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Extreme Nesting

 by Denise S Nakanishi, R,CRS, ABR, GRI

I grew up in a home not unlike many on the Big Island.  It had three bedrooms and was about 1000 square feet.  It was pretty much the same as many others in Palatka, Fla.  In those days, it was a big deal if a house had more than one bathroom. Sound familiar?  If so, innovations and the evolution of the American home might be a real eye-opener.  “Nesting” , the desire to stick close to home, really blossomed following 9-11.  In fact, the current economic downturn and the idea of a “stay-cation” continue to interest owners in the concept of creating a personal sanctuary.  Crafting spaces specific to an owner’s lifestyle has increased the popularity of home offices, media rooms, craft rooms, exercise rooms, saunas and, of course, swimming pools.  As witnessed by the continuing popularity of HGTV and home improvement stores, the focus on home renovations which intensified during the recent housing boom has not waned.  In fact, personal nests have reached a whole new level.  I’ve personally seen indoor hand-ball courts, tennis courts, wine cellars, indoor waterfalls, putting greens, skate parks and 3-hole golf courses.  From time-to-time we see tree-houses on the market and our office previously had a home listed with its own baseball field.  These, however, pale in comparison with the possibilities.  Love bowling?  According to realestate.msn.com*, for a cool $88,000, you could be throwing gutter balls any time you wish with your own personal bowling alley.  Worried about losing your sharpshooter edge?  Adding a firing range might be the answer.  For a mere $30,000 you can commence fire at your heart’s desire.  How about an indoor basketball court?  Adding one will take you to new heights; 2 ½ stories to be precise.  Some prefer indoor climbing walls, indoor shuffleboards or his and her hobby areas.  The possibilities are endless but here’s the rub.  These spaces are so specific that re-sale could  become a real problem.  Take for instance, the late Michael Jackson’s former digs at Neverland Ranch.  Except for the novelty, the number of buyers specifically interested in a 6.5 square mile zoo and amusement park which happens to come with a mansion is probably fairly limited.  Creating a personal home playground might sound like the ultimate fantasy but life can be unpredictable.  It’s good to remember that the time may come when the property has to be sold.  Too much of a good thing will severely limit the number of like-minded buyers.  One would think that living on an active volcano in the middle of the ocean would be extreme enough for just about anyone.  If, however,  you feel compelled to make a few unorthodoxed modifications to your home, you might want to first chat with your  REALTOR®.  After all, you don’t want your nest to become so extreme that no other hen will ever want to roost thereJ

*www.realestate.msn.com 5/18/2006

 

Signs of Better Times??

 by Denise S Nakanishi, R,CRS, ABR, GRI

Mealoha and I belong to several groups who routinely network across the country via the Internet.  Between input from REALTOR® participants and recent visits to the mainland, I am convinced that East Hawaii is faring much better than other parts of the US.  The number of “Bank owned” signs is staggering in South Florida and one participant on our calls a couple of months ago said that 2000 foreclosures a month were hitting the market in his marketplace.  It’s one thing to hear about it and an entirely different matter really see the scope of the problem.  And yet, I could go on for days about the unnecessary problems we encounter trying to close sales on both foreclosed and short sale properties. In a recent closing, the asset manager refused to sign a simple extension so that we could close on time. In another instance, a lender refused to make $2500 of repairs so that our approved buyer could close.  They later took $30,000 less for the property.  The stories are endless.  It’s still quite a mess out there and yet, overall things are improving.  Here’s a snapshot that attempts to show movement since the beginning of the year. 

Area	Active 1st qtr/ 2nd  2010	Med Active$ 1st qtr/ 2nd qtr	#Contingent 1st qtr/ 2nd qtr	Contingent$ 1st qtr/ 2nd qtr	Sold 1st qtr 2nd qtr	Sold $ 1st qtr/ 2nd qtr
HPP	138/132	269900/ 262911	52/40	202200/ 199450	35/45	202000/ 198000
S. Hilo	286/201	296500/ 484027	56/63	272000/ 260000	49/55	262000/ 265000
Ainaloa	22/27	197997/ 163000	21/12	132200/ 128750	15/21	126000/ 117000
Leilani	12/17	186000/ 190000	6/6	195100/ 194500	12/15	187000/ 180000
Nanawale	15/12	137000/ 104500	6/9	97383/ 63500	7/9	91250/ 95000
Mauna Loa Estates	11/10	201000/ 187000	4/1	241000/ 204000	0/4	0/169500
Royal Hwn Estates	6/13	191083/ 189000	2/1	181250/ 102000	1/3	138700/ 125000
Fern Acres	10/8	170680/ 164000	4/2	174000/ 140000	7/9	183500/ 139000

 

The sold numbers for these 2 quarters represent the majority of the sales that were likely encouraged by the first-time homebuyer’s tax credit. It would make sense then that contingent numbers (homes that went under contact since the credit ended) would have decreased across the board. This doesn’t seem to be happening. Sales continue to be fairly brisk and pricing fairly level in the busiest areas (HPP and Hilo). Inventory is also declining in these areas. Logically, prices in these areas should begin to show improvement over as the year progresses. Tracking one additional quarter should help paint a clearer picture but, for now, it seems the stars are beginning to align themselves for what we hope will be better times to come! (Other historical information can be found in previous blogs posted on www.majormom.com).

 

Apples for Apples!

 by Denise S Nakanishi, R,CRS, ABR, GRI

 

It’s good to see so many sellers interviewing multiple agents prior to listing. It’s an essential step when you don’t have an established relationship with an agent. The interview helps insure the best fit between agent, seller and property. Comparing applies to apples, however, isn’t easy. The interview should be more than “bonding time”. It should be a methodical process with several critical checkpoints along the way. A pre-listing packet or listing presentation is absolutely essential. An agent without a formal plan (including a detailed marketing plan) is clearly demonstrating they have no roadmap for getting the property sold. The plan should document their services, their experience, the depth of their support staff and the like. Listing a home is a huge responsibility. The agent should offer information about all aspects of their business; after all, they are on a job interview. It’s information you need in order to make an informed hiring decision. Providing thoughtful answers to your interview questions is the next step. Preparing your questions in advance will insure you cover a broad range of issues. For the most part, there are no right or wrong answers. You are looking for substance. Many questions can be a n swe r e d in advance. Email is a great method for gaining initial input. It takes a little extra effort but it’s an excellent approach and one that will allow you to completely consider each response side-by-side: experience, years in business, the number of closed transactions (full-time agents normally close at least 25 transactions per year), any formal complaints, their list-to-sale ratio (a high un-sold ratio indicates a willingness to take over-priced listings) and the number of homes sold in the neighborhood are all good indicators regarding the seriousness with which a REALTOR® conducts business. Not all agents believe in open houses and not all participate in Board caravans (agent tours). Agents who completely understand financing tend to close more transactions. Those with a strong web presence and the ability to quickly field questions about listings will harvest more buyer leads. These leads translate into buyers for your property. Sellers with particular interest in these areas should naturally be sure to ask. During the face-to-face meeting, ask the agent why they feel they are the best agent for the job. In the end, most interviews will turn on the “value” question; not the value of your home but rather the value the agent brings to your transaction. Pricing, however, is always a central issue for every seller. Some agents (especially in a declining market) will tell you what you want to hear. Pricing should involve an objective analysis of data not a number plucked from the air after a cursory view of the property. Ask for references. Most agents will happily provide them. Remember; use the same questions for each interview. Make notes and compare responses. You want to be able to compare agents as directly as possible. So, if you plan to go “apple picking” any time soon, remember to choose the best. In the end, the only way to insure quality without compromise is to gather the best “ingredients” available in the marketplace!

 

Owning Airspace?

 by Denise S Nakanishi, R,CRS, ABR, GRI

 

What do you call ownership of residential airspace?  Since 1961, the concept of condominium apartment ownership has blossomed throughout the country.  Interestingly, Hawaii was the first state to enact legislation allowing for development of condominium projects. When it comes to multi-family units, new construction has for decades taken a back seat to condo conversions in East Hawaii.  In fact, many don’t realize that Waiakea Villas and Hilo Lagoon were originally hotel properties.  Several local commercial buildings, including the offices at 688 Kinoole (the building directly across the street from BJ Penn’s Gym) are individually owned condo units. The condominium form of ownership is so widely accepted that it’s all fairly straight-forward, right?  Maybe not.   The concept that seems difficult for (especially) buyers to wrap their heads around is the idea that condominium ownership can exist even with single-family residential units.  Time was, condominimization of properties zoned both single family residential and agricultural was commonplace.  In Hawaii, condominium laws are State laws while zoning is the purview of the County.  Property owners previously used the condominium process as a way to by-pass County sub-division requirements. While it is no longer possible to ignore County zoning, we commonly see individual condominimized properties on the market.  As in a conventional condominium project, all land is jointly owned but each owner has exclusive right to use his or her designated portion of the property.  Similarly, there are also limited common elements associated with each property.   These are normally limited to a roadway or shared drive-way.  When dealing with individual residential properties, it’s a difficult but important distinction that although each property is assigned a tax map key number,  the County does not regard individual portions of a condo project as separate parcels.  This makes perfect sense.  Remember, the structure of the project is the same as a condominium building so parcels are each assigned a CPR (condominium property regime) number.  Each is a unit and not an individual parcel. Remember, the County of Hawaii issues building permits.  There are strict limitations regarding multiple dwellings on Agricultural land.  Agricultural zoning requires any dwelling after the first be built as part of a working farm.   An approved farm plan is required.  If a farm plan was not put into place when the condominium was established, every owner must consent to a newly implemented plan.  Language in the original condo docs might provide alternate instructions related to how the project is to operate but the County is probably not automatically obligated to consider an agreement between owners especially if it differs from normal County guidelines.  Fortunately, many condominimized properties have farm plans in place.  Remember, projects with existing dwellings are not usually impated.  When it comes to buying an Agricultural condominium unit, it is vital to review all condo docs and any related farm plan.  Buying airspace in any form is always more complicated than purchasing a stand-alone dwelling.  Clearly, the popularity of this form of ownership has stood the test of time.  Whether it’s a condo on 20 acres or a high-rise project, working with a seasoned agent is vital to gathering all the information and considering the nuances of this important form of property ownership.

 

Where's the Beef?

 by Denise S Nakanishi, R,CRS, ABR, GRI

Nothing sparks a livelier conversation than the issue of surveys.  That’s one reason I mention it so often.  It’s interesting that even the most seasoned sellers still object to the idea of paying for a survey.  A new survey absolutely provides the best protection for all involved.  Even though the benefits are covered with Sellers many times prior to accepting an offer, the expense still seems to cause controversy.  After over a thousand transactions and over 20 years, here’s my take on the subject.  Always check with your agent, their opinion and your situation may different but here’s mine.  You must survey.  Buyers need to know what they are buying.  On rare occasions it may be acceptable to waive the survey.  An owner able to produce a recent survey and verify all pins may have a good argument for not re-surveying.  Older surveys should probably be re-done.  Sellers of newly built homes often suggest the buyer should rely on the pins that were placed when the property was purchased.  I disagree.  This provides little assurance the new improvements are properly situated.  Remember, the County of Hawaii does not check setbacks.  In fact, they don’t even determine that improvements (buildings) are placed on the correct lot.  Recently subdivided properties should not need to be re-surveyed.  Economic considerations sometimes dictate the possible shifting of survey cost and responsibility.  For instance, here on the Big Island, we still have properties selling for as little as $3000.  A simple staking of the property could leave the seller coming out of pocket in order to close.  Sellers sometimes want to use pin-finders as a way of cutting costs.  Pin-finders are unlicensed “contractors”.  RELTORS® cannot recommend them.  Doing so subjects us to investigation and fine.  Most pin-finders use a metal detector to find pins.  The pins could be for some other purpose such as electrical poles.  Buyers and sellers wishing to waive the survey requirement will likely be asked to sign a very strong notice advising them of the importance of doing the survey.  Interestingly, property surveys are not always common practice in other markets around the county.  Hence,  out-of-area sellers aren’t always so keen to survey.   All things considered, it certainly seems that everyone should be in agreement on this issue.  Buyers want absolute assurance that the boundary pins are correct.  Sellers want peace of mind knowing they have properly represented the property.  The whole issue leaves me scratching my head and wondering the same thing that little old lady did as she drove thru the fast-food window;   “Where’s the beef?”

 

Do I have to pay....... Again???

 by Denise S Nakanishi, R,CRS, ABR, GRI

Quite frequently, I am asked why title insurance premiums must be paid over and over.  Good question.  Title policies extend coverage through the seller’s ownership period.  Even if for only one day, a new policy must be issued or technically a break in coverage  exists.  Title insurance premiums are based on sales price.  The seller normally pays 60%, the buyer 40%.  Title insurance is the insurance carrier’s guarantee that the seller has clear title.  In general, common title problems such as breaks in the ownership chain (watch for the word “exceptions” in Schedule A), child support liens, tax liens, failure to properly obtain a release of mortgage, and the like are cleared before transfer.  Title policies come in basically two varieties; lender’s policies and owner’s policies.  The amount of coverage afforded a lender reduces as the mortgage balance declines. Therefore, a lender’s policy is less expensive.  Owners’ policies cover problems which may not be discovered for generations.  Most title policy claims stem from access problems.  Correctly recording access is a common problem especially when new subdivisions are formed.  For example, at least one local farm community conveyed the bulk of their properties without reserving access for the remaining parcels. Had conveyance on a remaining parcel occurred prior to resolution of the problem, the title insurer would likely be on the hook. Also common is historical access that has never been formally acknowledged and included in the deed.  Such problems don’t usually come to light until an ownership change occurs, often in a neighboring property.   Interestingly, I reviewed a deed the other day and noted that access is via a government road that has never existed.  It’s entirely possible for a property to have legal access without having physical access.  Title insurance covers only legal access.  This makes perfect sense.  It’s impossible for a title searcher to determine if actual physical access exists.  Other types of covered claims include claims arising as a result of forged deeds, incompetence of the grantor, questionable notary acknowledgements or questionable conveyance authority. Title policies do not normally cover issues related to encroachments, boundary disputes, unrecorded liens or zoning violations.  Remember, while sellers benefit indirectly, title policies actually cover the new owner.  Unlike other forms of insurance, title insurance is a one time charge. When you think of it like that, the cost seems relatively inexpensive.  Of course, it’s understandable that someone would complain about paying over and over for something they’ll probably never get to use.  Guess that’s why Miles told me to stop buying those size 6 jeans.  I probably never need them, but they’re in my closet…just in case!  

"Paradise “Located”

 by Denise S Nakanishi, R,CRS, ABR, GRI

 

With some frequency, I receive email messages from property owners who painstakingly transcribe their legal description hoping that by doing so I can provide an instant evaluation of property value. Quite the contrary. In Hawaii, it takes tremendous effort to locate property from the legal description. Legal descriptions found in most deeds identify property by one of two methods. Parcels located in established subdivisions are assigned a lot and block number. Finding these parcels requires referring to the appropriate subdivision map. Many subdivisions consist of numerous maps containing lot and block numbers. A metes and bounds description uses streams or other natural features to identify property not part of a recorded subdivision. Locating these means finding the correct stream or topographical (often historical) feature and then hunting around for the lot. It can be a challenge especially because lots are numbered as they are created. They are not numerically arranged. It can be a challenge. Our real property tax system is based on a simple numeric system that makes it easy to locate property. It’s so convenient that it is commonly used in every facet of any real property transaction. While the legal description must still be carefully scrutinized prior to conveyance, it’s the Tax Map Key (TMK) number you’ll want to memorize. Legal descriptions are normally at least a page long. TMK numbers are a series of 5 numbers. If you live on Hawaii Island, you are in tax division 3. Oahu is Division 1, Maui/Molokai/Lanai are Division 2 and Kauai is 4. Each island is further numbered and divided in a logical sequence. To further illustrate, properties located in Hilo are zone 2. Kaumana is either Section 3 or 5. The Plat (vs. plot which is a plan showing the proposed location of property improvements) is next, followed by the specific parcel. Kaumana City, for example, contains Plats 28 to 32. A TMK in that subdivision might read 3/2-5-28, followed by the parcel number. You can download current plat maps from our county website (www.co.hawaii.hi.us). Any changes made after publication will be noted on the County Planning Dept maps. Changes will also be cross-referenced with the affected title report. Remember, the underlined number on a Plat map is the Parcel number, which is the last number of the TMK number. The circled number is part of the legal description (the lot number). Interestingly, the first two number of your property address will be part of your TMK number. Having worked briefly with a system that locates property by using legal descriptions, I can truly say that the TMK system is extremely simple and one I’m thankful for, even if my soon to be higher tax bill is part of the package.

 

Can a Short Sale be Short?

 by Denise S Nakanishi, R,CRS, ABR, GRI

 

Even as the market improves, there’s still no shortage of properties listed as “short sales” or “possible short sales”. When it comes to showings, these time-consuming, slow-closing properties are traditionally put at the bottom of our showing list. This may change as new rules implemented on April 5, 2010 take effect. As a sub-set of the Home Affordable Modification Program (HAMP), the Home Affordable Foreclosure Alternative (HAFA) offers the first pro-active effort to addressing the number of distressed properties that end up on the auction block. Previously, lenders would not disclose ahead of time how much they would take for short-sale properties. For the most part, listed prices were randomly assigned in hopes that the lender would come back with something that might work for the buyer. Over 70% of short sales failed. Lenders have finally realized that, in general, short sales are in their best interest. Most have agreed to changes that include pre-approval of an eventual sale price, standardized forms, strict time-lines and a stream-lined approval process. All this makes for a smoother and timelier closings which is hugely significant to investors and buyers with time constraints. To qualify, the owner must be participating in the Home Affordable Modification Program (HAMP) which means that the property must be a borrower’s principal residence. Short sales can occur on non-owner occupied properties but they aren’t automatically included. Participating lenders may be found at www.makinghomeaffordable.com/contact_servicer. When a modification has failed or where owners who do not qualify, these new guidelines apply. Borrowers are offered a Short Sale Agreement prior or during an initial listing period. If an offer is received without the up-front approval, the process changes slightly but most provisions remain. Remember, the loan must have been originated prior to Jan 1, 2009 and the loan must be delinquent or in jeopardy, the current mortgage balance must be less than $729,750 with payments that exceed 31% of gross income. The new changes allow a $3000 re-location payment to sellers. It also increases the amount normally paid to subordinate lenders and it directs that those in 2nd position may not receive part of the real estate commissions to settle any debt. Subordinate lenders have often held up sales at the last minute by trying to re-negotiate an approved pay-off thinking that the real estate agent would rather give up a portion of the commission than walk-away from a transaction they have worked months to close. Assistance from a real estate professional is always required. Neither sellers nor buyers may receive any compensation other than the relocation fee. Hardship and financial information is already on-file (submitted as part of the modification request). It need not be re-submitted. Participating lenders must release the borrower from further liability which is not taxable thru 2012 because it is related to a principal residence. Each lender treats credit reporting differently but it seems to be universally agreed that the impact is much less severe with a short sale than a foreclosure. Look for more details including a great Q&A at www.realtor.org. Remember, short sales are tedious but most agents sincerely want to help and for the first time, a short sale could actually be short!

 

How Does Your Garden Grow?

 by Denise S Nakanishi, R,CRS, ABR, GRI

Whether it’s a small garden, a big yard or a tropical retreat, the outdoor botanical experience is a huge part of why many people buy homes in Hawaii. Our unique climate offers the opportunity to create exquisite gardens that potentially bring value to the sale. While appraisers generally agree about the value of a new kitchen or a remodeled bathroom, there’s seems to be no set standard on how to quantify the true value of the one thing that makes that all important first impression. At the same time, the value of quality landscaping can’t be under-estimated. Take for instance, Leilani Estates. It’s an area that epitomizes the value that quality landscaping can add. Drive up Luana to Malama, cruise Kupono, Nohea or Moku Streets. Pick any street, it doesn’t matter. You’ll find one enchanting property after another. It’s indisputably a garden seekers paradise. So, how do appraisers assign value in situations where landscaping is as integral to the package as the dwelling itself? I asked several trusted local appraisers. Each provided a different response. Most agreed there is no hard and fast rule about how value aught to be assigned. Because it’s not a required field on an appraisal report, it’s fair to assume that most loan underwriters (those responsible for scrutinizing appraisal reports for lenders) don’t consider it a core consideration when it comes to value. Obviously, however, quality landscaping can’t be easily ignored. For the most part, local appraisers felt a reasonable adjustment would be 5-7% of overall value. In researching the topic on-line, estimates reached 15%. I examined several recent appraisal reports, including one with very elaborate landscaping where the appraiser noted that the landscaping was “good” yet made no value adjustment. There’s no question that the botanical garden setting was integral to that sale and yet the appraiser took a conservative approach and assigned no additional value. A few cautions about landscaping. Plantings located too close to the home promote moisture retention, which in turn becomes a conduit for termites. And while albezias can be beautiful, they don’t require fertilizer and you don’t want them close to your house. Tree removal can be expensive and is certainly best left to the pros (call us for our totally biased recommendation). Be careful what you plant. There’s a number of agencies willing to advise regarding invasive species. Seems we’ve had a bumper crop of pigs of late so be sure to protect your landscaping investment from critters. Remember, just as a fresh clean home with new flooring, fresh paint and updated kitchens and baths insures a faster sale, quality landscaping will make a huge difference in marketing time but often to a lesser extent that all important eventual bottom line.

 

When The Water Flows!

 by Denise S Nakanishi, R,CRS, ABR, GRI

When Gilligan and gang landed the SS Minnow on that tropical island, flooding may not have been their chief concern even though they were certainly prime candidates for dangerous and violent forms of flooding found in costal zones. Finding insurance in the so called “V” or “Velocity” zones may be a bit complicated and sometimes costly especially when there are obstructions or rooms on the lower level. Most would be surprised to learn that local REALTORS® don’t deal with flood zones that often. Truth is, neither do many insurance agents. Determining the flood zone is pretty simple. Here on the Big Island, a call to Public Works with the Tax Map Key (TMK) number is all it takes. Should the Powell’s, Ginger, The Skipper and friends decide to make their desert isle stay more permanent, there are a couple of inquiries they should make. Their REALTOR® should request a “C42” survey showing all improvements on the property along with the elevation certificate in the purchase contract. Elevation certificates indicate the base flood elevation and the height at which the bottom floor of the improvement (the house) is located. These apply to any property in any flood zone. Inland properties affected by flood zones have designations beginning with the letter “A”. Water sources in flood zones “A” originate from ponds, streams or other run-off. If the “V” and “A” designations are followed by another letter, it’s an indication that additional analysis has been done to determine flood source and frequency. Property in “B”, “C”, or “X” zones are generally not considered at risk for flooding and do not require flood insurance. Although I have never seen property designated “B” or “C” on the Big Island, there are certainly properties in zone “X”. As misleading as it seems, an “X” designation means that it’s not a flood zone. Most, if not all of Puna is in zone “X”. Anyone living off Pohaku Drive near 39th, on parts of 40th and in many parts of Hawaiian Acres can attest that flooding certainly occurs. The same is true for coastal areas. Down-slope property owners near new subdivisions should be aware that chances of surface run-off and flooding change with development. Some homeowner’s policies do not cover general water damage. Even though the crew of the SS Minnow may not need to worry about a dishwasher, washing machine or hot water heater overflowing, these things might be an issue for the average homeowner. Don’t assume you are covered. Here on the Big Island, we have learned that water always goes where it wants to go. Remember, flood policies are not effective during the first 30 days. Ask you real estate “Professor” what issues might pertain to your purchase. After all, being stranded on a desert isle can be a wonderful thing but it’s certainly good to plan for all emergencies. Just ask Tom Hanks and his pal Wilson!

 

Owner-Builder NO NOs…Some Relief in Sight!

 by Denise S Nakanishi, R,CRS, ABR, GRI 

 

Sellers in a slowing market naturally become concerned when they perceive their bottom line is shrinking. Typically, when prices decline, the issue of owner-builder exemptions become present themselves in very interesting ways. It’s an issue that could potentially affect sellers, buyers, landlords and tenants alike. You may recall from previous discussions that the State provides an exemption for owner-occupants who want to be their own contractors. Briefly, HRS 444-9.1 provides that a home built with an owner-builder exemption may not be sold or leased for a year following the final inspection (or from a verifiable date when the home was completed). Multiple owner-builder permits should not be issued. Owner-builders become employers for those laborers working on their project. As such, they are expected to withhold F.I.C.A., taxes and provide worker’s comp coverage. Selling prior to the one-year statutory requirement may result in a fine of $5000 or 40% of the value of the home for the first offense and up to $10,000 or 50% of the market value for subsequent offenses. Fines may be assessed against the seller and any Realtor® involved. The law is very clear on this point. Realtors® could be found guilty of aiding and abetting an unlicensed contractor. They could also license revocation. Although not specifically stated, a buyer might find also find themselves included in an investigation by the Department of Commerce and Consumer Affairs. Interestingly, the law is currently silent about situations where a hardship or mitigating circumstances force an early sale. It is also not specific as to properties sold prior to the final inspection or properties without proper permits. All properties sold prior to the one-year anniversary with an owner-builder exemption fall under the provisions of the statute. In today’s topsy-turvy market, it should come as no surprise that many distressed properties fall under the provisions of the owner-builder statute. The intent of the law is to avoid unlicensed work but because there were no exceptions built into the law, an already unfortunate situation might be easily exacerbated without an expedited sale. A change to the statute governing owner-builder exemptions will become effective on 1 Jul 10. Prior to that date, DCCA is required to investigate every complaint filed. Once the new law is in effect, owners will be allowed to request a hardship exemption prior to marketing their property. Permit amounts under $10,000 will be automatically exempt. Sellers should keep in mind that listing an owner-builder property (if you can find an agent brave enough to do so), under current law or any non-exempt property under the revised statute, will result in extremely diminished showing interest. Issues related to un-permitted structures or areas are always foggy. Because permitting problems are so common, it is best to keep in mind that the intent of the statute is to deter unlicensed activity. It is certainly not a stretch to assume the provisions of the statute apply. The owner-builder statute is not meant to be a vehicle to generate a complaint about every permit inconsistency. There are numerous reasons a permit record might be incorrect. If you need a permit correction in order to facilitate a sale, remember, owner-builder provisions apply. Ask your agent for advice in this matter. Most do a good job in helping explain the requirements. Verifying and correcting permits ahead of time provides everyone involved with peace of mind. Happy Permitting!

Big Island Surfing

 by Denise S Nakanishi, R,CRS, ABR, GRI 

The National Association of REALTORS® (NAR) routinely surveys to determine how buyers buy and sellers sell. It’s interesting to attempt to compare National trends with what’s happening locally. During the 1990’s, NAR watched the numbers of on-line searches so closely that they routinely included data regarding use of the Internet as part of annual survey reports. Today, on-line searches are so common that Realtors® expect that buyers are using the Internet as the initial portal to their property search. In fact, we generally assume buyers have done extensive on-line exploration prior to giving us a call. Because so many of our buyers are from the mainland, it’s not a stretch to assume that Hawaii numbers are even higher than the national average. Interestingly, and despite predictions to the contrary, almost 90% of those on-line purchased using a professional REALTOR®. The oddities of purchasing in Hawaii coupled with the demands of a compressed buying schedule dictate that buyers receive expert assistance while they are here. As much as the Internet and real estate have become partners in the home buying process, interestingly most buyers don’t normally find the home they eventually purchased on-line. Their agent usually found it for them. Nationwide, buyers take about 8 weeks to find a home. This is clearly not the case here. We feel lucky if we have a week to accomplish the task! It’s the extensive research done ahead of time that allows us to accomplish such an over-whelming task so quickly. On-line researchers are generally methodical and organized. Those arriving from off-island want to maximize their stay because, after all, they feel obligated to weave pleasure time into their Hawaii buying visit. While nationally, single family homes average 1830-2000 square feet, we’ve learned in Hawaii to be content with a much smaller space. Our average home is probably closer to 1200 sq feet. Nationally, the number of For-Sale-By-Owner (FSBO) homes has actually decreased. In fact, most FSBO transactions occur between buyers and sellers who already know each other. With an increased dependence on the on-line marketing experience, this percentage is logically lower here in Hawaii. While local data isn’t available, we see limited service listings lingering on the market much longer than full-service variety. The fear of dealing with FSBOs who generally neither understand real estate laws nor subscribe to the REALTOR® strict Code of Conduct often puts these listings on the bottom of the showing list. Interestingly, buyers purchasing in the traditional manner make about 25% less income than the Internet empowered consumer. Single women still purchase twice as many homes as single men and the number of minority buyers has continued to increase. There are even specialty classes about catering to specific minority populations. Of course, in a place that is still probably the most ethnically diverse in the USA, trying to target a minority may not be so easy. One thing remains constant, it still normally takes at least two incomes to buy a home here. So, whether it’s Honolii or Hapuna, 4-miles or Secrets, with so many people starting their search on-line, one thing seems very clear, “Surfing” has quickly become as important to our local Real Estate market as it is to Island Lifestyle!

 

How much is it worth??

 by Denise S Nakanishi, R,CRS, ABR, GRI 

 

I certainly wish I wish I had nickel for each time I was asked that question. Value is represented in various ways; the cost of construction, tax assessor’s value, insurance value, and loan value to name a few. Here’s a bit of practical insight into the current appraisal process. Lenders still depend on appraisers to provide an objective opinion of value but a new twist called HVCC prohibits lenders from speaking directly to the appraiser. For the most part, lenders must order appraisals from a disinterested third party vendor. The lender doesn’t even know from whom the appraisal was ordered until an inspection appointment is made with the listing agent. The attempt to limit undue lender pressure has simply created an entire new set of problems. AMC (Appraisal Management Companies) order appraisals from a list of (theoretically) geographically qualified appraisers. Appraisers must meet minimum qualifications. In order to stay busy, appraisers select a broad base of zip codes to service. Appraisers should be intimately familiar with an area in order to make accurate comparisons but there are penalties for declining assignments so, of course, it’s not uncommon to get a call from an out of area appraiser. I know agents who have had to lead the appraiser to the property. AMCs assignments pay less. Some feel that work quality has declined. The AMC process has added weeks to each sale making it difficult to predict a closing date. When a loan program needs to change, the AMC layer makes it impossible to have an appraisal re-assigned. A new appraisal must be ordered. Appraisers attempt to establish value by comparing sales of similar properties within reasonable proximity that sold during the previous 3 month period. The window is so narrow that it’s common that recent comps are all foreclosures! Foreclosed properties rarely reflect true value across a neighborhood. Dissimilarities between properties are addressed by adjusting the sold property. For example, a sold home with a pool will loose value when compared to one without. Now days, we are never notified in advance if there is a value issue so addressing inaccuracies is problematic. While appraisers use recent sales, owners commonly try to compute their estimated value using replacement cost. Replacement cost normally has little relationship to market value. Market value can change quickly. If a strong sale is pending near you, it may be a good idea to hold off ordering the appraisal. With a purchase, appraisers receive a copy of the purchase contract so they know the value they are trying to reach. This is not the case with a re-finance. It never hurts to let the appraiser know the number you are trying to reach. Despite a mathematical approach, there is still a great deal of subjectivity and opinion involved in the process. Appraisers are much like REALTORS®. Some are easier to work with than others. Some have strong geographical biases. Most have not personally been inside the sold properties they are using as a comparison property. They must depend on input from sales agents. Realtors® gladly provide a free opinion of value as part of the listing process. It’s something we do on a regular basis…which certainly answers the question about why I’ll never get rich answering the question about “how much it’s worth”!

 

Say Nice Things!

 by Denise S Nakanishi, R,CRS, ABR, GRI

I’m convinced there’s a special place in heaven for property managers.  While investing in rental property can be financially worthwhile, collecting rents and dealing with the day-to-day issues of tenants and owners is a thankless job.  It’s certainly one of the least glamorous jobs in real estate.  Property Management doesn’t require a different license but the rules governing tenants are completely different than those regulating real estate sales.  As our market declined, sadly some tenants found themselves occupying homes that were being foreclosed.  “The Helping Families Save Their Homes Act of 2009,” signed into law in May of last year, provides tenants leeway when it comes to vacating a foreclosed property.  Basically, tenants must be given 90 days notice prior to eviction and in some cases, they can stay in the property through the end of their lease unless the new owner wants to occupy the property as a personal residence.  Still, ninety day’s notice must be given.  Some foreclosing lenders may even give tenants a stipend to assist with relocation, especially if they leave early.  During a conventional sale, Landlords are normally anxious to have the tenant stay. They don’t want to disturb their income stream.  Leaving tenants in place can cause some interesting challenges for sales agents. Even getting an appointment to show a tenanted property can be tough.  Many owners choose to reward their tenant for cooperating with showings.   Most tenants know they are entitled to 48 hours notice prior to showing.  Tenants are generally wonderful and cooperative but this, of course, is not always the case.  Our Landlord/Tenant code, as pro-tenant as it is, is very clear on the issue of access to the home.  In part it states that tenants who refuse access could be liable to the landlord for any damage proximately caused by failure to allow entry.  For instance, if the faucet is leaking, the repairmen must be able to get into the home.  If not, the tenant could find themselves paying for damages.  Similarly, when a home is for sale, refusing access for showings could result in monetary losses for which the tenant might be held responsible.  Sales agents normally inform prospective buyers ahead of time that a home is tenanted. We anticipate that tenants will provide input, albeit sometimes negative and unsolicited.  We understand tenants don’t really want to move. It’s when the tenant goes beyond stating what is factual that problems could arise.  It’s not unreasonable to assume damages could be sought against a tenant who continuously provides false and mis-leading information in order to spoil a sale.  This is not unlike, for example, a nosey neighbor who spreads negative gossip about a listing.  Neighbors and tenants have been known to report ghosts, termites, permit issues, encroachments, zoning violations and the like.  Determining such information is best left to the experts.  It’s impossible to know what “information” might be critical to a buyer’s decision. Without direct and confirmed knowledge, it’s best to be extremely cautious about “sharing”.  Or like Mama used to say, “If you can’t say anything nice just don’t say anything at all!”

 

So Ask the Seller!!

 by Denise S Nakanishi, R,CRS, ABR, GRI

You have finally saved enough for a down payment on your first home. You’ll have just enough money left to buy a little furniture and sheets for the bed. Then you hear about the additional costs that you hadn’t anticipated. The costs have you concerned about how you will proceed. One way to cover a shortage is by including a request that the seller pay closing costs as part of the purchase contract. As a rule, sellers may pay a maximum of 3%-6% depending on the loan program you will be using. In today’s market, sellers are willing to negotiate numerous concessions in order to get the property sold. Things such as loan fees, points, escrow and title fees, appraisal costs and even pre-paid insurance costs are negotiable items. Sellers are often even willing to buy-down the interest rate in order to help you qualify for a home that may otherwise be out of reach. Paying a consumer debt or including furniture as part of the cost of the property are generally not allowed. And while reasonable repair requests are probably fine, large repair credits won’t be allowed and may make the lender nervous about the collateral. If they feel the property will require extensive repairs, it’s understandable that they may not be willing to make the loan. Keep in mind that when a credit is included in the price of the home, the appraisal must support the entire purchase price. The entire price must be justified based on the sales of similar homes in the neighborhood. When the credit amount exceeds costs, any excess can be credited to the buyer as a reduction in the purchase price or a return of the deposit money. The contract should specify how this will be handled. Your Realtor® should know how to structure the offer in order to consider the nuances of the credit. They should also have a pretty good idea right up front if the appraisal will support the added costs. So don’t be shy, ask the seller. Who knows, it may mean the difference in sitting on the floor or sitting pretty with the new furniture you’ll be able to buy!

 

Foreclosure Homework

 by Denise S Nakanishi, R,CRS, ABR, GRI

  Foreclosure auctions can be a terrific place to pick up bargains, right? Like my attorney friends always say, it depends. Only recently have foreclosure notices become common in our Hilo newspaper. It’s a dubious honor that we have gone from dead last in the number or foreclosures to currently nesting among the top third in the nation. Foreclosure notices designate dates when the property will be held “open” for inspection as well as a date for the scheduled auction. The lender’s representative will always attend the auction. They will always overbid anyone who bids below a predetermined price. Most times they will “buy” the property back by bidding as much as their credit letter allows. This letter represents the amount they have into the property, however, they are unlikely to bid more than any opinion of value that has been prepared for them. The foreclosed property is normally re-marketed with a REALTOR®. For this reason, it may be possible to get a fair price at auction but it may not be a “steal”. There are things to remember and stats to consider. First, not every home will be held open and if an open house actually happens, it offers only a cursory opportunity to view the home before the auction. There is no owner’s disclosure so learning the true condition of the property can be a challenge. Successful bids often go to a confirmation hearing at which time bidding can be re-opened. Any money spent on inspections and financing will be put in jeopardy. Properties are always conveyed “as is” even if the condition changed since the auction. There may be no outs, even for vandalism. One of the most common reasons to forego an open house, of course, is that the property is still occupied. It’s normally up to new owners to clear the property. Time was in Hawaii when foreclosed properties were considered to have the “cleanest” title. Two things changed this. Mergers and dissolutions of original mortgage lenders required complicated agreements. Sadly, flaws in the pooling and servicing agreements have indefinitely delayed closing in (especially) land court. In situations where a property was foreclosed through a non-judicial foreclosure (no judge is involved), when an owner signs the property back to the bank (deed-in-lieu) or when an owner mails the keys back to the lender (jingle mail), title companies become so concerned about off record claims that they normally refuse to issue a title policy. Conditions for issuance of a title policy normally involve the assistance of the foreclosed owner. Good luck with that one. No title insurance, no loan, no sale. So, how bad is the situation in East Hawaii? That’s my homework for next time. In the meantime, here’s yours. Go to my blog at either www.majormom.com, the Team Nakanishi Fan Page or Twitter where you should watch http://www.thinkbigworksmall.com/mypage/player/tbws/23088/1079681. After that, watch http://www.youtube.com/watch?v=UPlITw1YPj0. The last one’s just for fun. Trust me, you’ll need it after you watch the homework video!

 

When it's time to take a hike !

 by Denise S Nakanishi, R,CRS, ABR, GRI

 

The standard provisions of our listing agreement obligate the seller to help sell the property not only in a general sense, but specifically by preparing the home for showings, allowing access for required inspections, securing belongings and allowing a lockbox to be installed.  While we encourage seller assistance and cooperation, it’s sometimes counter-productive for sellers to actually walk potential buyers through the property.  Here’s why.  I spend a good amount of time with buyers prior to showings.  Discovering their preferences is a large part of my preparation. While a house with a steep driveway may be a problem for one buyer, it may excite another with a teen-aged skateboarder.  Buyers see features differently.  An astute agent will be able to direct the buyer’s focus to the features that interest them.  It’s understandably difficult for sellers to stand-by and let the agent direct the showing especially if the agent has never visited the property.  Remember, a buyer probably does not need to initially consider every feature of the house.  They only need to get a general sense of the property.  Of all the reasons a seller may wish to leave the property during showings, none is more important than avoiding what could be the basis for an awkward relationship later on.  Often an innocent inquiry escalates into negotiations or worse; it opens the door to a casual friendship that may easily be side-tracked.  Here’s a classic example.  Buyer stops by occasionally.  Eventually Buyer asks Seller’s permission to start making repairs to a vacant home.  Closing is delayed.  Buyer continues working, each day more vigorously.  Repairs are now major.  Just before closing, the lender re-verifies employment and discovers buyer no longer has a job, hence, no longer qualifies for a loan!  Get the picture?  It tough for a seller who has become friendly with the buyer to refuse their requests.  This situation would likely never have developed had Seller not been around during the initial showing.  So, while I dearly love all my Sellers, this is one situation where I have to ask them nicely to “take a hike”!

 

TO MARKET, TO MARKET!

 by Denise S Nakanishi, R,CRS, ABR, GRI

“You’ll wonder where the yellow went!” “See the USA in a Chevrolet!” “Double your pleasure, double your fun!” …… When that Chevy sat on top of that mountain every Sunday night, we remembered. Those twins put Doublemint gum on the map and I’m not even sure Pepsodent is still in production but I certainly recall their slogan more than 40 years later! Messages repeated again and again, stick. Studies tell us that it takes a minimum of 7 impressions to cause an impact. With a direct mail campaign, for instance, we know that if we aren’t willing to mail at least 7 pieces within a short period, we may as well not send any at all. But is advertising the same as marketing and if not, at what point does advertising stop and marketing begin? In simplest terms, advertising is a basic component of marketing. Marketing really refers to a systematic plan that incorporates various forms of advertising (print, photos, radio, direct mail, internet) along with other forms of exposure. The goal of both, of course, is to reach a desired sales goal. In my mind, successful marketing is as much a function of quality as quantity. The most effective ads help move the buyer mentally into the property. Anyone can compose a sterile ad with a list of features but good advertising evokes emotion. The more advertising touches the needs and desires of the buyer, the higher the probability the Realtors® phone will ring. After all, when it comes to real estate, causing the phone to ring is really the goal; nothing more, nothing less. Whether it’s photos, text or something as simple as sign placement, I spend a good deal of time capturing the essence of what’s special about a property. It really pays off. That’s the quality part. Coupled with the quantity created through an aggressive marketing effort, a well-priced product should sell. The tough part is that any component of the marketing plan can be critical. The open houses, social networking, board caravans, broad web presence, property brochures even the accessibility of the agent and the person answering the phone at the office all weave together to become part of the plan for marketing the property; the marketing plan. In a broad sense, it’s a plan for addressing the real task of capturing buyers by systematically implementing specific components of the plan. If it’s true that “when you fail to plan, you plan to fail” then the plan for marketing the property creates a road map to success. So when you decide to go “to market”, look for a plan. Because, after all, without a plan everything else is just advertising!

 

 

We're often asked about landscaping tips and types of flora and fauna

to plant once you have found your piece of paradise.

Here is a blog from our in-house botanical genius, Steve Starnes.

Steve Starnes, Realtor-Salesperson

Plant a Lychee Tree

Botanical Name:  Litchi chinensis  Family: Sapindaceae

This is both a delicious fruit and a nice tree for the landscape.  Clusters of bright red fruits ripen in the summer. The flesh is white, juicy and sweet.  A tree loaded with ripe fruit is quite pretty; the red stands out against the deep green foliage.  Generally, trees form a rounded crown and provide dense shade.  In Hawaii, lychee can be grown almost anywhere below about 1400 ft. in elevation.  At higher elevations, the yields are often lower.  Trees will tolerate moderate frost without damage and can be grown in Southern California and South Florida.  Soils need to be slightly acidic but trees will grow and fruit in rocky areas as well.  I'm growing in ripped lava with mulch.  For best fruiting, a dry and cool period in the winter is best.  Also, simply fertilizing the trees with potash (K20) or K-Mag in late December or January will encourage a spring flush with blooms.  After fruit set resume fertilizing with a complete balanced garden fertilizer.  It is best to prune lightly after harvest since severe pruning  may reduce yields the following year.  Pruning every year will keep the tree smaller and facilitate harvest.  Without pruning, trees can reach 40 ft. to 50 ft. tall.

Lychee originated in South China and there are thousands of cultivars.  Propagation is by airlayering. Usually airlayers will begin to fruit at 3 years old.  One of the best cultivars for Hawaii is Kaimana which was selected by the University of Hawaii; large sweet fruits with an excellent flavor and a low spreading growth habit.  Bosworth III which was selected in Australia and Groft which was selected in Florida perform well in Hawaii.  Bosworth III has a large seed but Groft has a tiny seed and small fruit.  

 

The “Super Bowl” of Transactions

 by Denise S Nakanishi, R,CRS, ABR, GRI

Nothing is more American than the spirit of self-reliance but trying to quarterback the largest transaction of your life can actually find you throwing passes right into the hands of the opposing team. Statistics show that you can cost yourself time, effort and certainly money by attempting to do so. The majority of homes sold are still listed with an agent, especially here in Hawaii. With so many buyers from off-island, it’s unrealistic to believe buyers have time, patience or motivation to drive miles and miles of roads scouting “For Sale” signs. With a limited amount of time in which to conclude their purchase, they want to make wise use of their time. After one disappointing experience visiting a home listed in the newspaper or viewed on the owner’s web site, most buyers flock right back to an agent. Motivation alone should leave buyers and sellers with serious doubts about proceeding without professional assistance. Sellers normally desire to “save” the commission or worse, they may be attempting to hide defects or get around the State owner-builder regulations. Buyers are looking for sellers representing themselves because they generally feel it’s a good way to get a bargain basement price. They are looking for a “deal”. In other words, there is simply no common ground from which to achieve a “meeting of the minds”. Sellers normally find themselves wasting precious marketing time placing ineffective advertising and showing the home to unqualified buyers. Interested buyers usually find themselves unable to interact honestly with a seller about their property or are so unsure of themselves they back away. So, if getting across the “sold” line is your goal, hire a professional quarterback. Just like they big guys, we’re extremely motivated for you to win in the biggest of all financial transactions!

 

Below is the current trendline chart for the previous 12 months of Big Island real estate sales.

 

Smart Ethics

 by Denise S Nakanishi, R,CRS, ABR, GRI

The smartest woman in the world may be the former Senator from New York but there’s no question in my mind that the smartest man is indeed a Hilo boy.  It’s not our Mayor, Uncle Steamy or even my honey (indeed a genius for having married yours truly).  Nope, smart as they are, in my book, none competes with now retired custodian Al Estabilio.  Watch this.  When Hilo High was stymied as to how to keep kids from hanging around outside during dances, it was Al’s common sense suggestion that led to simply turning on the water sprinklers! When no deterrent to girls leaving lip prints on bathroom mirrors could be found, Al’s demonstration of his cleaning methods using only a squeegee and a good dose of toilet water broke the cycle!  Sometimes we get so caught up in the problem that we loose sight of the obvious. And so it is with real estate.  Prior to license renewal every other year, Realtors® must complete 10 hours of continuing education.  A recent requirement added formal ethics training. Most commonly ethics disputes among agents surround representation.  Competing agents claim to either have been the procuring cause on a purchase or to be the chosen representative of a buyer.  The agent writing the contract is generally assumed to have introduced the property to the buyer.  When this is not the case, an ethics complaint might arise. Agents are not supposed to involve buyers and sellers in commission disputes. Most agents happily respect established relationships.  In fact, you should be hesitant to work with an agent who “forgets” to ask if you are working with another agent. Even today, most experienced agents have more business than they can handle.  One hypothetical used in an ethics class I attended dealt with procedures an agent should follow when another agent’s buyer wanders into an open house.  The buyer wanted to buy the house but their agent was out of town. Solutions suggested by agents attending the class varied.  I personally favored  allowing a buyer to proceed with their purchase while maintaining the relationship they have with their agent even if the agent never showed the property. Common sense and common courtesy, right? The fact that our National association feels we need such reminders is a bit disconcerting. While useful, it took a four hour continuing education class to convey what, if asked,  Al could have conveyed in two shakes; just follow the Golden Rule! It’s like I told you, the man is a genius!

 

 

Maybe The Sky Really Isn’t Falling!

by Denise S Nakanishi, R,CRS, ABR, GRI

Suffice it to say that 2009 will not be remembered as a banner year in real estate but as bad as it seems, it’s important to remember that we came a long way before we started to retreat. Watch this.  The median sales price islandwide at the end of the year 2000 was $175,000.  There were 101 residential sales on the entire island that year.  Now watch.  The median price of a home in Hilo at that time was $145,000.  Only 9, yep 9, homes sold that year (down from 19 in 1999).  Not surprisingly, the median price in Puna was a little above $67,000. Even if we fast forward, we still find homes selling for more now than they did in 2004.  It’s good to keep life in perspective.  Sales activity for 2009 was up  8% over 2008 and while sales prices  dropped 19% from the previous year, it’s important to keep in mind that the island-wide 2008 median pricing is still close to par with 2005 pricing.  Of course, many segments have been severely affected but numbers don’t always tell a complete story.  It’s difficult to say how much the (in my opinion unnecessary) exclusion of loan programs in lava zones 1&2 has affected market recovery in lower Puna and Ocean View but the compound effect of negative press surrounding this issue can certainly not be denied.  Sometimes numbers are all we have, so here they are:

Area	Active/Med $	Pending/MED $	Sold Med $ 4th qtr 09
VGCC	10/272,500	1/227,900	5/284,000
Ohia,RHE,MLE	19/179,900	5/189,720	5/165,750
HPP	127/263,000	43/199,000	38/210,250
HILO	182/379000	28/282,450	48/255,000
Nanawale	15/125,000	5/77,250	6/79,000
PPG	9/181,000	1/225,000	0
Leilani	21/192,000	5/148,888	7/187,000
Ainaloa	47/144,900	11/169,000	12/148,012
VGCC	10/272,501	1/227,901	5/284,001

 

Inventory levels are still declining and sales are hovering around 120 per month island-wide.  By historical measures, we are doing pretty well.  For certain, current numbers are way ahead of where we began this decade which might mean that the sky isn’t falling after all!

 

Gain First, Lose First by Denise S Nakanishi, R, CRS, ABR, GRI My Pops was a vertically challenged football player. Grandma usually tipped the scale at over 300. I don’t have many skinny genes. I can gain weight looking at a bowl of steam. I know all there is to know about gaining and losing. Specifically, I understand that where you gain first, you lose first. And so it is with real estate. Between about 2004 and 2006, Hawaiian Paradise Park (HPP) was regarded as the fastest growing area in the State. It was impossible to go down any street without seeing active construction. Now that the market has shifted, it’s no surprise that values in HPP have taken a hit. Residential (median) values dropped from $215,000 in August to 188,500 in September for a home that a few years back sold for $350,000. Sales numbers in HPP are misleading because there is a block of under contract foreclosed homes that have been awaiting land court action for months. Closed sales numbers (43) should be much higher. There are currently 42 homes under contract. Interestingly, the November median price is back up to $215,000. The fact that HPP is not a cookie-cutter neighborhood seems to be creating a market within a market. One segment consists of distressed or challenged properties while a parallel market consists of market rate sales. It’s possible to find the same home with very different pricing in each co-existing “market”. In fact, many homes listed below $225,000 are challenged, bank-owned or “distressed”. Homes without “issues” priced between $200,000 and $225,000 sell in days. Many have multiple offers. Buyers often want to avoid an extended escrow which is inevitable with a short sale property. Some short sale listings are offered at attractive but unrealistic pricing. Buyers close to their qualifying ceiling are afraid a lender’s counter will exceed their buying ability. Interestingly, Ainaloa is a different story. Between Aug and Oct, there were few sales of distressed properties and pricing and activity were inching up. This trend will likely continue as Ainaloa benefits from the effects of lender exclusions in lava zones 1&2. The point is that each neighborhood has a slightly different story to tell. In general, activity in East Hawaii is following the national trend; sales numbers are higher and prices lower this year over last. The median sold price in Hilo is hovering around $280,000 which means that homes in good condition listed around $300,000 move quickly. There are currently 201 homes actively listed. The median price tag is $375,000. Over the past 3 months, there were 50 sales with 27 waiting to close. These numbers indicate that existing inventory should be absorbed in less than a year. Once the absorption rate reaches 6 months, the market will be considered “balanced”. Trust me, moving toward this balance will track as described; the places that gained first, will lose first….which probably means they’ll gain first again the next time around! Believe me, I’m an expert on this subject!   Go With the Flow....Redux by Denise S Nakanishi, R, CRS, ABR, GRI Time was, water catchment was an immediate disqualifier for many buyers. Of equal concern was lava zones 1 and 2. Today’s buyers are still very focused on privacy and ambiance.. and price! In East Hawaii, what they seek is often found in Puna where catchment is the norm and well as they say, lava happens. Rarely do REALTORS® hear complaints about catchment any longer but the confusion about lenders and insurance often eliminates some properties and many buyers from the mix. Technical information regarding lava zones can be found in the USGS website or in a brochure entitled “Volcanic and Seismic Hazards on the Island of Hawaii”. Through what was formerly known as the “State” or HPIA plan, homes can be fully covered up to $350,000. A recent article in the Trib noted a significant increase in HPIA policy premiums. Contrary to the information contained in that article, there are, in fact, affordable alternatives outside excess lines such as Lloyds. Over time, we have lost a significant number of mainstream carriers but other vendors have generally stepped in to fill the gap. Insurance rates will never be as cheap as they are for properties located outside zones 1 & 2 but then, properties cost much less so perhaps it’s a wash. On a different but related subject, the issue of the Fannie Mae exclusion of lava zones 1&2 is far from new. Fannie Mae has excluded these areas for years. Newly excluded are VA loans which are underwritten by Ginne Mae. This is the first instance of a government insured loan excluding areas based on the lava hazard zone. In my mind, the Fannie/Ginnie exclusion issue is a zoning issue and should never have been a lender issue. Lenders are fully covered and protected by insurance. It should be left to our local zoning authorities to determine if these areas are too hazardous for habitation. A recent letter to the Editor was spot on when they called the exclusion redlining. While we do loose lenders every day, the perception that loans are no longer available in zones 1&2 is inaccurate. Because these are the most affordable areas in the State, we need as many lenders as possible to participate so that the buyers who need it most can take advantage of attractive financing. As it is, buyers are often into programs with higher interest rates and a lower loan-to-value. In other words, those who need affordable housing are sometimes forced into inferior programs because Fannie and now, Ginnie programs are not available. Interestingly, lava zones are not site specific. The reality is that poor loan programs and overly expensive insurance could have a devastating affect on property owners. After all, property will not be worth much without loans or insurance. A previous version of this article that outlines the affected areas is posted on my blog under the basic title of “Go With The Flow”. Also at www.majormom.com, you’ll find information about affordable insurance carriers as well as a previous response I received from Fannie Mae following a congressional complaint filed by me on this important issue. You can email Denise at majormom@ilhawaii.net How is the Big Island Real Estate Market? by Kevin Lewis, R "The Best Time to Buy... is when it's a Buyer's Market!"™   Big Island Hawaii home prices are down in 2009, creating new opportunities for those who wish they had bought at the prices of just a couple of years ago.  We are seeing a pick up in sales for Entry Level and Fixer Homes, mostly in the affordable Puna district.  The large number of inquiries show there is still high demand for Hawaii real estate!   The Big Island real estate market has slowed to a more "normal pace" in 2009.  The Hawaii real estate market has been affected by recent declines in the stock markets and the slower West Coast real estate market.  There are plenty of properties to choose from and interest rates remain historically low.  Big Island home prices are down less than many of the other real estate markets around the country.  Vacant land prices however have been correcting as too many Sellers rushed to cash in recent profits, creating plenty of inventory.   The condo market is fairly quiet as buyers search for better opportunity in lower priced homes.  The Hawaii economy has slowed, but the long term economic outlook for Hawaii's Big Island remains positive.  We continue to see 2009 to be a Buyer's market and there are opportunities to be found for those ready to take advantage of a slower market.   Buyers are always looking for a "great deal" and many are starting to take advantage of the today's good values.  Sale prices on the Big Island of Hawaii average about 94% of asking prices on homes, and about 90% of asking prices on land.  "Contingent Upon Sale",  "Low-Ball Offers" or "Trade for my Mainland Property" are rarely being accepted in our market.  Many of those who are buying properties today are planning for a Hawaii retirement, or for investment knowing that real estates market is cyclical and a Seller's market will return.  Income Investors are finding rental properties with cap rates averaging 4% to 5%.  Real estate inquiries from want-to-be residents continue to keep some of us Hawaii real estate agents quite busy, so we know the demand is there.  It's a question of "When" buyers will jump back into the Hawaii real estate market, creating a new "Sellers Market."  Some Buyers are still "waiting to see what happens" to our real estate prices, wait until the stock market hits new highs, or until they can sell there so they can buy here.  Buyers who wait too long may find themselves asking, ”Why didn't I buy when it was a Buyer's market?!"   Sellers are saying "I didn't get as much as I wanted, and it took longer than I thought, but I sold!"  The number of sales are down from the high three years ago, yet still within our 10 year average.  If you bought before 2005 and thinking to sell today, chances are there is profit to be made.  It's worth it to put the property online and price it right.  It's the "Lets try 20% above the market price to see what happens" that disappoints Sellers when their property does not sell.  Priced-to-sell as the best bang for the buck compared to other listings are more likely to sell in today's bargain driven market.  Land is more of a commodity and prices vary widely based on supply and demand.  We have a little too much inventory on the market, so you also need to be priced well in order to sell.   The 2008 national election has passed, we have an expanded First Time Home Buyers Tax Credit, and people's attitudes are beginning to improve about the direction of the economy, country and real estate markets.  This should help 2009 be a better year for Big Island Hawaii real estate sales.   ... Just my opinion of the Hawaii real estate market! Emai: hiloagent@yahoo.com Baby Steps on the Moon by Denise S Nakanishi, R, CRS, ABR, GRI   It was one of those moments in time that you just don’t forget. My friend ditched me to go to the beach with her boyfriend but I always thought I got the better deal. Improvements in our housing market certainly don’t rise to the level of an unforgettable moment but at the same time Neil Armstrong’s “one small step, one giant leap” quote seems somehow fitting among all the negatives.   After all, even baby steps are giant steps these days.  While the national media seems focused on price deflations, there are, in my mind, more important numbers to consider in determining market condition and future direction.  Median prices have fallen but still exceed those 6 years back.  More importantly, many areas are experiencing a pattern of inventory decline that may signal a leveling of the market.  REALTORS® in East Hawaii have been extremely busy over the past few months.  We are once again experiencing multiple (often cash) offers on well-valued properties.   Let’s take a look at a snapshot of market activity over the 2nd quarter.  In April, HPP had 147 homes actively on the market.  There are now 140.  Ainaloa had 51; there are now 41.  Leilani saw a net increase of 1 listing but inventory is moving.  Hilo inventory increased 10% but at the same time the number of properties under contract increased by over 33% (from 29 to 41).  The Volcano area continues to be very slow.  Vacant land sales are happening but inventory levels remain high.  Here’s a bit more detail courtesy of my friends at Hawaii Information Service:   Big   June 2008 2009   TO DATE To Date To Date Island   2008 2009 Median $ Median $   2008 2009 2008 2009 ENTIRE Residential 109 80 329,285 275000   628 507 379053 280000 Vacant Land 116 60 45500 25,000   664 430 43000 30000 Commercial 2 0 255000 0   16 3 555000 2800000 Condominium 32 18 301702 300,050   213 125 450000 295000 Business 1 0 40,000 0   8 4 52500 100000 PUNA Residential 41 32 230000 155000   213 193 230000 179875 Vacant Land 73 45 32000 20000   422 276 33500 25000 Commercial 1 0 430000 0   5 0 769274 0 Condominium 0 0 0 0   0 0 0 0 Business 0 0 0 0   1 0 555000 0 SOUTH HILO Residential 21 10 280000 289000   85 67 339000 257500 Vacant Land 5 2 187000 270000   43 29 275000 180000 Commercial 1 0 80000 0   5 1 320000 61000 Condominium 5 4 157500 70000   19 19 120000 69999 Business 0 0 0 0   3 1 65000 100000 NORTH HILO Residential 1 1 297900 575000   4 5 373950 444000 Vacant Land 0 1 0 160000   7 9 375000 360000 Commercial 0 0 0 0   0 0 0 0 Condominium 0 0 0 0   0 0 0 0 Business 0 0 0 0   0 0 0 0 HAMAKUA Residential 6 1 397000 325000   13 9 270000 325000 Vacant Land 2 0 380000 0   6 5 455000 410000 Commercial 0 0 0 0   2 0 0 0 Condominium 0 0 0 0   0 0 0 0 Business 0 0 0 0   0 1 0 600000   As always, for more information, visit www.majormom.com.