not able to get since the mid 1990s.
Honolulu view of Diamond Head
Retail is very soft; there are a lot of vacancies. Small strip malls across the state have an average vacancy rate of 9 %. Retailers are continuing to struggle with losses and many are going out of business entirely. Some are just walking away from their leases and letting the chips fall where they may, particularly in the big malls that charge high overhead.
Even some of the Big Dogs are biting the bullet: Niketown in Waikiki is selling its flagship building and Chicago-based General Growth Properties just recently filed Chapter 11.
In Hawaii, General Growth owns Ala Moana Center, the largest open-air shopping mall in the world, and Ward Centers. These are two of the largest shopping centers in the state. And if you stroll around either one of them, you’ll see quite a few empty stores…
Industrial is always a winner here because we don’t have much land to sprawl out on, and really tight zoning keeps growth to a minimum. So we are getting roughly $.85- $1.50 per square foot. Some a little lower, some a little higher depending on the property and the use.
I’ll be having an upcoming brown-bag lunch seminar in May for commercial tenants: “The Care and Feeding of your Commercial Lease- How not to get Bitten!” More on that as the date gets firmed up, or email me for more info!
Originally published on my worpdpress.com site on 12/12/2008.
November showed fewer sales than October but with a lesser months supply of homes on the market. I’d like to think that the overpriced stuff is starting to trickle off the market, but it may just be the “Homes Don’t Sell during the Holidays” Myth. I’ll play “Real Estate Mythbuster” after I give you the numbers.
In November there were 4,751 active residential listings on Oahu, which was an 8.6 month supply of homes if no new properties came on the market. 833 new homes came on and only 371 of the total inventory sold…OUCH!
I’m seeing fewer listings and more “Temporarily Withdrawn” or “Withdrawn” properties in the Multiple Listing Service so far this first week in December. Did you know that lazy agents convince their sellers not to market their properties over the holidays on the misguided concept that “Homes don’t sell from Thanksgiving until after the New Year”. That is not true.
What these agents are actually doing is making sure they have vacation time for themselves and not doing their sellers any favors. In fact: fewer homes on the market over the Holidays means motivated Sellers have less competition. Buyers who HAVE to buy before the end of the year, for tax or job relocation reasons, are out there actively looking. Homes show better during the Holidays because sellers typically keep up appearances for guests dropping in. Lots more reasons to buy and sell this time of year, contact me for more info.
I’m working on putting up the Quarterly Honolulu Board of Realtors Activity Report. It’s a monster PDF File that right now is bogging down my WordPress account until I can figure out a fix. If you want a copy of the report emailed to you let me know.
In closing: as I write this post I’m looking out my window and I am seeing the mountain passes where 67 years ago on December 7, 1941 the Japanese flew through to Pearl Harbor propelling America into World War II. Very humbling. I am extremely grateful to all our military, past and present. I truly believe that their sacrifices over the generations have allowed me to be sitting here living the life of freedom in America. Agree with me or disagree with me: that is the beauty of the whole thing.
Origionally Posted on my WordPress.com Blog 11/18/2008
Here are some quick facts about the Month of October in Oahu Real Estate:
Last month there were 4,770 homes for sale on Oahu, which is a 9.8 month supply if no new homes come on the market. Well, only 559 of these sold and an additional 1,123 new homes were listed.
There is a lot of overpriced, stale goods sitting on the shelf for too long. I blame uneducated and unmotivated sellers as well as incompetent real estate sales people who do not know how to properly price a property as well as not in control of their sellers.
Why take a listing you can’t sell? I just don’t get it. I talked to an agent who bragged “I have seven Listings right now!” I looked them up in the Multiple Listing Service and they were over priced buy as much as $20,000- $100,000! It’s an ego thing I guess…makes them think they are working.
But not properly pricing a property to generate offers and sell is hurting the motivated sellers who have to sell. And making it harder for the Realtors who know how to work this market properly and professionally do business.
There are properties that were listed and closed within 30-45 days last month. These were priced properly for the market and the sellers were motivated. So if you are buying right now there are some really good deals out there.
Who do you know that needs my help buying or selling Real Estate? I appreciate your referrals!
Wishing you the best for you, your family and your friends this Holiday Season!
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