Buyer’s Remorse: When Buying a Foreclosed Honolulu Property Goes Wrong

Buying a foreclosed Honolulu property is not for everyone.  And there are different circumstances for a foreclosed Honolulu property to be on the market.  But the situation typically starts with a Honolulu homeowner who has fallen behind on their mortgage payments. This results in the lender needing to step in and take possession of the property.  

As buyers, there are challenges with buying a foreclosed Honolulu property. However, it can be a good way for a buyer to get a house for less money.

Consider a Foreclosed Honolulu Property

There are not as many foreclosed homes on the market as there were in 2008 when the housing market crashed.  At that time there were many people without the means to pay for their homes and few buyers looking to take them over.  

Today, the housing market is in a much different place. But there are still thousands of properties that are being foreclosed on every year.

A Honolulu buyer that is willing to take on a foreclosed property will save some money.  The lender that is selling the property is not in business to buy and sell houses. They simply obtained the home because their borrower failed to make payments.  This benefits the next buyer who is willing to make a purchase because the lender will sell the Honolulu property for up to fifteen percent less than the value of the house.

Facing Foreclosure

The good news for a Honolulu homeowner that is facing foreclosure is that it is a long process.  Even if a homeowner is struggling to meet their monthly payments they will not immediately find themselves homeless.  Lenders are available to talk through financial problems before foreclosure has started.

A lender can only sell a house under foreclosure if their borrower has defaulted on their loan.  Default does not happen immediately, either. The homeowner must miss multiple payments before the lender will take serious action.  Most lenders wait until there is more than one payment missed before contacting the borrower about foreclosure.

If the borrower has defaulted on their loan, a lender will reach out to them to attempt to rectify the situation.  They are trying to avoid taking the property from the borrower. No lender wants the hassle of selling a Honolulu house.  Most lenders will restructure the loan and the payments to help the borrower catch up.

After this point, the borrower may still miss payments.  The lender would notify the borrower through a certified letter that they need to make a payment within three months to avoid defaulting on the loan.  If the borrower is still unable to make payments after this time period has passed they will then be served a notice of sale which outlines the details of the lender attempting to auction the property to regain their money lost.

Failure to Sell

A foreclosed Honolulu property does not always sell at auction.  The lender still does not want to keep the property and must sell it in another manner.  Enter real estate owned properties.

Real estate owned properties are listed for buyers to schedule a viewing much like any other property for sale.  These properties are referred to as REO properties and they are simply the lender attempting to obtain enough funds to cover the mortgage and fees that they incur for selling the property.

Obtaining a Foreclosed Property

The number one thing to remember is that a foreclosed Honolulu property is not going to be a move-in ready property.  Unless the homeowner took extreme measures to keep up on the maintenance of the home while they could not pay their mortgage there are likely some problems with the house.  The buyer is taking on all of these problems once they buy the property.

To find a foreclosed Honolulu property to purchase is easy.  They are listed of typical real estate listing sites and can be searched under ‘bank owned properties’ or ‘REO properties.’  The process is the same for scheduling showings. If working with a real estate agent, have them schedule the showing and they can handle making an offer to the lender if the buyer decides to make a purchase.

Avoiding buying a Honolulu house that has too many problems to repair is vital when buying foreclosures.  Many buyers put themselves into financial ruin attempting to fix what previous owners have neglected. Start by looking at how long the property has gone untouched.  Then hire an inspector to check if there are any problems that are irreparable.

When making an offer attempt to add contingencies to avoid being stuck with the property if there are serious problems.  The one problem is that a lender is not going to care what problems are found. They will not fix anything on the property and the owner must take full responsibility.  That includes any liens on the Honolulu property so be sure to check the title before closing.