Foreclosures can be risky
04/11/2008 – 5:59 pmIf you bought a property at foreclosure in the later 1990s or early 2002s, you probably have a built up a lot of equity and have a positive cash flow on your investment. With the current increase of foreclosures in Hawaii, people may be looking at this as another opportunity to make windfall profits.
However, conditions are different now and pose more of a risk in acquiring foreclosure properties. With the market stabilizingprices of foreclosures are often bid up to the market value. Be careful at the auction and don’t get carried away.
Since a Realtor is not handling the sale of the foreclosed property, there may be limited information available on the property. You also may not have the opportunity to inspect the property. Properties are auctioned off "as is" without any guaranties or warranties as to the title. As the purchaser you are also responsible in securing possession of the property. You may be faced with evicting the former owners from the property and the process can take months.
Lastly, the condition of the property you acquire may be unknown and you may be faced with doing considerable repairs. The owner who cannot make his payments, probably has not been spending money to maintain the property.
With the pitfalls involved with foreclosures, be sure to work with a realtor who is familiar with the problems and challenges.