On May 5, 2009 the City and County of Honolulu held its first tax lien auction in two years. Two properties were advertised. One parcel had a upset price of $20,023.87 and another had an $8,169.45 upset price.
You know how people get excited about buying foreclosures! Some friends of mine were interested in placing a bid, however they were going on a vacation in early May. They asked me to bid on their behalf and I said "Okay!"
Tax lien auctions are different from the auctions held at the courthouse. At the tax lien auction, the winning bidder must immediately pay the full purchase price. Methods of payment include cash, certified check, cashiers check or wire transfer arranged prior to the auction. In other words, don't plan on bidding and then going to your bank for a mortgage loan.
Another important thing to know is that the taxpayer whose property was auctioned off may redeem the property from the winning bidder! The taxpayer can do this by repaying the winning bidder the price he paid at the auction plus all costs he was required to pay, such as the deed recordation fee. Interest will also be added on at the rate of 12% per year. The taxpayer has one year to buy back the property from the winning bidder.
Hmmm. So a winning bidder should be very careful about the improvements he makes to a property in the first year. Extensive repairs and renovations might end up going back to the previous owner if he happens to get the money together to redeem it.
The auction was held at the Mission Memorial Auditorium at 550 South King Street, near Honolulu Hale downtown. I entered the auditorium, registered and went behind a curtain to show the organizers my "proof of funds." Actually, it was "proof of funds" for my friends, whom I was bidding for. They gave me one of those paddles with a number on it, to hold up when I place a bid.
When everyone was registered, the Director of budget and Fiscal Services for Honolulu went to the podium and announced the auction. He read a prepared statement and asked if there were any questions. Several hands went into the air.
One bidder had done some research on the first property, located on Hanalei Street in Waianae. The bidder said he had talked with the City building permits department. He said the property owner had made unpermitted additions which need to be removed or permitted. Fines were piling up at around $150 per day. He asked if the successful bidder would be purchasing the property "free and clear of all liens" as described in the public notice. The Director was unsure and he called a recess.
After conferring with other officials, the Director returned and said there is no guarantee that the building permit fines would be waived. Another bidder asked about mortgages. If the property had a mortgage, would the winning bidder own it be free and clear of the mortgage? The Director conferred briefly with others and then announced that "free and clear" means the bidder owns the property free and clear of property tax liens and that's all that's warranteed from this auction.
There seemed to be other issues and the Director announced that the first auction would be postponed for a short time. The second auction, with the $8,169.45 upset price would be held now.
This was the auction my friends were interested in. They gave me $8,200 to bid with. They had hoped that the bidding audience would be small and we'd "get chance." I could see about 30-40 potential bidders in the room and I wasn't sure how it would go!
The property being auctioned was a three bedroom, two bath home in Makakilo, built in 1968. Its tax assessed value was $425,700.
Bidding started at $8,269.45 and several paddles went up. The next bid was $9,000 and several more paddles went up. We were already out of the running!
I watched the bidding escalate. Most bids were in $1,000 increments. Once in awhile when there were lots of paddles going up, the auctioneer raised the price in $5,000 increments.
As the bidding price escalated, the number of bidders went down to a handful. The bids got up to $145,000 and there were two bidders left. Coincidentally, they were sitting a few feet apart from each other. The bids went up in $1,000 and 5,000 increments. Finally, the guy in the red won at $226,000!
Although I haven't seen the house, you can be pretty sure it was a good deal. There are just a handful of homes for sale on the entire island of Oahu in this price range. Basically, the bidder bought a house for a condo price. With some conditions, such as the one year redemption period mentioned above.
After the auction, the winning bidder went and sat with the officials for a quite some time as they did whatever they had to do to take care of his payment. I wanted to stay and see the results of the other auction but I had to go.
Successful bidders CAN get a great deal. As with foreclosure auctions at the courthouse, cash is KING. And be careful about that one year redemption period! You don't want to completely remodel a house and then have the old owner come back and buy it for the winning bid price plus interest nine months later.
There are plenty of MLS foreclosures, short sales, lender sales and even regular sales that are very attractive these days. Lower prices, lower interest rates and that $8,000 Federal tax credit to first time homebuyers can be a great buyers incentive.
Call Mike Bates at (808) 548-1220 to get started!
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This is based on a true story which happened recently.
Seller fixed up his condo very nicely. Seller puts the property on the market and gets an offer, which is accepted.
Buyer decides to conduct his own home inspection. He has some experience in the construction business and decides the unit is okay.
Seller's disclosures are delivered to the buyer. Seller describes in great detail the improvements made. Some of the things mentioned are:
- Electrical outlets and fixtures replaced by seller, who is not a licensed electrician, no warranties expressed or implied.
- Plumbing pipes changed from galvanized to copper by seller, who is not a licensed plumber, no warranties expressed or implied.
- Seller removed a shoji door (sliding divider) and added fixed divider wall to the studio condo, now calling it a one bedroom and listing as a one bedroom on the Oahu MLS. In the sellers disclosures he notes that he doesn't know if he needs permission from the condo association, nor did he obtain building permits.
Buyer received sellers disclosures and believes the majority of the work done by the seller should have been permitted. Buyer and buyer's agent review requirements for building permits in Honolulu. The answer is not easy. City and County building permit rules attach values to improvements in determining whether a permit is required. For example, a building permit is required "For any electrical or plumbing work that is greater than $500 in a 12 month period."
The buyer figured that the electrical and plumbing work done should be valued greater than $500. The seller figured the value was less.
Buyer continues investigation, following up with the Honolulu Department of Planning and Permitting. Buyer calls several divisions within the DPP, including:
- Building Permit Issuance
- Electrical
- Plumbing
- Building Code branch
Buyer sends sellers disclosures to the DPP for opinions in determining whether permits are required. The buyer is concerned about purchasing the property and having to remove additions later on since the work was done without a permit.
Buyer asks the seller to obtain building permits or reduce the price substantially. Seller says no.
Shortly afterwards, the DPP sends inspectors to the seller's condo. They tell the seller violations were reported and they must investigate. The seller grudgingly allows the DPP inspectors to enter the property.
Finding: Inspectors tell the seller he must remove the wall he created, which was originally a sliding shoji door. All other additions do not require a permit.
Result: The transaction is cancelled. Seller must remove the wall and then puts the property back on the market.
Some sellers put very little effort into sellers disclosures, marking off "NTMK" (not to my knowledge) on nearly everything, even if it's not true. They just want to get the document completed and get past that contingency.
Buyers appreciate thorough sellers disclosures. If the disclosures are delivered prior to the home inspection, the inspector will often take a close look at items mentioned in the disclosures.
Statements such as "I don't know if it's okay with the AOAO and I am not willing to get building permits" can become a problem for the seller.
If a buyer really wants a specific property, reporting seller violations is not a prudent tactic. The seller is likely to avoid dealing with the buyer again.
Aloha, Mike Bates
I was googling around the internet recently using search terms suitable for properties here in Hawaii. Then I came across some interesting listings. Someone in Mississippi decided to name a town after Hawaii's most famous landmark, Diamond Head!
Even more interesting, the streets in Diamondhead Mississippi have Hawaiian names as well!
Examples are: Hilo Way; Analii Street; Ahia Court; Kaimuki Court; Mahalo Hui Drive; Kapalama Drive; Ala Moana Street; Kahana Street; Maili Way; Maunalani Place; Molokai Village and Lanai Village. I guess when Diamondhead Mississippi residents visit Hawaii they have an easier time pronouncing our street names!
Check it out on Google Maps.
The people who named these streets picked good ones from some of our top neighborhoods In Hawaii:
Analii Street is in Waialae Iki.
Kaimuki is a neighborhood near Diamond Head.
Maili Way is in Manoa, near the University of Hawaii campus.
A search of Activerain found one member that sells homes at Diamondhead Mississippi, Tricia Cash.
I checked some listings and found Diamondhead Mississippi real estate costs a fraction of what Diamond Head Hawaii real estate goes for. I'll keep that in mind, should I know of some Hawaii residents who decide on a move to Mississippi.
Aloha, Mike Bates
Hewaii's economy is slowing and people are looking for causes. Unemployment in our state is at 7% at a 30-year high. TV news stations frequently remind us that construction employment is a significant factor in the rate of job losses.
Moana Vista construction was halted in December 2008. The developer is seeking additional financing to complete the project. Options include finding a partner with financing to complete the building and selling off other real estate investment.
Fred and Annie Chan, owners of KC Development, have the Kaiser Estate in Portlock on the market for $80 million. The price seems quite high, considering the property is in need of major repairs. On the other hand, the estate covers more than five acres of land on a prime spot in east Oahu. If the a sale of the Kaiser Estate fetches anywhere near $80 million, it should at least be a shot in the arm for KC Development to get things rolling again.
Earlier this week the project's contractor, Hawaiian Dredging filed a lawsuit stating that $30 million is owed on the project. It appears to be a public statement to other possible creditors of Moana Vista.
Moana Vista's sales office remains open and prospective buyers are driven to the affordable pricing. It's hard to make long term plans when a buyer doesn't know how long it will be until the move-in date. Another concern is interest rates. They are very favorable right now but they can't be locked in at this point in time. When construction resumes and an accurate date is determined for completion it will be time to discuss locking in a rate - and where will they be then?
Buyers can be comforted in knowing that their deposits are held in escrow. The money cannot be spent until the final report for Moana Vista is issued and the buyers have had 30 days to review and approve the report. Buyers can cancel and get their money back, less a small escrow fee.
Question: Historically, which way do prices go in Hawaii? Answer: Up.
Ten years ago, lots of us were hemming and hawing about the direction of the market and what to do. Then prices took off. I believe those times will come again. This might be the time to plant the seeds for your next residence.
Please visit our Moana Vista webpage, which includes a price list.
Aloha, Mike Bates
I've been to the courthouse several times to watch foreclosure auctions. This was the most crowded auction I've seen so far. Several properties were up for sale, but the majority of the people in attendance were here to see the fate of the Ilikai Hotel.
Honolulu attorney, George Van Buren was the commissioner and auctioneer of the property. There was one bidder, IStar - which happens to be the lender that foreclosed on Anekona Companies. In the photo above, the bidder (attorney Stephen Mau) is shown, who represented IStar.
First, the 203 residential units were offered. IStar bid $35 million. Next, the 16 commercial units were offered. IStar bid $15 million. The whole bidding process took about a minute.
Anxious watchers included Local 5 union members wearing red t-shirts, who work at the Ilikai Hotel. I asked them what they thought of the auction. They said they were happy that one company, IStar won both auctions. They believe that IStar will be a good employer for them.
After the auction, George Van Buren was interviewed and he seemed pleased with the process. The sale is subject to court confirmation, which should take place in about 30 days. At the confirmation, other bidders are allowed to submit offers which are at least 5% above the current bid amounts.
IStar's bid for the residential properties amounts to approximately $172,000 per condo. In 2006 when Anekona Companies were having better times, they were selling residential units for more than $500,000 each to individuals. Shell Vacation Resorts bought another 43 units at an average of $409,000 each.
Anekona left a big mess for Ilikai Apartment Building owners and the homeowners association. When Bruce Anderson's businesses started failing, they quit paying the common charges on the units owned by Anekona.
Many feel it's a positive sign that IStar is taking over the units formerly owned by Anekona. We hope to see Ilikai residential unit prices rebound in the coming months. It will also be nice to see the commercial areas of the Ilikai fill up with new tenants.
Aloha, Mike Bates
Experienced Hawaii real estate agent working full time for his customers. Innovative selling methods and great communication.
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