Hawaii Question: What price would I expect at a foreclosure auction on leasehold property if I already own the fee? Will there be other bidders?

Asked by Noelani, Honolulu, HI Thu Feb 25, 2010

There's a unit in my PUD that is in foreclosure. The owner has let their right to purchase the fee expire, so the fee is also available. The fee is available to investors for, say, $300K. The lease has 20 years to run, with the lease rent of, say, $500 a month. The unit has a rental value of around $2800 a month. The owner probably has $300K left on their mortgage. The auction is a couple of months out and the bank has it for sale, but the bank doesn't own the fee.

Here's my question: If I buy the fee as an investment, and then show up to the foreclosure auction as the owner of the fee, with no intention of ever selling it, what kind of leverage does that give me? Will I get the property for a song? Will other bidders at auction bite on buying a 20 year leasehold on a property where they will never own the fee.

If there is a realtor or mortgage broker in Hawaii that knows about such stuff, I'd love to hear from them.

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Raymond_dallou’s answer
Raymond_dall…, , Hawaii
Thu Feb 25, 2010
There are many buyers that are content to purchase the leasehold property because of the reduced prices. You really have leverage when the end term of the lease is under 15 years. Most lenders will finance between 5 and 10 years back of the end leasehold date, which does not make the Purchase of the leasehold transaction acceptable if buyer is looking to finance the property for longer terms.
Raymond Dallou
Guild Mortgage
Condo Hotels, Leasehold, Non warrentable Condos, Hawaiian Home lands and more
Big Island (808) 883-8833
Oahu (808) 292-7566
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