Fact or fiction: Is it a good deal?
I just got a list from Sharissa Chun at iNet Realty of the most recent list of foreclosure and short sale properties available, which got me thinking: When such properties have open houses, there tends to be a lot of interest if it’s in a good area. Are they good deals?
“Not necessarily, especially if you don’t have experience,” says Honolulu Board of Realtors (HBR) President Joyce Nakamura. “The buying process of such a home is not recommended for first time buyers.”
In the case of foreclosures, Nakamura says you are buying the home “as-is” without an inspection; there are no points during the transaction at which you can cancel if the inspection is no good. “If you go through a normal buying process, anything is negotiable. In foreclosure, there’s no true negotiation,” Nakamura adds.
Short sales, on the other hand, are handled more like real transactions, but are also taken with their own caveat. Short sales are homes that are not foreclosed yet, but the owners are not able to keep up with their payments and need someone to take over their mortgage. Short sale listings are normally priced below (but not too far below) market value.
“Short-sale homes are usually for buyers who are willing to invest the time to wait for bank approval of the sale,” explains realtor Rick Nakama of East Oahu Realty. “Once the contract is signed, you have to wait. There are short sales that have been approved in two months, and there are some that have taken more than a year for approval.
“On top of that, sometimes the bank does not approve the sale, so you don’t get the home after all of the time and effort invested,” Nakama says. “If you’re an investor or not in a rush, then it could work out.”
To get a better idea of how to navigate through a short sale or foreclosure, check with your realtor to weigh the risks and benefits of the property you are interested in.