Time and time, we are contacted by buyers who are ‘looking for a great deal on a foreclosure’, because… well, just because. They have heard – on the news, radio, newspaper, bulletin board, through a cousin, wherever – that REO’s and short sales are the best deals. And the resulting absorption rate of these properties is impressive. Our current inventory of condos is 1,001 and 37 of those are REO’s (easy math on this one, 3.7%), yet in the past month 18% of closed sales were REO’s.

So with all the frenzy about ‘smoking deals on foreclosures’, it begs to question whether they really are the best values on the market. For example, we had posted about what we considered to be a particularly good deal at Na Hale O Makena, which ended up selling a month ago for $925K, at 72.54% of the reduced asking price ($1.275M).  Since Na Hale O Makena was built in 2002, only 3 units have sold for less, and in the 2 years prior to this sale, the average selling price had been $1.63M. The sale in question was not a REO or Short Sale. Compare that to a Halama oceanfront home we had mentioned on a previous post. It was a REO (foreclosure/bank-owned) listed for $2.6M, went under contract within 2 weeks of listing,  and its sale closed a few days ago for $3.02M, 116% of the asking price. On multiple-offer scenarios, it is not uncommon for a buyer’s emotion to take charge and result in a bidding war. Was it a good deal? Arguably it was well within its fair market value spectrum, but  not an obvious well-below-market sale.

Properties are priced individually and reflect different motivational levels on the part of the seller (as well as their grasp on reality). There are many properties in the Maui real estate market in which a conventional sale property is priced below its comparable REO counterpart. Instead of focusing on classification (i.e. REO), buyers would best be served by being represented by a knowledgeable Buyer’s agent who can find/negotiate the best deal on their behalf.

Disclaimer: Information above relating to real estate values are the opinion of the poster based on available data and are not a formal appraisal of said properties.

Views from a Maui Realtor

The recession has had a long-lasting effect in the lives of most Americans, with an unacceptable number losing their homes and their lives’ savings. Many have been blamed, from banks for having loose lending criteria (i.e. no loan docs, stated income), to mortgage brokers for ‘pushing’ through loans without giving consumers the opportunity to review, to Realtors for selling homes to consumers they couldn’t afford, to, well, buyers who ultimately purchase properties they knew they couldn’t afford to keep. Although for many the financial meltdown negatively impacted their lives, there are lessons that we can all learn and hopefully implement as we move forward.

Our collective mentality has changed in how we see our properties, no longer is a house a cash-dispenser to be refinanced with ease and sold at profit at any time. Properties have transcended from being a dispensable asset, into what they are and should be: a HOME! Hard-earned equity has become a treasure, to be increased not necessarily by market fluctuations (which are obviously unpredictable and not to be relied on any time in the near future) but rather by paying down the principal through years of ownership. We, as a society, have changed our spending habits, not relying on available credit to live well outside of our means. Unnecessarily lavish lifestyles and MacMansions have been replaced with frugal behaviors and eco-friendly upgrades. Even in markets such as Maui that have not been hit as hard as REO-riddled Florida, Michigan, Arizona et al, buyers are making purchases with a mentality of staying put long-term. Although many fortunes were made by investors/homeowners flipping real estate at the peak of the market, most potential buyers realize that given current conditions, it may be several years before they can sell at a profit – surely foreclosures laws such as Hawaii Act 48 are only prolonging the inevitable: REO’s that must be absorbed by the market before we can move to more normal market conditions.

Those affected by the economic downturn (which is, well, most of us) have changed our credit-card maxing ways into a more simpler life: buy only what you can afford, treat our homes as our most precious financial asset, and have a cushion for that rainy day. Clearly these are only my opinions based on observations/experiences and may perhaps be wishful thinking on my part.

Comments are always welcomed and appreciated.

One of the biggest pieces of legislature concerning the foreclosure process is Hawaii’s Act 48, which was implemented in May. Take a moment to read more about Act 48 and how it changed the foreclosure process in Hawaii. There have been a myriad of consequences, some expected by those who crafted the legislation and some unforeseen.

First, Fannie Mae et al quickly adapted by changing their policies, whereby they would be pursuing foreclosures through the judicial route rather than non-judicial. Some critics say that foreclosing lienholders are skirting around what the legislation intended to do (protect homeowner’s rights), but clearly the judicial route was always an option. When there is a traffic jam in your favorite shortcut home, you take the longer way that still gets you there. This should have been expected and is well within the lienholder’s rights to do so. In addition, as owner-occupants are allowed to request mediation on non-judicial foreclosures, this is allowing homeowners more time in their home. Although the intent of this legislation is to allow homeowners (who must be occupants of the property) an opportunity to meet with their lender and try to work out mutually agreeable resolution, it is also clear that many may use this method to stall the process and prolong their stay in their property – presumably without paying mortgage payment during the foreclosure process. Furthermore, with some of the largest lienholders foreclosing judicially now, it has created a logjam in the courts, which were already underfunded and understaffed. This is merely prolonging the inevitable: these distressed properties must be absorbed by the market. Whether it happens now or in 2 years, it is a reality that we have to face.

Act 48 had a noble intent: protect rights of homeowners at a time when lienholders may be hastily foreclosing on properties. However, the implementation of this legislation fell short of its mighty objectives. If you have been impacted by Act 48 or have feedback, leave us a comment.

In an effort to better serve our clients/customers, we would like audience feedback:  If you were looking to purchase a property on Maui, what terms would you search for on Google? For example, ‘Maui Homes’, ‘Wailea Condos For Sale’, etc. Please leave a comment below with terms you would possibly use when performing a search, this could be whether you are looking for a Wailea luxury condo, a Kihei home, a Makena beachfront estate, Maui properties in general, anything.

From those who leave comments prior to 07/15/2011, one person will be picked at random and will win a $50 Gift Card  for Amazon.com, courtesy of the Maui Real Estate Search team. So what are you waiting for? Leave a comment, help us improve our services/site, and possibly win a $50 Gift Card!

**UPDATE** The winner of our random drawing is Sheralyn G. Congrats!!!

Protect Yourself with a Home Inspection

The following is a guest post by a good friend and fellow Realtor, Crystal Tost:

As a Calgary Realtor, I always recommend that my clients hire a professional to carry out a thorough inspection of the home they want purchase.

Whether your buying your first home or your tenth, purchasing a new home is an exciting time in your life. Not only are you embarking upon a new chapter in your life, but you are also making a significant investment. As such, you want to feel confident the home you are about to purchase will meet all of your needs and expectations. One way to ensure the home is up to par is to complete a home inspection before you make a purchase.

Unfortunately for many homebuyers, the terminology involved with the purchase process can sometimes become a bit confusing. For example, while an appraiser inspection will be conducted on the home in order to determine its value, this should not be confused with a home inspection. Whereas an appraisal inspection focuses on things such as the size, condition and location of the home, the home inspection surveys the home’s mechanical and structural systems. In other words, a home inspection doesn’t involve determining the value of the home. Rather, it is focused on the home’s condition.

By inspecting the condition of the home before you make a purchase, you will be better prepared to negotiate the terms of the purchase. If there are problems with the home, for example, you might be able to negotiate a lower purchase price. Or, as part of your terms, you may require the seller to pay for certain repairs to be completed by a certain date. Of course, depending upon what the home inspection uncovers, you might also choose to back out of the purchase altogether.

In order to get the most out of a home inspection, it is important to carefully select the inspector and services you choose to purchase. While a basic home inspection will focus on the structure and systems such as the septic and the foundation, you may choose to have other aspects of the home inspected as well. For example, you might also have the inspector conduct a pest inspection or check for hazards such as radon gas. Furthermore, while some home inspectors will consider the garage and other outbuilding as part of the inspection, others will charge extra to inspect these separate facilities. For these reasons, it is important to learn more about what is covered in the inspection when you start comparing quotes from various professionals.

While you will likely spend at least a few hundred dollars to get your home inspection completed, it is certainly a worthwhile investment. By catching problems early, you can potentially save thousands of dollars. On the other hand, if there aren’t any problems, you will enjoy the peace of mind that comes with knowing you are making a sound investment.

About the author: Crystal Tost has been a Calgary Realtor since 1997 and specializes in residential sales of homes and condos and enjoys working with Calgary first time home buyers.