Judicial Auction vs Bank-Owned vs Traditional

 

	Judicial Foreclosure	Bank-owned sale	Regular sale
How do I buy it?	Must win the in-person auction, have the auction approved at court confirmation, and get through an escrow process. No contract.	Could be an auction style or an offer situation.  Check with your Realtor for details. Bank contract or bank addendums added to standard contract.	Submit an offer on a standard Hawaii purchase contract form.
Do I need a Realtor?	No, but if you haven’t been through the process, you would be much better off with one.  You will need to compensate your Realtor directly.	No, but this is a lot to navigate so you would be better off with a Realtor.  Typically, the buyer’s Realtor is compensated by the seller.  Confirm with your Realtor.	No, but as always, you  would be better off with a Realtor.  Typically, the buyer’s Realtor is compensated by the seller.  Confirm with your Realtor.
Who removes the occupant if there is one?	You	Typically banks remove occupants prior to listing.  If they cannot remove the occupant, they will list it as occupied and then you are responsible for removal, but this is always clearly stated in the bank listing.	Negotiable.
Can I use a mortgage?	In some cases, but this is very risky. See FAQ for more details.	Some listings are cash only, some can use lending.  Clearly stated in the listing.	Some listings are cash only, some can use lending.  Clearly stated in the listing.
What if I find something wrong during escrow?	There are no options for exiting the transaction and no one to fix any issues.  If you don’t complete, you could lose your 10% deposit.	If there is a physical issue that will prevent lending, the bank may make the repair.  If not, and you’re still within your inspection contingency period, you should be able to exit the transaction and recoup your deposit.	Negotiable.  If you are still within you contingency period and choose not to move forward due to the issue, you should be able to recoup your deposit.
Will I be able to get title insurance?	Hopefully, but not guaranteed.	Sometimes banks know there are title issue, and if so they make that very clear in the listing.  Otherwise, yes, you will get title insurance.	Yes, unless otherwise noted.
Who pays for escrow, title insurance, etc.	You pay for 100% of everything.	The bank usually offers to pay for escrow and owner’s policy if you use their chosen escrow company.	This is negotiable but these fees are typically split between buyer and seller per the Hawaii Purchase Contract.
Are there restrictions regarding future sale?	No	Sometimes.  When bank-owned properties give “first look” to owner-occupants, and an owner-occupant buys the property before investors are allowed to make competing offers, the bank will typically prevent resale within the first year or so to prevent flipping.	Not usually.

 

Judicial Foreclosure Auctions VS County Tax Auction

Type:	BANK/MORTGAGE	COUNTY TAX
How often?	Any time	Two times per year
Where are they posted?	Newspaper (West Hawaii Today and Hawaii Tribune Herald)	Newspaper & Hawaii County Tax Sale Website
Open Houses	Maybe – Depends on Commissioner, occupant and safety.	No – mostly raw land – do drive-bys
Payment	10% at auction, cashier’s check made out to Commissioner.  Excess held by commissioner in trust account or might be returned upon request, depending on commissioner.	Must pay in full at time of bidding.  Cashier’s check made out to yourself, excess returned to you in form of county check.
When do you own it?	There is a court confirmation approximately 30 days after the auction.  At this time the judge may be asked to reopen bidding, and if he/she chooses to do that, bidders must outbid you by 5% or more.  You are allowed to bid again to keep your position, as long as your 10% still covers your increased bid.  After the bid is confirmed by the court, another 30-60 days for escrow and it’s yours.	Immediately.  But, the county takes forever to draft and record the deed, so you are in limbo while that happens.  You supposedly have full rights the minute the bidding ends, but they are hard to enforce without a deed.  For one year from auction there is a right of redemption for the prior owner.
Due Diligence	Ask for Fact Sheet.  Purchase a preliminary title report (sometimes the Commissioners have been provided prelims from the bank and will share a copy with you).  Check court record to make sure all lien holders are named in the foreclosure suit.	County tapes “Litigation Guarantees” to the tables at the auction for bidders to review.  You can also go to the Hilo tax office prior to the auction and review these in the office.  (Must leave your driver’s license to “check them out” to review at the desk.)
Are all liens extinguished?	Any liens that are named in the foreclosure suit are extinguished.  Any others may still be valid.	Yes… but not automatically.  Legally anything below county tax lien is supposed to be invalidated by the tax sale (mortgages, construction liens, etc, but not STATE or FED tax liens)   However, in order to remove them, you may need to take legal action.  If there is a surplus (amount bid over the “upset price”) the county writes to all lien holders and offers the surplus to the lienholders in order of lien date, so in some cases they will be paid off by the county.  If a surplus still remains after liens are paid, the prior owner may apply for it and it will be returned 2 years from auction.
Can you finance?	Maybe.  During this period between judgement and sale the commissioner is in charge of the property and makes all the decisions.  Most will allow for appraisal after auction, but I ran into one who said she would not.  Be sure to ask this question at the open house if you are interested in financing.  Also remember there is no one to fix any issues so be sure your lender won’t call out any required repairs.  This is very risky.	No (You can obtains funds out of a different property using a HELOC, cash-out refi, etc, but must have CASH auction.)
What if I change my mind?	You CAN decide to not complete the transaction, but at a cost.  Ideally you would make this decision prior to court confirmation.  You will ask the judge to let you out of the transaction and refund your 10%.  If the judge does allow you to receive funds back, the judge will direct the commissioner to re-advertise the auction, and you will be refunded your 10% less all the additional costs for advertising and commissioner’s time.  You may forfeit the entire 10% deposit.	If you change your mind in the 1 minute between final bid and turning over your cashier’s check, you can likely get out of it… (the county will announce that it wasn’t completed, and they will re-auction it at that end of the list, I’ve only seen this happen once, I do not think it is allowed.)  After you turn over your funds it’s all yours.