“One of every ten American homeowners who had a mortgage were either thirty days behind in their payments or actually in foreclosure” (quoted from the Richmond Times,12/2008). The Pacific Business News last month quoted Kaua’i stats at 1 in 35. Even though times are not quite as bad here as other parts of the country, approximateely 50% of Makai Properties’ business last year involved a distressed property in one form or another. Thankfully 2010 is showing signs that we are finally ‘digging out” as they say but it is still a roughly hewn path that we tread. Whether it be short sale, foreclosure auction or REO (that’s Real Estate Owned in banking terms) distressed properties dominate a large part of the Kaua’i market these days. There are very real opportunities out there but they are certainly not for the faint of heart. Here’s ten factors that one should consider closely before coming to the dance if you expect to go home with the prize…
#1 Have the money before you shop: Every distressed seller is anxious to get out from under the snowballing debt and is unlikely to accept any financing contingencies….get pre-approved and go to the negotiating table with the money available. You will need at least 10% certified funds just to bid on the courthouse steps and no less than 20% down plus another good portion of cash reserves to get a loan.
#2 Be mentally prepared: It is frequently an unpredictable situation. Define your negotiating parameters up front and determine ahead of time how flexible you can be when something flies in out of left field….because it will.
#3 Do your homework up front and come in strong with few or better yet, NO contingencies. Distressed sellers do not have the time to waste on all the buyer’s “subject to’s” we are used to seeing in a less toxic market. For the seller, it’s do or die time and they will pass you by for a more agressive offer even if your price is higher
#4 Be flexible on the property condition: Distressed property typically has, at minimum, some deferred maintenance and in some cases much much more. Just today Iwalked through one foreclosure where everything was gone including the kitchen sink!). If you lack the intestinal fortitude and tenacity to handle repairs then put your check book away and step back! “Turn key” or “move in ready” are rare descriptors in this part of the market.
#5 Be prepared to make your offer: know the market, seek the help of a Buyers representative and bone up! When you find one that you want, BUY IT! the best chance to get what you want is when there are no other competing offers on the table.
Ok…you are under contract and now in escrow. This where the real fun begins! If you can’t wait for the next factors #6 through #10 posted here, call or email me. I can scan/send my hard copy…..a hui hou, y’all!