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Pre-foreclosure or Short Sale? Best Options


In these times when homeowners are struggling to keep up with their monthly mortgage payments, foreclosure by the lender can become a sad reality and the number of fore-closed homes on the market increases.

Millions of homes were lost to foreclosure since the housing crash. According to CoreLogic’s December 2015 National Foreclosure Report, among the top five states with the highest inventory of fore-closed homes, Hawaii ranks third with 2.4%.

As interest rates and mortgage payments increase, the potential for savings in acquiring a fore-closed home is appealing for many buyers. In order to decide whether purchasing a foreclosed home is right for you, familiarize yourself with the process and assess the pros and cons of the various ways the homes are sold.

Pre-foreclosure or short sale – In a short sale, homeowners who owe more than the market value of the property may negotiate with the lender to sell the house short of the outstanding loan balance before the bank fore-closes on the property. The benefit here is that you can acquire the property for less than market value.

Auctions – Properties that do not sell during pre-fore-closure go to a third party auction and are sold to the highest bidder. However, prospective buyers are narrowed down to investors and lenders as payments are accepted in cash only. Be advised, if you buy, you assume all past-due taxes and liens tied to the property. This is an indication for non-experienced buyers that auctions can be a high risk investment.

Real Estate Owned (REO) – If the home if not sold at auction, or if the lender skips the auction phase entirely, the property will move back to the market as real estate owned (REO). This is the safest investment and the most popular way of buying a fore-closure because the bank clears all liens on the property before it is listed. However, you may have to make full-price offers as prices tend to reflect the market value of the property.

If you are thinking of buying a foreclosed property as a first home for a growing family, for downsizing, or for any other purpose, the knowledgeable staff at CU Network Services can provide expert advice and help you find the right financing option for your situation. They offer a broad selection of loan products including the Owner/Builder Construction Loan which is specifically tailored for major home remodeling. Call them at 529-4599 to speak with a Home Loan Specialist or visit their office at 715 S. King Street, Suite 100.

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