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Foreclosures, Short Sales & REO's

Buying Foreclosures in Hawaii | Can I Buy a Foreclosure with a Loan?

After writing my first blog about foreclosures, I’ve been getting all kinds of questions. This question is the most concerning, so I would like to address it here briefly.

Can I Buy a Foreclosure with a Loan?

I had someone call me who had already won the auction on a property, was pre-qualified for a loan and wanted to know what to do next. The short answer was already stated in my first blog…determine your top price, go to the confirmation hearing, and make sure you take your additional deposit with you. If you are the successful bidder, the commissioner will ask you what escrow company you want to use and will instruct you to open escrow. In our experience, not all escrow/title companies will give you clear title on a foreclosure property, so please research that beforehand to save you some time and trouble.

Will You Have Access to the Property?

If you are doing a conventional loan, my question is: will you have access to the property? Lenders will typically require a Termite Inspection Report which will require access to the interior and exterior. If there are termites, they have to be treated prior to closing (Tented for a Single Family Home, or spot treated for a Condo). For a single-family home, they usually require a Survey which will require access to the exterior. If there are encroachments, that has to be addressed prior to closing also. Lenders will also require an Appraisal which again requires access to the interior and exterior. And yes, you’re the one who will pay for all of it, in addition to all the closing costs.

If the owner or a tenant occupies the property, you might not have access. Without the Termite Inspection, Survey, and Appraisal, you probably will not be able to close the loan, and you will forfeit your deposit.

30 Days to Close

Sometimes, even for a retail sale, these things will delay closing. However, in this case, the Seller will normally agree to an extension so these things can get done. The court probably doesn’t have provision for these things. You have 30 days to close, and that’s it; you forfeit your deposit.

For someone in this situation, maybe the best thing to do is hope and pray someone outbids you at the confirmation hearing.

As with any endeavor, it’s best to have your strategy planned out before jumping in.

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