H o n o l u l u   C o n d o s

Definitions of Distressed Properties

Short Sale Properties - Short sale is the process a homeowner attempts to go through to prevent foreclosure.  They ask the lender to forgive the debt since they are selling the property for less than what is owed.  This is also known as a short pay. The sale is contingent upon approval by the lender. There is no guarantee that the bank will accept a short sale even if the buyer offers the full list price.  Most short pay approvals from the lender will require that the homeowner be able to prove some sort of financial hardship.  It is also not uncommon for most lenders to require that the homeowner be in default (behind in mortgage payments) before considering a short pay.

In these situations, the seller still owns the property.  When purchasing a short sale, you normally have to accept the property in ‘As Is’ condition.  You are still allowed to ask for a home inspection period, termite inspection, and survey like a normal transaction. 

Foreclosure Properties – These are properties that are in the process of being foreclosed on by the property owner’s lender.  In the State of Hawaii, all foreclosures are a judicial process.  When a property owner falls behind in their mortgage payments, at some point, foreclosure proceedings begin and the process to place the property for public auction begins.  If the property is not sold at public auction, these properties will become Lender Owned properties. When they are listed for sale, they are identified in our MLS as “Foreclosure” properties. Many of these sellers are highly motivated and may sell at below market values if they have equity or cash assets to make up any difference in what may be owed on a mortgage.

Lender Owned Properties – These are properties that have been foreclosed on by the lender.  At public auction, there were no buyers, so as a result, the property is now owned by the lender.  Typically the lender’s asset managers will list these properties with real estate agents.  When they come on the market, they are identified in our MLS as “Lender Owned.

Also referred to as REO properties, REO stands for Real Estate Owned.  These are properties that have already been foreclosed on, so the bank is now the owner/seller.  The bank now wants to sell the property hoping for fair market value. 

The approval process is much quicker than the short sale process, only taking 1 to 2 days for a response from the bank.  The property will be sold in "As Is" condition, and a Seller's Disclosure will not be provided by the bank.  You are still allowed to ask for a home inspection period, termite inspection, and survey like a normal transaction.