Monday, September 2, 2013

How to Buy Foreclosure Property on Maui - Part 2

This post is Part 2 of a series on how to purchase foreclosed property on Maui.

When selling a property, a Commissioner must advertise the property in a newspaper of local circulation.  The Commissioner must also conduct open houses of the property.  The dates and times of the open houses will be listed in the legal advertisement.  An open house is your chance as an investor to perform due diligence and investigate how high you should bid on the property. 

Due diligence is particularly important when purchasing foreclosure properties because they are sold “AS IS.”  This term means that if the house has termites, structural damage or a serious mold problem you have no recourse after you complete the purchase and you should price your bid accordingly. 

Typically a Commissioner will hold two open houses of the property, however, some Commissioners will also arrange a private viewing for interested bidders.  When you have access to the property, take pictures, make notes and if necessary, take an expert with you to examine the premises. 

In addition to inspecting the physical condition of the property, you should also investigate the possibility of liens, back-taxes, homeowner’s associations arrearages, property encroachments and problems with the title.  A Commissioner may be able to give you some relevant information but will not be able to give you legal advice about the importance of this data.  If you have questions about the legal consequences, you should hire an attorney to guide you through the process. 

After you have completed investigating the property and have decided you want to purchase it, spend time with a calculator determining your maximum bid.  If you are the highest bidder, you will be responsible for all closing costs including the costs of escrow, conveyance and back taxes.  You should also consider the cost of repairs and improvements to the property. 

Do not bid higher than your predetermined maximum bid.  Many potential investors become excited with the thrill of an auction and bid more than they originally intended.  Savvy bank representatives will happily prey on your enthusiasm and counter your offer, trying to drive your bid higher. 

In the next part of the Foreclosure Investment Series we will discuss what happens in the judicial foreclosure process after the auction. 

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