Distressed Honolulu Homes, Are They Really The Best Buy?
October 2nd, 2009 categories: For Buyers, The Market
The Wall Street Journal has an interesting article on buying distressed homes.
“Seth and Crystal Grotzke, both 25 years old, recently bought a bank-owned two-bedroom, two-bathroom townhouse in Edina, Minn., for $110,000—when similar homes in the same development were selling for as much as $131,000. But exactly one day before the scheduled July closing, the Grotzkes learned there was a second, unpaid mortgage. Because of the foul-up, the couple was forced to live in Mr. Grotzke’s boss’s basement for more than a month. They finally closed on Aug. 31.” CLICK HERE TO READ THE ENTIRE WALL STREET JOURNAL ARTICLE.
Before you buy a foreclosure or REO, here are five things to consider.
1. Because a property is “distressed”, it is not automatically a great buy! You still need to do your homework and compare it to other properties that have sold and are currently listed for sale. Don’t forget that properties that are not “distressed” can be excellent values too. Take each property on its own merits and confirm that your are getting the price and terms that are in your interest.
2. Be ready to work on them. Most “distressed” condos and homes need work, so be ready to make the repairs yourself or budget money to have someone else make the repairs. Note that many banks will have an REO home painted and carpeted before they put it on the market, don’t be blinded by the glitz and be sure to look very hard at the physical condition of the home.
3. Be ready for surprises. No matter how hard you look at a home, plan on missing an item that needed attention. Many times issues are not discovered until you have been in a home for a while.
4. Don’t expect a lender to do what a traditional seller does. A regular seller is required to disclose the history and known deficiencies in a property. A foreclosure commissioner or an REO lender won’t have the requisite knowledge to be able to tell you about these things. You will go into a distressed property with only the information that you can discover.
5. Expect higher closing costs. Customarily, a Honolulu seller pays for the following: a termite inspection; termite treatment; a land survey; condominium documents; ½ of the escrow fee; title insurance and more. With foreclosures and REO’s much of this can be passed on to the buyer, so make sure you read the purchase contract and addenda to be clear about the fees you will be paying.
If you would like me to find you the best buy, feel free to call me at 808-737-2093 or toll free at 877-737-2093. You can email me at keahi@lava.net.
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Interesting article. I never really thought about the cons of buying a “distressed” home. Thanks for posting this!