Tactics from the trenches from Aloha Group Maui.

Getting the property you want under contract is job #1. That puts you in control and gives you options and time. 

If you are hearing from friends and the media that there is "no inventory", they are wrong! There were a record number of real estate sales last year on Maui and 2022 is off to a red hot start. 

Question: How could there possibly be a record number of sales if there was no inventory? 

Answer: That couldn't happen

The fact is, there is inventory, it just doesn't sit on the market very long, and sometimes it never even gets to the market in the MLS.

So, how do you win in a competitive market? Here are 5 insider tips from one of the most successful real estate teams in Hawaii.

1. Be first 

Today, real estate is a team sport and this is no time to be shy. Be PREPARED, be BOLD, and be FAST. Remember, the market is moving faster. That means if you are getting a loan to buy a property, be pre-qualified, and have your proof of cash for your down payment ready to show the seller.

If you happen to spot a new property before your agent notifies you - call immediately. Yes, we look at the new listings many times a day, but you could still be the first to spot something you like.

Get your offer in as quickly as possible, first if you can. As listing agents, when we receive more than one offer on a property, we give extra consideration to the first offer that comes in. It shows that the buyer is serious and their agent is on top of it. In a hot market, neither sellers nor their agents want to waste time with potential buyers who appear to just be testing the waters.

If you are afraid of being first, remember the story of the early bird and the worms.

 

2. Pricing

Afraid of making an offer over the asking price? Lean on your agent and the data, and be prepared to make an offer over asking price if it's warranted and you really want the property.

How much over asking price do you need to go? Good question. It varies based on the desirablity of the neighborhood or condo complex and property condition. It might surprise you to find out that on average, about half of the properties are selling for over asking price. If the property you want is in the half that are going over asking, you can expect the selling price to be 1% to 9% over the asking price.

Your agent can give you guidance based on comparable sales and what she/he can tell you about their sense of the trend for that type of property in your desired area. If you like the property, probably someone else will too, and they will likely offer over asking. So, it's wise to quickly pick a number that you are comfortable with.

If you afraid of overpaying, take comfort in the fact that prices are still on an upward trajectory, and the price you pay today will likely be lower than the price for the same property next month.

 

3. Escalation clause

What is an escalation clause? If you are really, really afraid of overpaying but you really, really want the property, the escalation clause may help you to hedge your bet.

The Escalation Clause language is "Buyer is aware and understands that there are or could be multiple offers on this property. Should Seller receive a bona fide offer prior to the acceptance of this contract at a net offer price (excluding any seller concession to the buyer) higher than this offer Buyer hereby agrees to increase his offer price to an amount equal to $XXXX more than the highest competing offer, up to a maximum offer price of $XXXX. Seller agrees to provide the buyer with a copy of any such offer for verification."

These are commonly used in today's market. Do they work? Sometimes. An escalation clause is better than nothing, but if you really want that property, it's smarter to make your highest and best offer first.

 

4. Cash is King 

If you can find a way to pay cash it makes your offer stronger. When a seller receives 2 offers that are identical except one is cash and the other is financed, they are likely to go with the cash offer because there is more certainty it will close. We have had several clients find ways to pay cash by getting a home equity line of credit (HELOC), getting short term funds from retirement accounts and some lenders have programs that allow you to get prequalified for an immediate cash out refinance for those who have enough cash but prefer not to tie it all up in one place.

 

5. Appraisal

If you are getting financing, your lender will require an appraisal, and will only make the loan to you if the property appraises for the full amount of your offered price. 

You may have heard of situations where buyers "waive" the appraisal. Well, they don't really "waive" the appraisal. They agree to come in with enough additional cash, the difference between the contract price and the appraisal price, to get the lender to approve and fund the loan.

Typical Appraisal language would be - "The buyer agrees that should the property appraise for less than the price offered and agreed to, the buyer will put down enough additional cash for the down payment to secure the financing detailed in this contract." 

If that sounds too scary, you can limit the amount of additional cash you are willing to bring in to get your loan.

This is an important clause because appraisers use sold comparable properties from history. While they can do minor adjustments for the rising market, appraisals are often lower than sold prices.

If you are still afraid of overpaying based on just the appraisal, the price trend is probably protecting you. And the house that doesn't appraise today will likely appraise in another couple of months.

A bonus tip if you are getting a loan is to use a Maui based lender. Getting a loan for a property on Maui is just like getting a loan anywhere else in the U.S., only different. There are nuances that out of state and sometimes even off-island lenders miss. When that happens, the loan falls through and the deal goes south. A local lender with a good reputation is going to give the seller's agent more confidence that the loan will go through and gives your offer a better chance of being accepted.

 

6. "AS-IS"

In about 90% of the offers we see an AS-IS Condition Addendum which is used to tell the seller that you intend to purchase the property in the condition it is currently in.

Why would we recommend you agree to purchase AS-IS? What if there is something wrong with the property? In Hawaii, the Purchase Contract is very buyer-friendly, and our AS-IS does not eliminate any of your rights or options. You can still do your inspections, you can still review all pertinent real estate documents, you can still do anything you would do in the normal process with the AS-IS, including your right to terminate the contract and get your deposits back under any of the 7 to 9 applicable contingencies in the Purchase Contract.

What you are telling the seller is that you are not going to nickel and dime them with issues; my favorite example being from an inspection report where the inspector noted that one of the kitchen drawers did not glide smoothly. However, true big issues, such as safety issues, the roof, plumbing, electrical, and the like are still on the table. 

Your agent and brokers are skilled at crafting and presenting offers. As noted, the Hawaii Purchase contract is very buyer-friendly with contingencies to help protect you once you get under contract. Your #1 job is to get the property under contract. We'll be right beside you all the way.

 

For more information click on the links below.

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For 4 Things You Need to Know Before Investing in a Condo on Maui

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