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Business :: Real Estate :: Understanding the Hawaii Real Estate Market :: How to Successfully Purch...

How to Successfully Purchase Hawaii Real Estate

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There are approximately 19,000 Real Estate Agents in Hawaii of which approximately 1,700 are Realtor-Brokers whose designation on their business cards will have a logo like this "R". These are agents who have actually been licensed twice. First they were licensed as a Sales Agent and their designation on their business card will look like this "R.A.", “ Real Estate Associate.” Then after several years of experience these R.A.’s can choose to become Brokers or “ Realtors” by passing the Broker's Exam and they became “®" as depicted on their business card.
There are plenty of experienced, good "Sales Agents" out there to choose from. Sales Agents can be either Realtor Associates or Realtors (also known as Brokers) but I became a "R" because of my love for this business and my driving desire to be one of the best agents on this Island.

Approximately 90% of the 19,000 sales agents in Hawaii sell less than
5 homes / year.

That leaves 10% of all agents doing most of the business.
It is not about the years in the business in qualifying the prospective agent, it is about the # of transactions. The more transactions that an agent has had the more knowledgeable they are going to be on Hawaii Real Estate as each and every transaction is different and something new is learned from each transaction.
There is no Hawaii Real Estate Manual for agents to learn from that will cover all contingencies and issues. A successful agent will depend on his or her experience, the quality of the Broker In Charge (B.I.C.) in the office to supervise and coach, Company training program (if available) and the availability of other experienced agents in the same office who can render assistance if needed.
The Industry Standard in Hawaii for the # of transactions for a typical sales agent is 4.31 transactions/ year. My current ratio is approximately 14/year.
Interviewing an agent is most important to see if there is a 'fit.' Can the agent listen and repeat back to you your goals and desires etc.
Most important of all...always ask for the agents Sales Report. This will provide you with key information of what they have sold and will also provide you with another key indicator through "W's" (Withdrawns) and "E's" (Expired) listings that may be on their sales report. If a sales agent has many of these W's and E's then it may mean that they do not know how to price/value a piece of property properly.
There are exceptions to every rule...

There are a few agents out there who are experienced or not experienced enough. There is no available data on this topic. Some agents know fully well how to properly price/value a property.

Some agents will still take a listing if it is unrealistically priced by the seller after the agent has advised the seller as to the correct pricing.

This happens in many listings simply because the agent expects the Seller to lower the price in the short term and subsequently gets it sold and the agent makes a commission.
There are dangers to this strategy as the longer the home is on the Market the more difficult it is going to be to sell the property for anything near what the Seller wants.

A key indicator of how long a home has been on the market is known as D.O.M. or Days On Market. This number will be on every listing.

Prospective buyers and their agents will assume that the seller is motivated to sell after they have been on the market by how high the D.O.M. is as compared to the average D.O.M. for that neighborhood.

Homes must be priced properly in order to sell for the highest amount of dollars and in the shortest time frame. Simply, the longer the home sits on the market without going into escrow with an accepted offer will result in ultimately the seller lowering the price or pulling it off the market.

Listing agents who will still take an unrealistically priced listing will persist in asking the seller to lower the price during the duration of the listing. The listing agent will also explore opportunities to provide any prospective buyer for the same neighborhood to a home that is correctly priced and sell that home to them.
How Best to 'Shop' for a Home:
Internet...Internet...Internet. Over 85% of all people looking to purchase a home will shop the internet. They will not 'hook up' with any particular agent, but they may 'talk to' as many as 20 agents over a period of 1-9 months during their 'investigative period.'

When the right home is identified they will call the agent that kept in touch with them and had provided them with the information they deemed as valuable and necessary to their successful home purchase. They will write an offer with that agent.
At my website at you can look up all properties that are for sale.
Listings for sale will look like this...

This MLS For Sale Listing is directly from the Honolulu Board of Realtors. There are lots of websites to search for homes that will give you access to the entire MLS but I would prefer if you use mine.
The key areas of a listing are the price, the square footage under roof, any 'other' additional square footage, Association Fees, Lease Hold or Fee Simple tenure, Monthly Taxes, View, utilities available and Maintenance Fees. Also "Inclusions" are important as this will tell you what comes with the house, washer, dryer, built in book shelves, window coverings, refrigerator, etc.

Now...if you click onto the Main Photo it will bring up all additional pictures of the Home.


When Searching for a Home on the Internet:
You will need to know what neighborhood you are going to search in, the price range you can afford, how many bedrooms, how many baths, how big a house,  how big a yard, how many parking, covered or uncovered parking, Fee Simple (F.S.) or Lease Hold (L.H.) and amenities that come with the home and the neighborhood.

Just as important as the home’s amenities are the amenities of the neighborhood like schools, shopping centers, hospitals, crime rate, restaurants etc. These neighborhood amenities can be found through other search parameters on your MLS search site.
As I mentioned earlier different sites have different types of Search Pages and not all of them will give you the same information. I think mine will give you what you are looking for.

Your search page will look like this... 


It is very important to know what you can afford. It is a 'best practice' to speak with a Mortgage Lender and obtain a Pre Approval Letter before you actively begin to visit properties for sale. This effort will save you a lot of time in finding the right home in your searches.
1) It takes 10 minutes on the phone with a Mortgage Lender to get an idea of what the lending institutions will lend to you based upon your F.I.C.O. score (Credit Rating Score), debts, price of the home, down payment and so forth.
2) A "Pre Approval Letter" is like "Gold" to most Sellers as it tells them you have already seen a Mortgage Lender, the lender has run the #'s and has given you the 'Green Light' to proceed to find your home. This piece of paper is given to the seller with your offer. The 'Maximum Loan Amount' is not stated on the paper but is 'replaced' with the amount of the offer for the home, less your down payment and earnest money deposits.  This way the seller never knows what your maxium Pre- Approval amount is.

3) A Pre Qualification Letter is 'not worth the paper is it printed on.' It simply tells the Seller you have contacted a lender, but...unlike a Pre Approval, this letter has many 'stipulations' on it specifying the criteria you will have to still meet to qualify for your loan.

4) When shopping for a loan it is important to know that each time you provide someone with the approval to run your credit it will drop your F.I.C.O. score a little at a time. It is best to compare no more than two lenders offerings by giving them approval to run your credit and providing you then with a "Good Faith Estimate." This Good Faith Estimate is a single sheet of paper listing all of your charges and terms for the loan. This piece of paper can be used to compare with other lenders Good Faith Estimates.

Your Search Results will look similar to this...
If you click onto any photos in Search Results like this it will bring up the 'Detail Sheet' and all available photos of the property.

I also have at my disposal a form that looks like this below and can be filled out to tell you what your Monthly Mortgage will look like, escrow charges etc.

Now is that house really worth the price?...
C.M.A. (Comparative Market Analysis) is what you use before you go and see the property or put an offer in on it. This will tell you what the home is actually worth on the market at that time. You can obtain this C.M.A. from a sales agent. It's the easiest thing to do and much more accurate than some other websites offering Sold Data like Those other websites I have researched and have found them to be not accurate and therefore not a good tool use for this important step.

The C.M.A. looks like this...

From the above C.M.A. you can see 3 different but similar Subject Properties For Sale and the Average Selling Price is as you can see at the bottom of the 'For Sale' section is $698,000 and they have been on the Market for an average of 113 Days. (D.O.M.-Days On Market)
Average Sales Price / Square Foot is $430.33 or $698,000.
Now look at the Solds in the 'Sold' section. Appraisers will only use the last 6 months Solds to value a property in Escrow. This C.M.A. has the last 6 months Solds for 'like kind properties' and the Average Price Sold / Square Foot is $425.50 or $662,500.

Now...since this is not a rising market we can use this C.M.A. as it currently is without adjusting or a rising market value.
This means that out of the above Subject For Sale property #3 is Below Market Value and might be the 'Best Buy.' The # 1 Subject Property is a close second and the # 2 Subject Property might be over priced for the Neighborhood, depending on any additions or alterations that may have been done to each of them.
It is best to compare in a CMA all 'like kind' properties of equal amenities. You can do this by reading the amenities list, the inclusions list and the comments section on the listing.
It is best to compare in a CMA all 'like kind' properties of equal amenities.
If all things are equal on the #3 Subject Property above then my above comments are true and therefore this is a proper C.M.A. and valuation for these properties.
This is what you base your Offer on. This is the stuff you need to know before you go and visit a property or make an offer. It saves a tremendous amount of your time.
I hope this helps you and if you have any questions, please feel free to contact me anytime on my cell 808-384-9015 or by email
Much Aloha,
Mike Gallagher
RE/Max Kai Lani, Kailua, Hi. 96734

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