Mikie Likes It!

Malaki – as in March. Well there’s been a lot of activity over the past couple weeks, but mostly in the form of BOMs (back on market -describing the update status when a home falls out of escrow), and DNs (a down grade in price). I personally favor the DNs because that shows a realization on the part of sellers that they need to get more in line with the market on pricing which will eventually interest more buyers. BOMs on the other hand are discouraging and points to the sad but true fact that JUST BECAUSE A PROPERTY MAKES IT TO ESCROW, DOES NOT MEAN IT WILL CLOSE. And believe me over the past 90 days we been, there done that!

On a more positive note, I noticed 31 DNs, that’s right, THIRTY-ONE PRICE DROPS IN ONE DAY ALONE LAST WEEK in the market areas of Waimea, Waikoloa and Kohala and some of them were fairly significant price reductions like as much as $40,000 on some I saw. But anyway, here’s a snapshot of the market right now.

TODAY IN WAIMEA:

• 102 homes on the market (about the same as last month!)
• 24 are less than or equal to $500,000
• The least expensive = $310,000
• The most expensive = $5,390,000
• The highest days on market (DOM)= 766

IN WAIKOLOA:

• 98 homes on the market (makes it 5 more than last month)
• 32 are less than or equal to $500,000 (4 more than last month so 8 more than in January)
• The least expensive = $379,000
• The most expensive = $875,000
• The highest days on market (DOM)= 399

IN KOHALA:
** NOTE** Kohala data pertains to the entire district of North Kohala, including the coast and resort properties
• 76 homes on the market (a 10% increase over last month)
• 12 are less than or equal to $500,000 which is 3 more than 30 days ago
• The least expensive = $319,000
• The most expensive = $15,000,000
• The highest days on market (DOM)= 898

IN SUMMARY: If you are a buyer who has been sitting on the fence (aren’t you tired or getting splinters or something already??) there’s lots of inventory and some major price reductions. And the developer product (new homes) sometimes offers even more opportunity because they have in-house financing specials too. So why not call your favorite Realtor and see if you’re ready to say “DEAL” or “NO DEAL”??

Aloha, Mike
RE/MAX Pacific

On Island: 885-5557
Toll Free: 800-500-4895
My “Sell” Phone: 808-896-1943
MikeSells.com
WestHawaiiBlog.com
Mike@MikeSells.com

I always check the MLS just before I shut down my computer every night to be sure I haven’t missed anything slipped in before the midnight hour. There really is a strategy to when you report what in the MLS as far as new listings, price reductions and status changes go -at least I think so.

For instance, I like to release new listings around 10 AM, and the best days are Tuesday thru Thursday. Come on, you might say, what the heck difference can it really make? Well my thinking goes that you want to release a new listing when the most agents possible will see it.

I have a hunch somehow that more agents will spot this new listing at say around ten in the morning than at 8 AM. And if you’ve done your job counseling the sellers on price and value, AND if they got it, your new listing will be seen and acted upon right away.

Now price reductions are a different animal altogether. The dark of night may be when you want to slip these puppies in. If for instance, you have one of those sellers that insists on chasing the market down in $5,000 bits you may not want to expose that to the maximum number of agents because if the seller does it often enough, it’s gonna catch someone’s eye, they’re gonna smell blood. My radar goes up when I continually see the same listing show up in the status changes with price reductions time after time. And if I see that too much I know desparation can’t be far behind. Now don’t take this wrong. I have a heart, I feel terrible when someone is losing money, and I do my very, very best to give people the best advise I can, acting always in their best interest, but these situations do create opportunities for buyers too and that is part of our job.

Case in point- there’s a 17th Fairway Villas unit on the Big Island in Waikoloa Village right on the golf course screaming to me. I’ve counted 24, that’s right TWENTY-FOUR PRICE CHANGES since it was listed 10 months ago. Now say what you like, but I SMELL A BARGAIN COMING! And the price changes are coming closer together which means someone is breathing down this guys collar. So if you are in the market for a fairly new (2004), 3-bedroom, 2 and a half bath fee simple, free-standing condo (townhouse style with 2-car garage) on a golf course where you can play 18 holes of golf for $25 dollars (less than the price of beverages for your foursome!) you may want to call me right away (808) 896-1943. Someone’s gonna snap this up soon and it may as well be you!

Aloha, Mike
RE/MAX Pacific

On Island: 885-5557
Toll Free: 800-500-4895
My “Sell” Phone: 808-896-1943
MikeSells.com
WestHawaiiBlog.com
Mike@MikeSells.com

Okay, yes it is a buyers market, but it’s not just about price any more. I have clients who I believe are genuine buyers, but so far I am struggling to get them real on what an offer should look like to be acceptable. Most deals going into escrow today are a result of the seller finally getting the picture on price. To be in the enviable position of in escrow, sellers have undoubtedly gone through the process of adjusting the price, painfully and incrementally so, but never the less they somehow finally got the message that “right pricing” is the only way to attract an interested buyer in this market.

But to be fair to the beleaguered sellers many buyers today are just too cocky. With the reality in the ever morphing world of financing REALLY, ONLY A CASH BUYER HAS A RIGHT TO BE SO SURE OF HERSELF.

The mortgage rules of underwriting are quite literally changing daily. First to fall as they should have, were the no-doc, no-job, no-asset so called liar loans. But even for a good qualified borrower, in the old days of mortgage financing (as in less than a year ago) the underwriting process was realistically just a ceremonial last hurdle before funding. I mean they might come back and ask for one final pay stub, verify that you were still employed and do a final lien check just prior to unleashing the cash, but my oh my, that’s all history now. Underwriters today hold the trump card and the whole game is over at their whim.

I wrote an offer 2 days ago with the additional clause stating the buyer was “pre-approved” and I added boastfully, had already been cleared with a glowing credit check! But that didn’t impress the seller’s agent one bit and I knew why. Pre-approval is nice, but it doesn’t carry too much weight unless and until the buyer survives the underwriting gauntlet. I have had deals stopped in their tracts even after final written loan approval, the day before the buyers were supposed to sign closing documents, due to a new condition the underwriters came up with. And that condition was the ultimate show stopper. It killed the deal.

How can a seller possibly plan for that? They almost have to include a clause that possession will take place two weeks after closing -to cover themselves in the event that it doesn’t close. Otherwise they’ve arranged and/or paid for the final cleaning, transferred utilities, contracted movers, etc., etc., all for naught if they get snagged by changing rules based on which of the world’s biggest, strongest, widest reaching investment houses just missed going under, save for the largess of the federal government at the taxpayers expense, I might add.

Investor buyers like to put as little cash into a deal as possible, but in today’s world, don’t assume you’ll qualify for PMI or mortgage insurance – another over-night disappearance in the lending world. If you don’t have at least 20% down payment, mortgage insurance will be mandatory, but will be either prohibitively expensive or just impossible to get. So goodbye to deals where the buyer is low-balling the price and also has no real skin in the game. It just won’t fly anymore! Any offer where the Buyer will need PMI just will not be attractive to most savvy sellers whether they’ve settled on the price or not. Many sellers are coming around to a better understanding of price, but now the buyers need to learn what makes an offer palatable in the eyes of not only the seller, but the lenders too. I guess it’s all part of the process of getting the teeter-totter (and our market) back on even keel again.

Aloha, Mike
RE/MAX Pacific

On Island: 885-5557
Toll Free: 800-500-4895
My “Sell” Phone: 808-896-1943
MikeSells.com
WestHawaiiBlog.com
Mike@MikeSells.com

“Here today, gone to Maui” as they say. I’m referring to financing programs that seem to be hitting the wall with increasing regularity.

Heidi, my partner at RE/MAX Pacific was writing a back-up offer on one of our listings in Kamuela. Now that in itself is unusual. I mean in this market to have 2 parties interested in the same property at the same time -well almost the same time, says something about the quality (and great price) of this particular property. But back to the point, “Gone to Maui”. She called the lender to make sure the prospect was qualified for the loan program she wanted (95% financing) on Monday and learned,

“Yes, no problem, the buyer is very qualified, credit scores are terrific and this will work.”

The very next day however, the lender calls back to say effective immediately, there are no more loans available with only 5% down payment. That’s it, no explanation just “no more, gone, history” (though I think I can read the tea leaves here). First the no doc, stated income loans disappeared, then no more 100% financing -no matter how good someone’s FICOs are, and it’s pretty clear now the way things are headed. Lenders are retrenching, hedging their bets so to speak, and basically playing catch-up with a lot of bad decisions made earlier in the game. The unfortunate thing is more and more solid borrowers will be jepordized. But the pedulum always seems to swing to far in correction, and we’re certainly in need of some correction in the mortgage world.

My advise, is act swiftly if you’re on the prowl for financing of any kind. Watch the rates because I think they are headed down, but have your ducks in line and ready to move on it before it’s poof, gone to Maui!

That’s my Tip of the Day and I’m sticking to it!

Aloha, Mike
RE/MAX Pacific

On Island: 885-5557
Toll Free: 800-500-4895
My “Sell” Phone: 808-896-1943
MikeSells.com
WestHawaiiBlog.com
Mike@MikeSells.com

Yup, I wonder if it’s true, but I wouldn’t be surprised if it is. This was from an appraiser I was chatting with. She acknowledged it as a rumor and asked if I’d heard it too, (I guess “twice-heard” solidifies the truth of the rumor -or maybe not). Anyway, it was that the developer of Sunset Ridge in Waikoloa Village is finished building houses in that project. THEY’RE JUST GOING TO SELL OFF THE REMAINING LOTS AND CALL IT A DAY.

Of course at this point it’s just that, a rumor. There’s a lot of infrastructure already in place so they have a plenty invested in the project, but it never makes sense to create inventory that you cannot sell because the carrying costs are too dang high. Selling just the lots means they won’t make their projected profits, but sometimes it’s better to cut your losses before you bleed out!

Anyway, stay tuned and maybe I’ll have some more to add to the rumor and let you in.

Aloha, Mike
RE/MAX Pacific

On Island: 885-5557
Toll Free: 800-500-4895
My “Sell” Phone: 808-896-1943
MikeSells.com
WestHawaiiBlog.com
Mike@MikeSells.com

Didja ever notice how certain parties dis you when a deal’s going South?

I hate it! I’d rather know the truth than be lied to or avoided because someone is too chicken-sh_ _ to fess up.

Here’s the deal. We’re involved in a transaction that is less than a week from its contract closing date when I hear from the buyer’s agent the buyer is going to ask for a 30 day extension. Why, I’m wondering since everything till now has gone pretty much according to Hoyle?

“WELL, THE BUYER FOUND OUT THERE’S A 40% PENALTY FOR TAPPING HIS RETIREMENT ACCOUNT”

And at this point I go ballistic!

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This is a guy who is in business for himself so he should be somewhat aware, right? Bad assumption I guess, but I pretty much thought anyone out of 3-cornered pants (as my grandma Sullivan used to say for ‘outta diapers’) kinda knew the consequenses of early withdrawls from IRAs or 401K plans. Besides that, I’d inquired very early in the game given the current financial turmoil the banks, lending and mortgage businesses are all in, just where the buyer’s down payment money was coming from. And I was assured by the buyer’s agent -direct from his buyer, that there was no contingency on the cash funds.

Now to set the stage as to how we got here, I offer this as background. The buyer’s agent is a neubie. He admits to me this is his first transaction “that ever got this far”. And, I’m beginning to understand why! He’s eager and willing, but he just doesn’t know what to do and I know his broker, who should be holding his hand and guiding him through the process, but I also know he has a regular play date on the golf course nearly everyday. And now nobody returns my calls. The lender refuses to send the latest conditions required by the underwriter (”Oh, there’s just a few and we’ll have them taken care of tomorrow”), and fails to notify me as promised, when or if they are removed. The buyer is totally out of contract and his agent can only get his voicemail and all my phone calls and emails go unanswered. What’s a gal to do?

Well my client, the seller, just happened to have the buyer’s agent’s business card which had been left at the house, so she calls him! Sort of a no-no, but she couldn’t take the obfuscation any longer either. Anyway the combination of my reaction, nicely tempered by my seller’s cool head (good cop, bad cop?) seems to have made an impression on the buyer. We think (stay tuned), he’ll have the money needed within 4 days. Not soon enough to close on time, but with special dispensation from the sellers, soon enough to close within about a week of the scheduled closing date.

I’m upset the way this transpired but I know what to look for when dealing with this lender, broker and neubie agent the next time they are encountered, but I’ll do my best to avoid all these clowns in the future!

Aloha, Mike
RE/MAX Pacific

On Island: 885-5557
Toll Free: 800-500-4895
My “Sell” Phone: 808-896-1943
MikeSells.com
WestHawaiiBlog.com
Mike@MikeSells.com

FACTOID, I love that word! It sounds sort of like an alien being from outer space, but the root of the word, fact gives it some presence or clout if you will. Okay, here I go again off track, like my favorite 5th grade teacher. She was supposed to teach us geography, but you could interest her in most anything if you were crafty enough, and then you could go sometimes a good 45 minutes off on a tangent until the bell rang!

But I just read an amazing article, by Steven Marshall of Strategic Equity LLC sent over from Laura Merrifield, Business Development Director at Old Republic Title full of these great little tidbits. The title of the article by the way, is

“HOW THE AFFLUENT MANAGE HOME EQUITY”

Now I know a lot of you think there’s no such thing as EQUITY any more, but it caught my attention because it’s times like these where there’s opportunity. Note these interesting factoids:

1. According to the Federal National Mortgage Association (Auntie Fannie Mae), the average American mortgage lasts 4.2 years.
2. You pay a premium for a 30-year fixed rate mortgage yet most don’t keep a mortgage even 5 years.
3. Making a huge down payment and or extra principal payments may not be the best thing to do when you could DIVERSIFY THAT HOME EQUITY INTO OTHER INVESTMENTS!
4. Every dollar you give the bank to pay down your mortgage is a dollar you did not invest-and, here’s the killer, you earn NO interst on it, and if you need it back you’ll pay high fees to get it, and you have to convince the bank you can qualify for it -YOUR OWN EQUITY!
5. With the market gone to hell in many areas all over the country when foreclosed on, the guy who took every dime of equity out and invested it elsewhere, loses a lot less than the guy who went in with a huge down payment and kept making principal payments with the hope of owning it free and clear some day.
6. If a bank holds 100 delinquent loans, which ones are they going to foreclose on first? Those with the most equity because the last thing they want to do is take back a house they will lose money reselling.
7. Bottom line is this: Home equity has NO rate of return. It sits idle.

So, if you are not one of the masses upside down and trying to sell before you get foreclosed on, watch interest rates which are likely to come down and consider separating the equity from your house. Put it into an investment that will pay interest or some other return -AND take advantage of the mortgage interest deduction while you’re at it.

Home equity is SERIOUS MONEY. Don’t gamble it. You want to CONSERVE it, not to CONSUME it. It should not be invested aggressively! You want to look at safe, conservative investment vehicles that will grow and compound over time.

That’s my Tip of the Day and I’m sticking to it!

Aloha, Mike
RE/MAX Pacific

On Island: 885-5557
Toll Free: 800-500-4895
My “Sell” Phone: 808-896-1943
MikeSells.com
WestHawaiiBlog.com
Mike@MikeSells.com

Hopefully by referring to our Leap Year month just past as PEPELUALI instead of February, the people in places like Chicago, New York or the midwest, won’t feel so bad because I know they have been getting hammered weather-wise. For example check out these photos.

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THIS IS CHICAGO IN FEBRUARY, AND THIS IS HAPUNA BEACH IN PEPELUALI!

Okay already, I don’t want to rub it in too much, so here are the monthly listing statistics for the 3 major market areas we service. Too keep it simple we only include residential stats here, but you will find that condos and vacant land follow a similar trend.

TODAY IN WAIMEA:

• 103 homes on the market (8 less than last month!)
• 27 are less than or equal to $500,000
• The least expensive = $297,500 (Whoa!)
• The most expensive = $5,390,000
• The highest days on market (DOM)= 735

IN WAIKOLOA:

• 99 homes on the market (makes it 5 more than last month)

• 28 are less than or equal to $500,000 (that’s 4 more than last month)
• The least expensive = $385,000
• The most expensive = $865,000
• The highest days on market (DOM)= 368

IN KOHALA:
** NOTE** Kohala data pertains to the entire district of North Kohala, including the coast and resort properties
• 69 homes on the market
• 9 are less than or equal to $500,000
• The least expensive = $329,000
• The most expensive = $15,000,000
• The highest days on market (DOM)= 867

IN SUMMARY: I used to love the new listings. It was something different to look at and it was fun to see them as soon as they came on so you could call all your “READY (when the price is right)” buyers, but lately the new listings have lost their alure. The old, I mean really old, ones are better because the longer they’ve been on the market, the more realistic the price.

Case in point, I called on a FISBO yesterday (fisbo = for sale by owner) and learned the house was going to be listed today. Coincidentally just this morning clients who’d recognized the floor plan as the same as their rental (which they love) wanted to see it right away. But like most new sellers, they have come out of the shoot priced too high. We’ll go look at it, but the seller probably won’t be too enthusiastic about their offer -it’s too new on the market and they still carry that “false hope” about the value. But with 98 other homes on the market, it’s not hard to figure where it should be priced. Oh well, it’s a process and I’ll have to be patient I guess.

We’ll talk numbers again next month!

Aloha, Mike
RE/MAX Pacific

On Island: 885-5557
Toll Free: 800-500-4895
My “Sell” Phone: 808-896-1943
MikeSells.com
WestHawaiiBlog.com
Mike@MikeSells.com