Big Isle auction draws hundreds
By Kevin Dayton
Advertiser Big Island Bureau
HILO, Hawai'i — Hawai'i's real estate fever was on display yesterday in Hilo, where nearly 400 bargain hunters showed up to bid on 30 Big Island properties at a county tax-foreclosure auction.
Kevin Dayton • The Honolulu Advertiser
Hawai'i County convenes the auctions twice a year to sell off properties whose owners failed to pay property taxes for at least three consecutive years. The auctions traditionally are seen as a good opportunity to snatch up underpriced land — and with the state's overheated real estate market and low mortgage rates, interest in yesterday's event was particularly keen.
County appraisal supervisor Mike McCall, who presided over the auction, at one point warned the crowd to "please be careful of what you are bidding on." That's because two buyers reneged yesterday soon after learning that they had bid on virtually inaccessible land.
But judging from the action, held at the Afook-Chinen Civic Auditorium, the rock-bottom prices of years past are gone, perhaps forever. Bidders found property selling near market prices or even above market value in some cases.
The first property sold was an 8,000-square-foot vacant lot in Nanawale Estates in Puna that went for $18,000, prompting a collective "Oooh!" from the crowd. The price was considered high compared with past sales for Nanawale lots, most of which have no water service, can be reached only by substandard roads and are in a relatively high-risk area for lava inundation.
Mike McCall, the county appraisal supervisor who conducts the auctions, was pleased. "Well, that's a good way to start it," he beamed at the crowd.
But that would depend on your point of view. Yesterday's prices left some hopeful property shoppers shaking their heads.
Joey Aukai, 39, stopped by while visiting from O'ahu and was prepared to bid if the price was right. He watched and listened, but didn't buy.
"I was definitely hoping for lower prices. I wanted a steal of a deal, which I didn't get," Aukai said.
Noelani Spencer, 24, came looking for an investment property, but said she made only one unsuccessful bid yesterday. To her, most of the prices sounded like "retail," or even above the going market.
Adrenaline apparently got the best of some of the bidders: One offered $6,100 for 814 square feet of land in Ka'u, and another bid $11,000 for 3,248 square feet in South Hilo.
Both properties are land-locked, with no legal access that would allow owners to reach them by vehicle, and both buyers promptly backed out when they realized what they had done.
After the second buyer reneged, McCall gently advised the crowd to "please be careful of what you are bidding on."
Most of the lots that were sold were 1-acre parcels in Hawaiian Ocean View Estates in Ka'u or smaller lots in Nanawale, two of the Big Island's least expensive rural subdivisions.
The most expensive parcel of the day was a 1.3-acre lot in Kaumana above Hilo. The winning $90,000 bid came from Henry Peters, a former speaker of the state House and onetime Bishop Estate trustee.
In years past, the winning bids were usually 60 percent of the market price or less. Officials were often unsure if they would even get the upset price, which is the amount the county must collect to recoup the back taxes, penalties, interest and cost of preparing the land for auction.
But that has changed as Hawai'i real estate prices soared in the last two or three years. William Takaba, director of the county Department of Finance, said there has been an element of "frenzy" at recent auctions.
The last auction, on Dec. 14, attracted a standing-room-only crowd of more than 600 people to Auntie Sally Kaleohano's Lu'au Hale.
"If the fire marshal had come down, we would have been shut down," said auctioneer McCall. That turnout prompted county officials to move yesterday's event to the larger auditorium.
Buyers at the two auctions last year generally paid prices that were about 80 percent of the estimated market value of the land, McCall said.
Real estate professionals told the county that in some cases the bidders at recent auctions actually paid more than market value, Takaba said. "There are cases where people overbid sometimes, and we don't want that either," he said.
The county does not benefit from overbidding because it keeps only the upset price. Once back taxes, penalties, interest and costs are covered, leftover money from the sale is given to the owner who lost the property to foreclosure.
The county collected $886,800 from yesterday's auction, but will keep only about $78,300.
The auctions' real benefit to the county is that they are a powerful tool to pressure property owners to pay overdue taxes. Many pay up as soon as they are notified that the county plans to foreclose. For example, the county initially published a list of 67 parcels it planned to sell off yesterday, but more than half of the owners paid their back taxes before the auction was held.
Maui has not held a similar tax-foreclosure auction in many years, and Kaua'i last did so in 1999, officials said. Honolulu holds annual real property auctions, including one last month where three properties were sold, a city spokesman said.
Reach Kevin Dayton at kdayton@honoluluadvertiser.com or (808) 935-3916.
