Foreclosures in North Hawaii

Foreclosure sign

Many Mainland buyers interested in our sunny Big Island Kohala region explicitly ask to look at “foreclosures.” These buyers are often looking at properties in other warm climate areas such as Arizona, Nevada, California, and Florida–the four states that happen to have the highest foreclosure rates in the U.S.

Compared with these Mainland markets, bank-owned properties in South Kohala, including the Kohala Coast Resorts, Waikoloa Village and Waimea, constitute a small percentage of our property sales. Although not all REO properties are properly identified as such in our MLS, here is what the statistics currently show.

There are 620 active listings that are not bank-owned, and only 14 listings that show as bank-owned (again, I can think of at least one listing that doesn’t come up in this search because although properly identified as an REO in the description, the proper box isn’t checked on the data input form, so the number is imprecise). That works out to about 2% of properties on the market, whereas in some areas the numbers are more like 2% of all homes with mortgages!

There are 52 properties in escrow that aren’t bank-owned, and only 9 that are (plus another 5 or so that are identified as short sales). To date there have been 95 properties sold this year in South Kohala, including condos, homes and land; of these, only 6 were bank-owned properties and all of these residences and condos were in Waikoloa Village or Waimea.

In other words, the wave of foreclosures has not yet hit the Kohala Coast beaches, although foreclosure listings at newer condominium projects such as Kolea, Halii Kai, Waikoloa Colony Villas, Waikoloa Beach Villas, and the Fairways and Villages at Mauna Lani are starting to show up on the Big Island MLS.

Summarizing the year-to-date statistics, around 2% of the properties on the market in South Kohala are REOs, although they constitute a disproportionate 6% share of the sales. But what about the future?

It is difficult to get an accurate handle on the real number of homes in some stage of the process. Searching the popular foreclosure websites would give almost 100 properties as pre-foreclosure or trustee sale, but the careful reader will see many of these are duplicates.

On the other hand, our team was discussing the example of one listing among the 620 non-REO active South Kohala MLS listings that we knew would be bank-owned as of the end of this month. The furniture and appliances have already been removed. Yet there was nothing in the listing to show it as a distressed property, and because the owner negotiated a deed-in-lieu of foreclosure, it also doesn’t appear on sites such as RealtyTrac or Foreclosures.com.

The other factor is that with the Hawaii legislature having just removed some of the restrictions real estate agents had faced in helping clients with their distressed properties, we may actually find more homeowners getting help to renegotiate and keep their homes, or accomplish a short sale. That would apply more to the residential markets of Waikoloa Village and Waimea than to resort properties which were bought as second homes or investment properties.

Some things we can say for certain, however:

• With the majority of sales in Waikoloa Village and Waimea (Kamuela) having been developer close-outs and foreclosures so far in 2009, they constitute a large enough percentage of sales that appraisers must use them as comparables. That means buyers benefit equally whether they are looking at a foreclosure or a regular property. And the non-foreclosure may be in much better condition!

• If you want to pick up a bargain in a resort property, the wave of foreclosures is just beginning. But it currently looks as though it will be 2-5% of properties, not 20-50%–so don’t count on necessarily finding the exact home of your dreams among the foreclosures. And be prepared for additional closing costs and post-closing costs (repairs and furnishing) before the property is back in prime condition.

ʻē lā wē