Making an Offer in Oahu’s Real Estate Market

Seller’s Market

Inventory in Oahu is low and the number of people moving here has increased steadily in the past 20 years. Seller’s markets exist when buyers compete for a low inventory of active listings. It’s not unusual for a new listing in the prices below $700,000 to get multiple offers in the first week. If the home is priced at market there may likely be a bidding war. But the price isn’t everything to a seller. There are other factors. If you are trying to buy a home in a seller’s market, here are some suggestions to help you get your offer accepted:

Submit a Preapproval Letter With Your Offer

Getting a preapproval letter from a lender should be done before looking at properties. Most sellers in this market require a letter from your lender that says your credit rating has been examined and you can afford to buy their home.  It tells the seller that you are serious, qualified, and will not take extra time to go shopping for a loan after the offer is accepted.  Chances are, if the seller has a higher offer from a buyer without a preapproval letter, your offer will likely win.

Make Your Offer as Clean as Possible

If your offer is contingent on the sale of another property or has other requirements it may be a good idea to consider solving these issues beforehand. You may want to consider a bridge loan, rather than jeopardizing the offer. Also, don’t ask for help with closing costs or other concessions outside of the offer price.

Include a Personal Letter

An experienced agent will always include a personal letter with the offer. If the seller has multiple offers and your offer includes a letter that is personally handwritten by you, your offer will stand out.  In your letter, explain why you are in love with the seller’s home and include reasons why your offer should win. Sellers like to know something about the new family moving into their neighborhood and it will make them feel good knowing they made a decision based on something other than money.

Write a Friendly Offer

Your goal is to get the offer accepted and to make sure the transaction will close. Avoid making demands on your offer that will likely irritate or anger the seller. Also, keep in mind that the seller’s agent can influence the seller to work with a buyer that is more reasonable.

Offer to Close Quickly

Unless there are extenuating circumstances, many sellers prefer to close within 30 days or fewer. If you can offer a 21-day closing time frame, that might be more important to the seller than an offer for more money and be just the edge you need to beat out the competition.

Don’t Ask for Personal Property

Unless the seller offers furniture or other items as part of the sale, don’t ask for it. Your offer could be very similar in price to another that isn’t asking for items that belong to the seller.

Consider Waiving Some Contingencies

If you feel comfortable risking your deposit, you might want to consider waiving contingencies such as those for loans, appraisals or inspections. However, there are risks. If you waive an appraisal contingency and the home appraises below your sales price, you will need to make up that difference in cash. But without some contingencies, your offer will be more solid than a competitor’s.

Offer Above-Asking

This is not the market for making low offers and hoping someone will bite. You will have to make your offer strong enough to beat out a multiple-bid situation. If you really want the house, you’re likely going to have to go above the asking price.

Put Down a Strong Earnest Money Deposit

Your EMD is your proof to the seller that you are good-faith buyer. A larger EMD than is traditionally offered (about 1%-3%) shows that you are a serious buyer and that you fully intend to purchase the property.

Consider Doing Minor Repairs Yourself

The home inspection can kill the deal. Trust the inspector and don’t sweat the small stuff. Minor repairs can add up and stress the seller out. Avoid asking for simple repairs like fixing leaky faucets or tightening toilet bowls.

Add an Escalation Clause

An escalation clause means that your offer will outbid other offers up to a maximum price. This means that you make an offer saying you will pay X price for a home, but if a higher offer is received, you will increase your offer to Y price.

Work With an Experienced  and well-known Real Estate Agent

The bidding process in a seller’s market can be complex. I have helped both buyers and sellers in over 4000 transactions over the past 20 years. One important thing about doing business in Hawaii is relationships. I have good relationships with hundreds of agents in Hawaii and around the world.

Merry Christmas & Happy New Year!

You may have seen this video on Facebook, Instagram, or YouTube. I am so thankful for the relationships I have with my clients. I decided to create a short video of this past year. Wishing all of you a Happy and Prosperous New Year!

Over 4000 clients trusted Me to help them Sell and Buy in Hawaii and throughout the US.

Buying vs Renting – Your Permanent Home

In the last 35 years or so I have lived in many homes. I really couldn’t tell you all of my past addresses. I traveled from the east coast to west coast and now live in Hawaii. I love traveling, meeting new people, and experiencing new places.

buy vs rentPeople who are struggling with the question, “Should I rent or buy?” are smart to get the best information and analyze the situation before jumping in with both feet. Especially those with a family and small kids.  Moving is not an easy thing to do and if your kids are in sports, the situation may be compounded by laws that prevent you from changing schools. On the other hand, owning your own home is a good way to plant roots in a neighborhood and provide stability for the family.

The Decision Process

What’s the neighborhood like? Are the homes well-kept and neighbors friendly? I have lived in places with great neighbors with holiday parties and common interests and other places that were a nightmare. There were neighbors that partied all night, and were still partying the next morning and through the next day. Not to mention, the non-stop dog barking. We didn’t like living there, so we moved. Renting gave us that flexibility.

Buying is not always the right decision. Some questions you should ask yourself when deciding whether it makes sense to buy: How secure is your job?  Are you living within your means and putting money into savings or investment accounts? How is the local real estate market?  Can you take advantage of interest rates and potential tax deductions?

Advantages of Buying

When you pay off your home, it’s yours. You eliminate a major portion of the cost of your housing once the mortgage is paid off. Depending on where you live, home ownership may be the best investment you can make. If the home appreciates more than you’ve paid in mortgage, interest, taxes, and maintenance over time, you’ve earned a return, or you break even. Tax credits help offset some of the cost of homeownership. Typically, the longer you stay in a home, the more financial sense it makes to buy from a tax and investment perspective.

Homeowners take pride in their homes and generally care more about their neighborhood. Houses are well-maintained, landscaping is groomed and people are generally more courteous. Homeowners are more likely to be involved in community events like neighborhood watch and city council meetings. Rental units are treated more like assets that often get neglected.

Advantages of Renting

Renting isn’t throwing money away—you get a place to live and you didn’t have to dump your life savings into it. You don’t have to pay for repairs, maintenance, or other issues that come up. If home prices are falling, being a renter is the best place to be. Renting offers more flexibility than owning. If you are faced with job relocation or other circumstances which require you to move, renting is ideal. Renting requires no long-term commitment on your behalf, and is best if you don’t intend on staying in one place for a long time. As a tenant, you will probably be able to live in area in which you could not otherwise afford to buy.

Financial Considerations

Buying a home comes with more upfront costs, including a down payment, closing costs, and other fees. Also, there may be renovation costs if the house is less than perfect. For renters, the upfront cost is typically a month or two of rent for a security deposit and the landlord is responsible for maintenance and repairs. Homeowners also have more reoccurring costs like property taxes, home insurance and maintenance costs.  As a tenant, your only insurance cost is to cover your personal belongings.

The Economy

Interest rates will also play a big role in the overall cost of a home. As rates increase, buyers will get less house for their money.  Rates affect the real estate market from both sides. Buying power is lower and sellers may wait for the market to improve.

Saving and Investing

Renting means you could save all that money for a down payment and closing costs and invest your money in something other than real estate. Your 401k, the stock market, foreign currencies, or in your own business.  Financial advisors usually recommend diversifying your portfolio.

But buying a home is also investment and can be a key component of building wealth. Every mortgage payment means you own more of your home, which you will get back when you sell it.

Tax benefits

Homeowners can also take advantage of tax deductions for things like mortgage interest and property taxes, which can lessen the cost of owning a home. But tax laws have changed recently and some of the deductions we have enjoyed in the past have gone away. Buyers are now only able to deduct interest on the first $750,000 of mortgage debt on a home. Plus, homeowners can now only deduct up to $10,000 in state and local taxes, including property taxes — a deduction which used to be unlimited.

Hope This Helps

This article may provide you with some things to consider and is certainly not a comprehensive tool to evaluate your life-changing decision. I wish you the best with your research and feel free to comment with any questions or suggestions.

Thanks.

September 2018 Honolulu Market Report

Median prices are increasing, with Number of Sales down from 2017.

home-for-sale

September Oahu Single-Family Homes Median Price Tops Previous Record

Oahu’s single-family home median price in September topped the previous record set in August according to resales figures released today by the Honolulu Board of REALTORS®.

Single-Family Home Resales

Number of Sales Median Sales Price
September 2018 309  -17.4% $812,500  +6.9%
September 2017 374 $760,000

Condominium Resales

Number of Sales Median Sales Price
September 2018 511  -2.9% $428,000  +0.7%
September 2017 526 $425,000

According to the Days on Market indicator, the median days for single-family homes was 17 and 20 days for condominiums.

The information contained in this report is provided to the National Association of REALTORS® and the Hawaii State Department of Economic Development, Business and Tourism for its official reports. This report reflects information about resales of existing properties only and does not include new home sales. All of the MLS information is compiled from sales reported during the cited months; this data is known only after closing of escrow.

This information was obtained from HICentral.com, the official website of the Honolulu Board of REALTORS®.

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