You’ve heard and read the national media hype about foreclosures and they sound like a great opportunity, don’t they? Maybe you’ll change your mind after reading this post.
What Causes a Foreclosure
- Many adjustable-rate subprime loans initiated between 2003 and 2006 will adjust their rates in 2008.
- Many of those buyers barely qualified for a loan when they purchased their home in the first place.
- Now, as their mortgage rates adjust, they cannot afford the monthly payments.
- These borrowers may not be able to refinance because they no longer meet more stringent credit requirements or prices may have dropped in their neighborhood.
- If prices dropped considerably, an eventual sale may not be enough to pay off the mortgage.
Hawaii Foreclosures are Limited
- Hawaii has one of the lowest foreclosure rates in the nation (ranked 43rd of the 50 states).
- Hawaii’s market is relatively stable. This allows many financially distressed owners to sell their property before reaching the foreclosure stage.
- Since the supply of Hawaii foreclosures is so limited, the majority of these properties are bid up near market value.
There are Risks to Consider
- Information about the property condition is limited. Photographs may not be available.
- It’s often difficult to get access to the property because many foreclosures are not listed by a Realtor. Don’t expect free access via open houses.
- The current owner may be openly hostile and uncooperative.
- If the owners are not paying the mortgage, they may have failed to pay property taxes. It’s reasonable to expect the property hasn’t been maintained properly.
- If you actually buy foreclosed property, your may have to evict the previous owners. This may take six months and you still have to pay your mortgage during the eviction process.
