I’m sitting here thinking this quiet Saturday late afternoon while it’s still too hot to do the yard and my wife is taking a nap so I figure I’ll get some alone time. It’s a brand new year and my goals and New Year’s resolutions are all printed up and I’ve been looking at them everyday.
This year I’ve got some big ones to do. Quit smoking. Today’s day #1 and I’ve got a wife who can pick up a cigarette and smoke a whole pack and then not do it again for another week, month or year. Me? I am up to two packs a day and weigh too much and drink too much. Train Wreck you say? You Bet!
When it comes to resolutions I’ve wanted to figure out a way to get back into the Top 10 Authors of the Around Hawaii crew at Oceanic Cable as I haven’t been there for at least half a year now. Apparently it is bothering me so much I am willing to write about it so I’ve been contemplating just how to get back onto this list as I don’t think my vanity can handle it.
First off, I realize that just perhaps I might have to write more pertinent articles that readers would like to read about. Most people I find who are reading Real Estate Articles are those who do not have any. I think most owners who have already taken the investment plunge actually forget about it and Real Estate is just not Top of Mind until they are ready to perhaps buy another property or sell one they have.
So…let’s talk about that!
Are you one of those people reading about Real Estate because you are doing your ‘due diligence?’ (Realtors like to use “due diligence” in order to empress the folks we are talking to) Are you doing your research so that you can eventually make an informed decision? If so, read on and let me tell you what I know as I suffer from this nicotine withdrawal…
Before you Purchase Real Estate…
I think the first place you should start is with your F.I.C.O. score or more commonly called your Credit Score. There is really no point in investigating whether or not you should make any investment until you first find out if you can afford to. Credit scores are easily obtained by a quick check on the internet through various free services available. However, I personally recommend you simply call one of the many Mortgage Companies that are doing business in Hawaii and in approximately 10 minutes with a Mortgage Officer on the phone you can find out what lenders will be willing to lend to you or…not.
Once you have this figure you are well on your way to being able to investigate Real Estate Investing in a practical manner.
If you are at a loss to where to find a Mortgage Company, then go to http://www.hicentral.com/ which is the Honolulu Board of Realtors where you can find on their Welcome Page a link to all Mortgage Companies doing business in Hawaii, their rates and their contact information.
Of course like everything else in life, relationships are very important and although you may not want to marry your Mortgage Officer or you may not like your Mortgage person it doesn’t mean you have to work with them or have a relationship with them. Always remember a simple “Thank you” for their help and “I’ll not need anything else, I’ll call you if I need something” will suffice in fending off any follow up calls from most sales people including Mortgage Officers. I think most sales people will respect your privacy but you will have from time to time be ‘clear’ with them that you wish not to be contacted. Enough said on this.
If you would like to start off with a Mortgage person whom I prefer to work with due to his professionalism and years of experience I would call a Mr. Young Hong at Platinum Mortgage Partners. You can reach him at 808-220-1311 or you simply call anyone on your list of prospective Mortgage Companies.
Remember, this is only preliminary work. You are not getting a Mortgage commitment or signing anything. The only things you want to know during this 10 minute phone call is what will the mortgage companies lend to you, what interest rate they are quoting and what the monthly principal and interest will be on the loan.
What are they going to ask you when you call? They will need your Social Security Number, approximate debt in Credit Cards and other debts and an idea of your assets. No big deal.
Now, assuming you haven’t been rejected for a loan and now armed with an amount of money the lenders are willing to lend to you, start your home search. There are any numbers of places you can search for any property in the United States, including those of just Hawaii or any particular Island. What you will technically be searching is the Multiple Listing Service or M.L.S.
The only sites I would use to look up property for sale would be those sites that will allow you to look up properties that have sold as well. This may be a little more difficult to find but will be essential to successfully determining if a particular property for sale is really worth the money. One such site that I know off the top of my head is Prudential’s site at http://www.prudentiallocations.com/
I am not saying that correct pricing of properties never occurs but it’s best to assume that all prices you see for homes are negotiable. After all, you do not get what you deserve in life…you get what you negotiate!
Generally speaking if you are looking for a Condo or Town Home investment, set up your searches in mind that these properties will be listed for sale between $10,000 and $20,000 over their Market Value. If you are shopping for a Single Family Home I would set up your search keeping in mind that typically homes are $20,000 to $40,000 listed for sale over their Market Value.
One other thing to keep in mind when searching for properties…in Hawaii the term Condo is synonymous with Apartment, Condo and Town Home. If you are going to look for a Town Home then there should be a search set up on most MLS websites that will allow you to search exclusively by these categories. Of course everything can be searched by Price Range or that matter Fee Simple or Lease Hold.
O.K., now it’s time to get organized. You are going to need to know if you are going to look for a Condo, Town Home or a Single Family Home. You already know how much you would like to invest now you need to limit your scope to where you want to live. This sometimes is not as easy at it sounds. I would first start with the Top three areas you might want to live. Perform a search in those areas but this one time do not put in any price ranges. This will allow you to see everything that is for sale and you will immediately recognize whether or not there is anything available in your price range. You may be surprised that there will not be anything in your price range. If this is the case you now know that you need to expand your area selection to more than three and perform the same no price range searches.
If you do a price range search and find that there is inventory you can choose from to investigate in your price range then narrow those down to the ones that are most interesting. The next step is to perform what is known as a Comparative Market Analysis or C.M.A. Now, since most folks do not have the software or the sites you are searching from do not have this function, do not despair. Simply be prepared to compare ‘like kind’ properties together. Same number of bedrooms, baths, parking, and approximate square footage, etc. and armed with a calculator divide the asking price by the interior square footage to arrive at a price / sq. ft.
Now if you are looking for a Condo or a Town Home this is going to be a little different. As a prospective owner of one of these properties you are going to have to put up with the Association Rules and Guidelines as you are going to be living within a Community where many of the features are Commonly Owned. The first rule on everyone’s mind is Pets? If this is the case you may want to start at the Hawaiian Humane Society website.
Now that you have narrowed this down through the help of the Hawaiian Humane Society you can perform the same type of search as you did for SFH’s only this time for Condos or Town Homes.
One Note on Fee Simple vs. Lease Hold…
Professionally I think it best you always perform your searches in Fee Simple for Land Tenure as I just do not think it wise to invest in Lease Hold property. Many areas in Hawaii still have an abundance of Lease Hold property for sale and will most likely hood remain so long after we are gone. Waikiki is such an area, even Condos in the Diamond Head area. If you must consider Lease Hold then please take note that one of the most important aspects of your investigation stage on these properties will be the Lease Expiration Date. As an example, say the lease ends in the year 2016. This will mean that the lenders for such a property will only give you a loan for up to 5 years short of the lease expiration. This means you will get a mortgage for only a term of 3 years! Now imagine what your Monthly Mortgage amount is going to look like as compared to a 30 year term!
Also to keep in mind will be Lease Renegotiation Dates. Over the life of the lease there will be step increases in the lease rent charged / month. For instance say the lease runs till the year 2030 but the Renegotiation Date or Dates are 2015 and again in 2025. The problem here is that in the majority of cases nobody knows how much the lease rent will go up unless it is spelled out in the lease documents that accompany the paperwork a buyer will receive in Escrow. In many cases this lease rent can double. Enough said on Lease Hold vs. Fee Simple? See the example of a Lease Hold For Sale below.
If you are considering selling the functions that you go through in investigating buying are similar but have some different aspects to consider. Buyers should pay attention to this portion as well.
Out of all the considerations a seller has to make the #1 determining factor for a successful sale is the For Sale Price.
This consideration is so important to your success, your financial and mental well being that most of the other considerations you are going to have to make should be based upon this one step of determining the correct for sale price.
How do you do this? The best way is through a C.M.A. just as the investigating buyers have done. After all, as a seller, aren’t you going to have to think like a buyer? A seller is going to look really bad to those prospective buyers and buyer’s agents out there if the price is just ridiculously wrong. The property will end up not selling, it will solicit low ball, unreasonable offers, if it gets any offers at all and your agent is going to walk away from you if he or she can’t talk any sense into you. As a matter of fact if you have a ridiculous for sale price, you’ve most likely picked the wrong agent too as no experienced, good agent is going to take your listing and waste their time and money in trying to sell a property that simply is not going to sell due to your decision to incorrectly price it.
A seller’s best bet to get a correct price is to consult with an experienced Realtor but what the heck, you might try to understand how a Realtor would do it, so do a C.M.A. and be sure to compare features that are all like kind and remember to choose comparable sold properties from the last six months only.
I strongly recommend that you hire a good Realtor to do everything for you. It will be much less stressful and hopefully litigation free. After all, this is why you pay them for service. However if you still want to understand how this process works and run it by that next Realtor you interview you will be happy you did.
Most people interchange the word Agent for Realtor and think they are the same. Not really. All Realtors are agents, but Realtors are also members of the National Association of Realtors. Agents are not necessarily members of the National Association of Realtors. Realtors have to subscribe to a Code of Ethics. Agents do not necessarily have to. I have included the newest National Association of Realtors Code of Ethics at the end of this article for your review.
Choose to interview agents/Realtors who have been in the business for a number of years and most importantly ask them for their Transaction Report. This will tell you exactly how experienced they are as you will see how many homes they have sold, what % of the sales price did they get, how many Expired and Withdrawn Listings they have had which is an indicator of how successful or not they are at PRICING and selling. Basically though the more SOLDS they have probably is the best indication of how successful they are.
Timing is almost everything…
Besides having the house properly ready for sale (email me if need info on how prepare your home for sale) before you begin to market you home the next most important consideration is when to put the home on the market.
Timing can be everything…
These two graphs above should tell you that most buyers are looking to buy in the $400,000-$499,000 range.
I think as a seller you may want to take a look at the information supplied in these above graphs to help you decide when might be the best time to bring your home into the market. In this case the Ewa area which is used as an example we can see the following from the graphs:
Pricing will be extremely important!
In summation, if you are a seller in Ewa you want to have your home prepared and ready to go to market no later than the beginning of December and on the market no later than the first of the year in order to have less competition which will mean you will in most likely hood obtain more of your asking price and you will probably sell faster.
You will also want your competition to look like this…
Not like this…
I need to say a word or two on Promotion…
In closing I would like to say that I’ve been very sarcastic of agents who do not take any photos of their client’s property for the M.L.S. I totally believe that this is unjustifiable. I simply can think of no excuse for it. I think part of the responsibility lies with the agent, his or her Broker and with the Honolulu Board of Realtors.
The task of taking photos for the internet, which provides the root cause for all showings of the property to be at least 85% is not mandatory under the rules of the Honolulu Board of Realtors.
Taking photos for the Big Island’s Boards is Mandatory!
Well, as a seller you can do something about this. While you are interviewing agents I would recommend in addition to asking for the all important Agent Transaction Report to see the agent’s credentials and experience level, I would ask how they intend to promote the property.
Of course promotion is much more than listing the home in the M.L.S., sticking a sign in the front yard and praying for the best to happen. Photos are essential to sell your property. As much as 85% of all prospective buyers will view the internet before ever asking to see the property. What do you think happens when I am asked by a client to find a home? I search the internet and when I come across a listing that does not have a photo I pass it up. When I come across a listing that has poor photos I pass it up. Why? Because simply there just isn’t time to track down the agent for photos to view if they don’t have any in the first place and if the photos provided are poor it is usually an indication that the property is going to show poorly too. No effort should be made on this while there are lots of potential buyers out there looking for that same ideal home for sale.
Something to get excited about…
I recently have just run across a new service available to all agents in promoting a client’s home that is absolutely excellent. It is not available in all areas yet, but I am sure it will be soon. Word of mouth is spreading the news of this service and sooner than later this service is going to completely dominate over the industry of advertising a home. I strongly recommend you go to: http://www.open2view.com/.
This service which is provided locally by Michael Cummings is an all new approach to selling property. I cannot possibly convey simply in words how effective this new service is in selling a home without you visiting the website and exploring this service for yourself.
The best news is, as a seller it is free. You can ask your agent to pay for it. I think most agents will agree with me and will gladly include this service in their listing presentation package as long you, the seller, agree to a realistic selling price.
In conclusion, I hope that you have enjoyed this article for this month. If so, I would appreciate some feedback sent to me as well as my Editor before he asks me find something else to do. I would like to know what is most important to you the reader and I would like to set up a series of articles for you this year about what it is you want to read about in further explaining the Hawaii Real Estate Industry. Thank you.
Well, by the time I’ve finished this article over a period of two days…I am still smoking, still drinking and loving it! Darn…I am just going to have to try again!
I wish you all much Aloha, until the next time…
Broker in Charge