Deal or No Deal?
Shopping for foreclosure or short-sale real estate may fetch you a good deal, but you have to be willing to work—and wait—for it.
Some experts believe that now is as good a time as any for shoppers to find bargain-basement deals through foreclosure and short sales. “With Hawaii sales prices staying relatively stable compared to the rest of the country, I think that makes foreclosures more appealing to someone in Hawaii who may not be able to find [a bargain] through MLS (multiple listing sevice) or sales through agents,” says Daren Blomquist, a marketing communications manager with RealtyTrac, an online marketplace for foreclosure properties.
Good deals can be had with both short sales and foreclosure sales, say experts, but each presents challenges. Short sales, in which the bank agrees to let the owner sell the property for less than what’s owed, offer homeowners an alternative to foreclosure and allow banks to recoup some of the money they may otherwise lose through foreclosure. “In this market, a lot of people owe more money than the property is worth,” says Blomquist, “and, in this case, the best bargains are through short sales.”
But buyer beware: Short sales are neither short nor easy. Once an agreement has been reached between a buyer and a homeowner, a copy of the offer is submitted to the lender—no transaction is final until the lender has given the OK. It’s not uncommon for lenders to ask for more money, and the lender reserves the right to say no to the deal. There are many additional factors that can slow or totally derail a short sale, including any liens against the property, such as tax or homeowner’s association liens.
If a homeowner doesn’t pay off his default amount and the house doesn’t sell via short sale, the property is foreclosed upon and will go up for public auction. Anyone can bid, as long as they’re registered and have in-hand a cashier’s check for 10 percent of their top bid. All properties are sold as is, meaning that any problems with the property—termites, a leaky roof—become the buyer’s problems. Finally, like short sales, foreclosure sales can take time. “Going after foreclosure properties is not for the faint of heart,” says Steve De La Peña, the vice president of operations for Century 21 All Islands and the broker in charge of the Hawaii Kai office. “If there are title or other problems, they can delay closing by 30 to 45 days.”
So how much can homebuyers realize on foreclosure and short sales? Well, it depends, says De La Peña. “You can get a pretty good price, but it’s probably not going to be a lot less than market value.” In fact, most experts say that today’s all-time-low interest rates may represent a good if not better deal. “I would not hesitate or wait to see if prices go down because you take the chance that interest rates will go up,” recommends De La Peña. “You save more on a low interest rate than a 5-percent or 10-percent price cut.”