Hawai'i's housing market isn't in big trouble like some other states, but one local real estate firm recently introduced a product that's popular in more troubled Mainland markets: the foreclosure property tour.

'Aiea-based Realty Experts Hawaii Inc. earlier this month began taking prospective buyers on tours to see numerous O'ahu homes for sale by owners facing foreclosure or lenders after foreclosure repossession.

Local real estate brokers say it's the first such tour in Hawai'i, where foreclosure filings have been growing for the past 14 months.

Though the number of homes being sold as pre-foreclosures or post-foreclosures remains relatively small, Realty Experts principal broker Duke Kimhan believes the big trend in places with devastated housing markets such as California, Florida, Nevada and Ohio, is a growing niche opportunity in Hawai'i.

"This is going to be hot for the next couple of years," he said. "It's a real tough time right now."

According to property search Web site www.oahure.com, there are about 60 single-family homes and condominiums on O'ahu for sale by lenders, and about 240 short sales in which owners cooperating with lenders list their homes for less than they owe on their mortgage.

Combined, that's just 0.6 percent of the roughly 4,800 homes on the market in recent months on O'ahu, though the percentage may be higher since not all lenders disclose in the Multiple Listing Service that they are selling a foreclosure property.

According to California-based real estate research firm RealtyTrac, the number of Hawai'i homes repossessed by lenders has grown from about five per month early this year to 19 in May, 19 in June and 25 in July.

Realty Experts plans to lead two tours a month, with each tour focusing on a different region of O'ahu with single-family homes that vary by size, price and quality. Kimhan said he tries to select homes that appear to have good value.

The first tour two weeks ago attracted 35 people and covered homes in Mililani, 'Aiea and Pearl City, Kimhan said. On Wednesday, a second tour drew seven people shuttled in a rented van to see homes in Makakilo, Kapolei and 'Ewa.

Will Kava, a 25-year-old graduate of the University of Washington who recently moved back home to Hawai'i with his wife, attended the tour armed with a digital camera and the intent to own and occupy his first home.

All other tour participants were looking for investment property, including a Marine Corps infantry instructor, a city and county worker and a couple who own a business providing bikini-clad models for events.

"It's not as tough as everyone thinks," said Stacie Lino, who with her business partner in Islandbabez Dot Com Inc., Gene Simeona, has invested in four homes and sold three in the past eight years.

"We usually look for the run-down ones and fix it up," Simeona said. "We're always looking. You only have to get lucky once in awhile."

The tour group, over four hours, visited 14 vacant homes with asking prices from $371,100 to $674,900. Most of the homes were only a few years old and in good shape, though the lawns on a few were dying.

Pulling up to the first home on the tour, a three-bedroom, three-bathroom house in Makakilo's Highpointe neighborhood, tour leader and Realty Experts agent Patrice Duggan announced: "This home for the price — I think you folks will be impressed when you go in."

Property records show the 1,954-square-foot home sold new in December 2004 for $503,638. In August 2005, the home resold for $745,000. The property now is listed as a short sale at $590,000, or $155,000 less than the previous sale price.

Listing records also show that the current owner had listed the property for sale at $849,000 in June 2007, and reduced the price five times since then.

Duggan noted that buying a short sale can take longer than a typical 30-day closing because the lender ultimately decides whether to accept an offer. Homes already repossessed by a lender are generally a simpler purchase.

"Once they (lenders) take it back, they just want to get out," Kimhan said.

There's a common perception that buying a home in foreclosure means getting a deal below fair market value. But that's hard to evaluate without having a professional appraiser assess the property.

A FAIR PRICE

Often prices for foreclosure property are lower because homes need improvements. Also, lenders usually don't disclose whether there are issues with homes being sold as is required in a normal sale. Buyers may need to hire their own consultants to do a boundary survey, termite inspection or other assessments.

Russell Nishimoto, an agent with Prudential Locations who specializes in selling foreclosed homes for lenders, said lenders employ asset managers who typically commission a few local real estate agents to give them multiple rough assessments of a home's value.

The assessments, called broker price opinions, aren't as rigorous as more costly assessments by certified appraisers, but help lenders get a fair price for their assets.

"They don't allow somebody to steal a property and benefit from someone else's misfortune," he said. "The properties are being priced pretty much at market."

Nishimoto added, however, that lenders don't hesitate to reduce prices if properties don't sell fairly fast.

Georgia Roberson, an agent with Coldwell Banker Pacific Properties who also sells homes for lenders, said the number of foreclosures in Hawai'i isn't high enough to produce deals where buyers can purchase homes for 50 cents on the dollar.

"I tell them to go to Florida or Nevada," she said.

However, Roberson has agreed to let Realty Experts bring tours to her post-foreclosure listings, and expects the inventory and interest in foreclosure property will grow.

Tour participant Andre Dolor, a 35-year-old Makakilo resident who bought an investment property at a foreclosure auction about four years ago, said he was amazed by the $650,000 to $675,000 asking prices on two homes in the Woodbridge neighborhood of Ewa by Gentry that sold new almost three years ago for about $740,000.

"The prices they were set at — wow!" he said. "It's amazing how the market has swung."

Though no one made offers immediately after the tour, Kimhan said a few offers were made after the first tour.

It used to be that the main place to buy foreclosure property was at publicized auctions typically conducted by an attorney or court-appointed commissioner outside the main entrance to the Circuit Court building in Honolulu.

RISE OF PROPERTY TOURS

Few sales, however, take place at such auctions, which are required before lenders can repossess a home. That's because lenders usually claim the property if no one bids more than the lender is owed. Also, there's often no opportunity to see inside the house, and evicting the former owner, if necessary, becomes the responsibility of the buyer.

So foreclosure property tours have become a novel, if somewhat impudent, way to sell a growing segment of property and increase business in a slowing market.

The tours are common in many Mainland markets deluged with foreclosures. One free tour in the Tri-Cities area of Washington State takes prospective buyers around in a stretch SUV limousine. In one New Jersey municipality, a tour was hosted by the city government using a school bus. And a Michigan company, www.ForeclosureBusTours.com, organizes tours in multiple states.

For the Realty Experts tour, participants agree to be represented by the company if they buy a home seen on the tour, earning the brokerage firm a commission. Kimhan also charges participants $20 for the tour to help cover the cost of gas and a bento lunch.

Kimhan said the next tour is slated for Sept. 13 to visit homes in Kaimuki, 'Aina Haina and Hawai'i Kai. After that, there will likely be a Windward O'ahu tour.

Miles Kimhan, brother of Duke and owner of Realty Experts, said if the tours catch on and foreclosures continue to rise, the tours could be expanded.

"We might need a couple of Roberts buses pretty soon," he said. "It's unfortunate for somebody, because they had to lose their home. But there is opportunity for other people to get a very good-priced home in Hawai'i. There is definitely a need."