Most people know by now what “REO or Foreclosures” are all about. Just in case you do not, here’s the lowdown in the first paragraph and following are some tips on buying foreclosures in Hawaii.
Foreclosure (or REO – Real Estate Owned) is a legal process in which a lender attempts to recover the balance of a loan from a borrower, who has stopped making payments to the lender, by forcing the sale of the asset used as the collateral for the loan.
If you are looking for a foreclosure property you’ve probably heard that there are still some great deals out there, worthy of your life’s savings.
The truth is, foreclosures are not necessarily the best deal. Back in the downturn (starting in 2007), on average they were 40 – 60% less than traditional properties. Today, they sell very close to market / appraised value.
If you find an REO that is a “fabulous” deal, just remember, you get what you pay for – and this could be a red flag, so get busy on your due diligence. There is “NO” seller’s disclosure provided when purchasing a foreclosure.
Additionally, once you are ready to make the purchase the bank sends an addendum that negates almost every safety trigger for the Seller in our Hawaii State contract. Plus, the bank requires the buyer to pay per diem of at least $150 per day if the property does not close on time, only if, for some reason the buyer cannot perform. If closing late is the fault of the bank there is no per diem charge. The most likely time frame for closing is 30 days for all cash, and 45 days if you require a mortgage.
If your goal is to purchase a foreclosure, the truth is probably that you are, in fact, looking for a great deal. Great deals exist, but don’t limit your choices to foreclosures alone. In this market we have a shortage of properties available for sale, why would a bank sell their foreclosures for less than appraised or market value?
Short sales continue to be one of the best deals next to Auctions.
However, this is only if you have the patients to work through the wait it takes for the banks to make up their minds on the sales price and “IF” they feel the borrower is worthy of selling their property as a short sale. Sometimes we are lucky enough to find a short sale on the market that is already bank approved which drastically shortens the time to close one of these properties.
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