BY ANNIE MENDOZA RS– We are still seeing a lot of short sales on the Big Island—especially along the Kohala Coast.
Wake up to these views from (MLS# 233717)—Kohala Estates short sale asking $550,000
For our buying clients and customers, here’s a guide to the pitfalls and benefits of short sales in Hawaii:
Short sales and foreclosures made up a significant portion of the market during the financial crisis in 2008, but local industry experts are seeing the wave of distressed properties start to clear out. However, there are still homeowners and investors who are placing their homes as short sales on the market.
Or…how about this Kohala Estates short sale (MLS# 245522) asking $599,000?
Let’s take a look at what you need to know as a buyer when considering purchasing a short sale property:
Tips and Tricks:
- Patience is one of the big issues with short sales. While a buyer is waiting for a short sale to go through the arduous processes, the buyer could be missing out on other opportunities.
- Understand that the lender is key. In many cases, it seems that the lender holds ALL the cards in a short sale. The seller and buyer just hope the lender is reasonable and wants to get the property off their books instead of going through the foreclosure process.
- No guarantees. The seller can be foreclosed on during the short sale process, resulting in the property no longer being available to buy as a short sale.
- No set time frame. There are times that you might have to wait 6 weeks for the bank to respond. From experience, that process can often take even longer, sometimes as long as 6-8 months or more.
- Multiple lien holders make the process more complicated. Sometimes there are multiple lien holders on a property being marketed as a short sale. If so, each situation is different on who will forgive a portion of the debt. The first lien holder might have to negotiate with other lien holders. The red tape in this negotiation process can be cumbersome. Again, patience is needed.
- Be prepared for an “AS IS” sale. The property is typically sold “AS IS,” where neither seller or lender will agree to make repairs. The seller may have limited or no funds, and is already in the process of divorcing themselves from the property, since they will receive no profit from the sale.
- Buyers assume all closing costs. Unlike normal sales where closing costs are shared between both buyer and seller, the buyer may have to pay all closing costs (however, the brokers sales commissions are typically being paid by the lender, not the buyer).
- Buyers need to be “arms length” from the seller. There can be no familial relation, or business relation between seller and buyer, and the seller cannot rent back from the buyer.
- Experience makes a difference. Although short sales present challenges and have many uncertainties, our team has numerous success stories. We can provide you with one of your best chances of success, as we use proven systems, employ administrative assistants, and have knowledge to recognize the intricacies and “signs,” so that you can determine how to proceed or not. There’s almost no quicker way to watch a short sale die than by the hand of an agent with little to no successful short sale experience.
The End Result:
- Such a deal! Short sales can be worth waiting for. They can be a great buy if you’re in the right place at the right time!
- Property is usually in much better shape than it will be if it goes through the foreclosure process and comes out as an REO on the other end.
Annie Mendoza wrote this for HawaiiLife.com