FAQ Version .80

This is Albert's FAQ on real estate in Hawaii, specifically O'ahu.

FAQ Overview
In regards to real estate in Hawaii, we actually felt three FAQ's were necessary. One for general real estate questions, one for Sellers, and one for Buyers . Until the FAQ gets larger, we'll separate them into three sections.

Section A-- General Real Estate Questions

Question 1: What's going on in the market? As of Sept. 7, 1998
Answer: Hawaii is in its eighth year of a slump. Historically, our real estate cycle has been seven years from "good" to "bad". I personally have very little optimism in the near future, and expect trends to continue for the next five to seven years, unless some major economic windfall should occur during that time. In General, Volume, the number or rate of sales has increased, however the price of homes has remained flat, if not continuing to decline. Higher priced homes have taken harder falls lately.

Question 2: What strategy would you recommend?
Answer: Obviously strategy has to do with what your game plan is, and different people have different preferences, but this analogy seems to make things clear: The market is like quicksand--The severity of the situation depends on how tall you are. If you can handle the negative effects of holding your property through the next five to seven years, hang on. If you are in a negative situation-- too severe for your comfort, then get out and do what you have to in order to get out fast. Another analogy is to liken real estate to the stock market. Although you may be losing money on paper, that loss is not recognized until a sale occurs. If you're looking to buy, there is not going to be a better time in the near future. Put it this way--If you're goign to have a 30 year mortgage, would you rather have that mortgage at today's prices with today's interest rates, or wait until the market improves to buy the property at a higher price?

Question 3: Is there any other way to cut my losses?
Answer: For the most part, yes. If you're an owner occupant, and have suffered financial hardship over the last two years, you may be able to perform a short sale. If you're an investor, and have some equity left, you may be able to put your equity into a better-performing property. Analyzing your situation is very simple, and can be done in a matter of minutes if you know what questions to ask. There are other creative solutions to solving your problem, such as using seller financing, or renting the property with an option to purchase, but it's best to consider your entire situation with a real estate professional that can help guide you to the quickest, most effective solution.

Section B-- Sellers

Question 1: What if I can't sell my home?
Answer: Every property has a price. Many Sellers don't want to take the price the market has to bear. No agent or individual person can out-perform market values, however, real estate professionals vary in performance depending on their level of expertise. Your choice of selling or not is dependent on how the property is impacting your bottom line. If you can't sell, or better phrased, are not willing to do what it takes to sell, you should take a hard look at assessing your decision, and either do what it takes to sell, or don't waste time trying to sell the property. We've sold a lot of property that others couldn't. Check out our track record.

Question 2: How do appraisers determine market value?
Answer: There are three methods to determining an appraisal value, 1) Replacement cost, 2) Income stream, and 3) Comparable value. Most residential appraisals are based on the third approach, using the most recent comparable sales to determine value. However, it is important to remember that the appraisal is only an opinion, and the figures found are used to benefit the client of the appraiser. You may be surprised to find that the appraiser's client is not the person who pays the bill, but rather the person who the appraisal is done for--usually the bank. Further, when an appraisal is done for purpose of purchase, the appraiser will tend to use the more conservative valuation, to protect the lender from funding an under-valued home. When that same home comes up for a refinance or for an estate valuation, the same appraiser may use the riskier, higher valuation, because that will allow the lender to lend more money. Weird but true.

Question 3: How long does it take to sell?
Answer: There are really two dates we have to work with: 1) Marketing time to find a ready, willing and able buyer, and 2) going from escrow to closing. If the property is priced right and marketed correctly, it will sell within the first 60 days on the market. During that time, an offer is made, and the agents "open escrow". This begins the due diligence process, The Buyer usually has a professional inspection performed, has a chance to review the seller's disclosure statement and condominium documents or CC&R's (Covenants, Conditions and Restrictions) of the neighborhood, performs a termite inspection, survey (for Single Family only) and appraisal. The loan application process is actually what takes the longest, but normal escrow times are 30-45 days, 60 days is not uncommon. By the way, sound strategy--regardless of scheduled closing date, don't pack until you have verbal loan approval.

Section C-- Buyers

Question 1: I'm interested in buying a house. What should I do from here?
Answer: Although it may seem roundabout, the first thing you should do is set an appointment with a Realtor to discuss what your thoughts are. When you come in to meet with us, your first meeting will 1) define your financial boundaries, 2) define your geographical limitations, including background information of neighborhoods, and 3) we will help you define and prioritize the things important to you in your next property.

Question 2: How much down payment will I need?
Answer: Normal financing for Owner-occupants is 20%, for investors, it's 25-30%. However, there are many financing packages that allow you to buy with as little as 0-3% down payment, and the current market frequently shows Sellers paying for much of the Buyer's closing costs.

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