How to Buy Foreclosure Property on Maui - Part I

Maui, like many other parts of the country, saw a significant reduction in economic activity after the Great Recession of 2009.  Although the economy is recovering, the housing market is still lagging and prices are much lower than they were before the downturn.  Many smart investors are buying on the dip in prices while calculating that the market will recover.  This series of blog posts will help you navigate the often confusing area of housing foreclosure and show you how to purchase property that is still within the foreclosure process.  Finding properties that are still within the foreclosure process can help diligent investors find lucrative investments at significantly reduced prices.  

In Hawaii, a foreclosure can be judicial or non-judicial.  A judicial foreclosure has oversight by the court and will go through a court process including a court hearing before the house is sold.  There are many statutory requirements for a non-judicial foreclosure and this process is only available in certain situations. 

As an investor, you should look for houses that are in judicial foreclosure.  There is no central database or clearing center that lists properties that are in foreclosure.  Although some websites list “foreclosed” or “REO” properties for sale, these houses are usually owned by banks who have possession of the house after the foreclosure process is complete.  Occasionally, the bank will offer the property at a reduced price but usually the price will be close to fair market value. 

To take advantage of significantly reduced foreclosure prices, you need to find properties that are still within the judicial foreclosure process and attend the actual auction. 

A property enters the judicial foreclosure process when a homeowner defaults on a loan and the lender files a lawsuit asking the court to auction the home to satisfy the debt owed.  Legal proceedings typically take a year or more.  When the court is ready to auction the property, a foreclosure commissioner is appointed to take possession of the property, conduct an auction and distribute the proceeds of the auction to those who are owed money. 

The commissioner will inspect the property, advertise the auction and hold open houses so that potential bidders can see the house and formulate a bidding price.  The commissioner will try to obtain the highest feasible price for the property in order to satisfy as much of the debt as possible. 

Hawaiian law requires that a Commissioner advertise an auction of a property three times in a newspaper of local circulation, thus giving the owner of the house and the general public notice that the property is to be sold.

In Part II of this Foreclosure Investment series, we will continue exploring how investors can find and take advantage of attractive foreclosure prices. 

Foreclosure law can be intricate and confusing.  Homeowners often hire an attorney to defend a foreclosure lawsuit.  Investors often also hire an attorney to help them purchase a property in foreclosure.  A local attorney experience in foreclosure law can represent you at an auction and bid for you, even if you are out of state.  

For an overview of Hawaii foreclosure law click on this link.  Hawaii Revised Statute Chapter 667