It’s official! Oahu real estate has fully recovered in 2012 and Oahu properties for sale are hotter than ever! It’s a bit hard to be a Buyer in the Oahu real estate market, when inventory is so low. Sellers have all the leverage. All the great properties are going fast, with multiple, often over asking price, offers. What is a Buyer of Oahu real estate to do?
First and most importantly, you can make sure you are working with a great Oahu real estate agent or Oahu real estate broker. Your Oahu real estate professional should be experienced in handling Buyers, in a Seller’s market, and should have multiple strategies to suggest, depending on the situation, that will enhance your ability to purchase some great Oahu real estate.
Here are just a few Oahu real estate buying strategies that you might consider:
1. PAY CASH, IF POSSIBLE: Unfortunately for many buyers, its seems like a lot of people have been sitting on cash for the past few years and they (investors) are coming out in droves to buy Oahu investment properties. Also, many investors are doing 1031 exchanges right now. Oahu investment properties are not only multi-unit buildings, but many single family residences and condos, so this can affect buyers of primary residences, as well. Even if you are only looking at single family homes, you may have competition from investors looking for a single-family home to use as a rental or, in some cases, to tear down and build single family residences that are adaptable to multi-unit configurations. There’s also competition from retirees or mainland buyers with cash they have pulled out of another property.
So how can a regular buyer, getting a loan, compete with all these people paying cash?
a. Put as much cash down as possible in the form of downpayment. Borrow, if necessary and possible, from a parent or other relative, or from a retirement or savings account, subject to your lender’s guidelines.
b. If you can’t pull together a bigger downpayment, make sure to make your earnest money deposits and second deposits strong as well, as it shows comittment to the property. Just be aware of the risks you have of losing this money if you change your mind on the house after your contingencies have been removed.
c. Look at the possibility of pulling out cash from another property, if you have one, rather than financing a second property. This can be done via home equity line or loan, for smaller amounts, or by a refi or obtaining an entirely new mortgage on a home already paid in full.
d. If there is no way you can come up with more cash than the minimum downpayment, at least make sure that your financing for the new Oahu property is air-tight. This means you have a pre-approval letter done, based on submission of a full loan application, documentation, and a credit report, not just a pre-qualification letter, which carries less weight. Have conversations with your lender, prior to writing an offer, to troubleshoot the loan and make sure the lender has everything he or she needs in advance. Make sure the lender is willing and able to talk to the listing agent for the property and give you a glowing referral.
Don’t worry if you are not a cash buyer. The majority of Oahu real estate transactions still involve loans. This is just one factor to consider in a competitive situation or in the more sought after neighborhoods on Oahu.
And if you are a cash buyer, be aware that, in this market, “cash discounts” on Oahu properties for sale are few and far in-between. There are many Sellers that prefer a higher non-cash price from a pre-approved Buyer to a lower all cash offer, and you also are competing against other cash buyers. You will likely have to pay the “market rate” to get a property that you really want, if there is a competitive situation.
2. WRITE A “PICK ME” LETTER: Many sellers of Oahu real estate actually care who buys their home. Sometimes, even investors care who buys their investment property. Have your Oahu real estate agent find out as much as she can about the sellers when you make the first inquiry. Who are the decision makers, the owner-occupants? the children of someone deceased? an unrelated trustee? The emotional frame of mind of the seller is important to consider when you are negotiating for Oahu real estate. So you may want to write a letter (in consultation with your Oahu real estate agent), or at least have your Oahu real esate agent have an in-depth conversation with the listing agent, which explains why you would like the property, it’s appeal to you and your family, and what you plan on doing with the property, so long as it is nothing controversial. It also goes without saying, that if you plan to tear down a home and the seller has a lot of emotional attachment to the home, you may not want to mention that to the seller.
3. CRAFT A CLEAN OFFER WITH TIGHT DEADLINES: This is another area where your Oahu real estate agent can be of much assistance. Make sure your timelines are reasonable and as short as possible, while still ensuring that you’ll have time to do your due diligence on the Oahu property for sale. Do not add any contingencies, such as having to sell another property or waiting for cash funds, if you can help it. If you have to put certain contingencies in, you may try to make up for it by offering a higher price or other concessions. And make sure to have your inspectors lined up in advance, so you can get in and out quickly, to make your deadlines and still have time to consider all the factors concerning the property.
But even a very clean and tight, highest cash offer does not always work. Recently, on a large, Kailua close to beachfront lot, I had an all-cash buyer with the highest offer (which included a waived termite inspection, a very short J-1 Home Inspection contingency, and a quick close) lose out to another all-cash buyer with a significantly lower price because the other buyer removed ALL contingencies. My Kailua real estate buyer wanted to keep the inspection period and I don’t blame him, but unfortunately, he lost out and this is and example of what is happening more than you would think in the Oahu real estate market. So this brings me to #4.
4. WAIVE ANY UNECCESSARY INSPECTIONS/PAY SOME SELLER COSTS: This is part of crafting a clean offer. Though not generally recommended, there are times where you may want to to waive a termite inspection or home inspection, for example, if you know you are going to tear down the home. It is not advisable to ever waive a survey or title report, but you can always offer to at least pay for the termite inspection/treatment or to pay for the survey or seller closing costs, to make an offer more attractive.
5. PUT OFFERS IN QUICKLY AND AT “OFF-HOUR” TIMES: Timing also comes into play with Oahu real estate. The early bird often gets the worm in the Oahu real estate market. Make sure that you and your Oahu real estate agent are closely monitoring the market, so that you see the new listings as soon as they come into the Oahu MLS. Sometimes, if you draft a good, clean offer that does not require a counter offer, you can get your offer in and get acceptance before anyone else gets a shot at it.
Just recently, I wrote an offer for an Oahu property for sale on Christmas Eve morning. The Honolulu property for sale had just come on the market late night on the 23rd and the listing agent told me she would be turning her phone off at noon on Christmas Eve and would be doing nothing else until the 26th. That was great! I called first thing and got my client in to see the property by 11:00am on the 24th, with an offer in hand, which required a response from Seller the morning of the 26th. Only one other buyer had time to see the property that morning and we had a clean and generous (slightly over asking) offer in-hand before she turned her phone off. I turned my phone off too and enjoyed my holiday. On the morning of the 26th, I learned that our offer was reviewed and accepted over Christmas! This was a great Christmas present for my buyers! The listing agent told me she had over 25 calls on her phone requesting showings on Christmas Eve and Christmas Day, including one offer to purchase sight-unseen. Moving quickly, during a holiday period where I was informed the listing agent was not going to be working for a while, helped us to get the property before anyone else had a chance to see it and avoid the almost inevitable bidding war on this Oahu property for sale.
These tips above are just a few suggestions and each situation will vary. For example, getting the offer in right away is not necessarily a good strategy where the seller is holding all offers and reviewing them at some date in the future, for example, after the first open house. This is a common seller strategy, right now on Oahu, for handling offers in popular areas or at popular price points. I’ve had many situations recently where the listing agent has communicated the price and terms of their current best offer to anyone considering making a new one…And this is ethical, so long as it is done with the seller’s permission. Hence, it is important for your Oahu real estate agent to make the first contact with the listing agent quickly, seeking as much information as possible, about the sellers and about how they will be handling offers, to enhance your strategy for obtaining the Oahu property in which you are interested. It is also important for the buyers to be flexible enough to literally drop everything to go see a property, if necessary, or on some occasions, to offer sight-unseen.
If you have more questions about purchasing Oahu real estate in a seller’s market, please do not hesitate to contact me at 808-721-8088.
~Aloha~