Maui Real Estate Blog
Canadian / English (Hawaiian) Real Estate Glossary
With relative strength of the Canadian economy and the Loonie, we continue to enjoy working with a substantial number of Canadian Buyers and Sellers. Canadians and Americans usually become fast friends. We share a border, similar values and for the most part we speak the same language. However, there are some differences in terminology and process when it comes to real estate transactions.
I wrote a previous blog post that served as A Primer for International Buyers. In this post we are going to specifically focus on some of the different terms used in some provinces of Canada and what they translate to here in Hawaii. We understand that condominium and real estate laws do vary by province and we are by no means Canadian real estate experts, but we do hope that this may help shed some light on the differences in real estate terminology. Without further ado:
|Canadian Term||Maui Equivalent|
|Strata Fees||Maintenance Fees|
Aside from these minor differences in the terminology, there are also differences in the purchase process as explained in the Primer for International Buyers.
To highlight a few of those differences:
- Buyers usually take a minimum of 10 to 14 days to remove their inspection contingencies (subjects) via the use of professional property inspections which may include home, pool, mold and other inspections if necessary. We know the best inspectors on Maui and can coordinate the inspection process for you. There are no laws in the Hawaii that prevent a Seller from transferring a property that is not up to code or that has defects. In other words, it is a Seller’s legal obligation to disclose these, but not necessarily fix them. This can become a negotiating point during the escrow process. If a Seller asks a Buyer to sign an “as-is” addendum, this is a statement that the Seller is unwilling to make any improvements to the property.
- Financing in the US is often done via fixed rate mortgages that amortize over a period of 30 years. Many Canadians opt to use their own financing from Canada for US properties, however, if you decide to finance here on Maui, we have lenders with years of experience helping our many Canadian clients obtain loans. Note that they will most likely require 35% down payment and full income documentation for at least two years. The documents needed include T-1’s, T-4’s, corporation and business returns, and current pay stubs.
- Signing documents. Some documents will have to be notarized by a US notary. The instructions will likely direct you to do the signing at the US Embassy. That will likely require scheduling an appointment and can be time consuming. If you live close enough, it may be easier to make the drive across the border to a US Notary.
- Closing. Many of our Canadian buyers have already returned home prior to closing. Once appropriate documents are signed, notarized and returned to escrow, closing takes place two days after all funds are received.
- Utilities. We’ll provide you with the appropriate phone numbers to change all utilities into your name including electric, telephone, liquid propane, cable, alarm and any other services. It is often customary for Maui Electric and some of the other utilities to require security deposits for Buyers just establishing credit in Hawaii.
Finally, if you’re still reading this post, we think that you ought to choose a Realtor with at least a modicum of understanding of Canadian Culture and perhaps a bit of a sense of humor. To that end, we recommend that you screen your prospective Realtors with The Following Test.
Maui Real Estate Blog
The New Hawaii Purchase Contract and its impact on Buyers and Sellers
The new Hawaii Association of Realtors purchase contract that goes into effect on May 1, 2012 is dramatically different than the current purchase contract. The new purchase contract is meant to flow and read more naturally; groups like contingencies and provisions together; and more clearly defines roles, responsibilities, time frames and obligations of Buyers, Sellers and their Realtors.
I would imagine that the first 30 to 60 days after implementation will involve some back and forth between brokerages as we adapt to the new purchase contracts. The Maui Real Estate Team is taking a proactive approach to understanding how the new purchase contract impacts Buyers and Sellers by taking the following actions:
- Attending the Realtors Association of Maui training session the other day.
- Discussing the implications of the new purchase contract with our corporate attorney.
- Spending several hours this weekend analyzing the changes.
- We will have a company meeting / training session regarding the new purchase contract.
- We will create a Buyer’s Guide to the New Hawaii Purchase Contract and a Seller’s Guide to the New Hawaii Purchase Contract which will be available to registered users of The Maui Real Estate Team’s website in the next 30 days.
As with any document that has undergone a major revision/ re-write, the new document isn’t perfect. In fact, in some ways it is more complex and requires more written communications between Realtors, Buyers and Sellers. The new Hawaii Purchase Contract requires Sellers to be more organized and diligent in their approach to selling their Maui properties. For instance, upon closing, under the “cleaning clause”, carpets are now designated as needing to be professionally cleaned. An odd addition, but one to be aware of. Did someone on the purchase contract committee have a cousin in the carpet cleaning business?
As for Buyers there are potentially additional “Buyer safeguards”, some of which require intimate knowledge of the new purchase contract. However, there are also different “options” for cash transactions which need to be carefully handled. There is also the mention of several types of resources that Buyers should use whenever purchasing a home, condo or land on Maui. We are in the process of updating our list of resources.
If you are thinking of buying or selling Maui property at this time, please consider contacting The Maui Real Estate Team for a free consultation regarding how the new Hawaii Purchase Contract will impact your purchase or sale. Our experience and insights will help you minimize headaches and surprises and help you execute your real estate transaction without a hitch.
Maui Real Estate Blog
Assessed Value versus Appraised Value versus Market Value
(NOTE: This turned into a longer blog post than originally intended…and could have been longer. It is a complex subject, that deserves a lot of attention).
People often ask us what is my home, condo or land worth? After all, we are supposed to be the experts…right! This is a tricky question for several reasons, one of which is that there are so many definitions of value. The advent of AVM’s (automated valuation methods) has added to the complexity of this answer. Most fundamentally, real estate is difficult to value because it is not considered a “liquid asset”.
In order to address the question “What is my home worth?” properly, it is a good idea to understand the definition of the many different ways properties may be valued. Here are a few of the terms you will hear and a little about each of them.
– Appraised Value – The appraised value of a property on Maui (assuming we are talking about a single family home, piece of vacant land or condominium) is the unbiased value according to a qualified appraiser after a site visit and thorough analysis based on property facts, analysis and market trends. Although I am not not an licensed appraiser, my understanding is that a professional appraiser utilizes a formula that includes a combination of the cost approach and a sales comparison (or comparable sales) approach to determine the Appraised Value. There is a third component used in commercial and investment properties called the income approach which utilizes Net Operating Income or NOI and return to establish the value.
Appraisals are a fair and often very accurate way to get an understanding of the value of a property. Unfortunately, appraisers cannot capture some of the intangibles that improve the value of a home / property. Appraisers are also biased by trends and external pressures. Many appraisers now are being extremely conservative with their appraisals since they were blamed as co-conspirators in the housing bubble. It is unfair to assign blame to appraisers for the housing bust. Suffice it to say that there are honest appraisers and dishonest appraisers just like in every business / profession whether it be real estate, lending, law, medicine, finance etc.
– Assessed Value – Here is fairly generic definition of Assessed Value followed by definition by Maui County. Assessed Value is the dollar value of real property assigned by a public tax assessor for the purpose of taxation. In Maui, according to the official County of Maui website, assessed values are defined as “100% of fee simple market value using the cost and market approaches to value.”
People often confuse the Assessed Value of their property with the Appraised Value. Appraised Value and Assessed Value are very different animals, or as we say on Maui, Pineapples and Mangoes. Assessed Value is a number we see as property owners at least once per year, approximately March 15 on Maui. One would think that it is an accurate number since it is used as a basis for taxation. The theory sounds great, however, I have seen a lot of extremely poorly assessed properties on Maui. Furthermore, Assessed values tend to greatly lag the market (good during good times and bad during bad times). I would use Assessed Value as a benchmark or a data point, but never anything more.
– Automated Valuation Method – Unless you have been living under a rock (or on a rock if you live on Maui) you’ve probably heard of Zillow. Zillow is website which uses a proprietary algorithm to provide an automated calculation of the value of a property. That calculated value is called a “Zestimate”. I have seen some really bad “Zestimates” on Maui (35% error) and some fairly accurate ones. There are a few other sites that provide a similar service. AVM’s are controversial in that they may work fairly well in a homogeneous neighborhood or condominium complex, but they cannot address the fact that no two properties are alike, and cannot provide the context that a human expert such as an appraiser or real estate professional can provide.
– Market Value – The intersection of the highest price a buyer is willing to pay and the lowest price a seller is willing to accept. With substantially tighter lending and appraisal guidelines these days, appraised value comes into play. Unless the transaction is a cash purchase or has an extremely large down payment, the appraised value and market value are going to have to match.
So what’s your home worth? If I had to choose between the first three methodologies, and had the available funds, I would certainly choose Appraised Value. In addition, I would seek the opinion of an experienced, licensed real estate profession to obtain a Broker’s Price Opinion / Comparative Market Analysis. When I am given such an assignment, I utilize all of the tools at my disposal to help determine the Market Value, including using the three aforementioned methods, my local knowledge and business experience. At the end of the day, the answer is best determined by the market.
Please contact me or any of The Maui Real Estate Team professionals if we can help you answer this question or you would like to discuss anything else related to the Maui Real Estate market.
Maui Real Estate Blog
New Real Estate Terminology?
The housing crisis and economy have introduced quite a few new “words” and terms to the English language. Yet another has emerged in the past few weeks of the foreclosure debacle. “Robo-Signer”. I don’t think there is a Wikipedia entry for it yet…but I’m sure there will be. After a little research, the earliest mention I could find of the term was January 29, 2010, on Matt Weidner’s Blog. Matt is a foreclosure defense attorney located in Pennsylvania.
I am not sure if Mr. Weidner coined the term, but here’s my definition of a Robo-Signer. A Robo-Signer is a bank or mortgage company employee who signed an extraordinarily large number of foreclosure documents over a short time. Simple math (no calculator necessary) demonstrates that there is no way humanly possible that these employees were able to review these foreclosure documents with the amount legal care and diligence required. The slew of lawsuits and the foreclosure moratorium are the off-spring of these Robo-Signers.
No one is really sure whether the fallout from these Robo-Signers will hurt or help the economy. I’m pretty certain, some attorneys will cash in…but other than that, who knows how this will all unfold.
Maui Real Estate Blog
Bureau of Conveyances Changes
The Hawaii Bureau of Conveyances is the state body that records all real estate transactions. Like many states, Hawaii is facing some budget challenges due to the current recession. Those budget issues are having an impact on staffing at the Bureau. As a result, the Bureau has some new rules that will go into effect as of July 1, 2009 that could potentially impact a real estate transaction. Here is a quick summary of the changes.
- No Specials: The Bureau of Conveyances will no longer allow specials regardless of the liability
(dollar) amount. Specials are where title and escrow are able to submit documents to the bureau on the same day of recording instead of a day or more in advance as is the norm.
- No Pulls: The Bureau of Conveyances will no longer allow documents to be pulled once they have
been submitted for recording.
- Projects or Bulk Recordings: No project/bulk recording will be allowed during the
last five business days of each month.
- Recording Fee: The Regular System Recording fee will increase from $25/document to
$30/document. Land Court document Recording fees are not affected.
- Good Funds: Documents will not be submitted unless escrow has good funds in hand
two business days prior to recordation.
The new Good Funds rule is going to have the biggest impact on buyers and sellers. As it stands now, loans are taking longer. Buyer’s and sellers are going to need to make sure they allow sufficient time to close to accommodate longer loan processing and more time at the bureau of conveyances. The no specials rule will also have an impact. Specials were helpful if there were any delays getting documentation from a lender and there was a threat that recording may have needed to be pushed back. While there were no guarantee on specials, that safety net is no longer available.
Maui Real Estate Blog
Maui Short Sales
I have been using the term short sale regularly on our blog as this type of listing increases in frequency. In using this term, I have made the assumption that most understand the term short sale. That is probably an incorrect assumption. Going back to square one, according to the Hawaii Association of Realtors a short sale is defined as “a sale where: 1) the liens of a property combined with the associated costs will exceed the purchase price of the property and 2) the seller will be asking the lien holder for a release of the lien on the subject property without a complete payoff”.
The seller does not necessarily have to be late on payments. They can be fully up to date. If a seller is at risk of foreclosure, delinquent in their payments, has a lien for nonpayment or is at risk of a lien, this is defined by the state of Hawaii as being a distressed property. It is worth reiterating that short sales and distressed properties are not mutually exclusive. You can be a short sale without being distressed. You may also be a distressed property without necessarily being a short sale.
What does this all mean for buyers and sellers?
For sellers, you need to be aware that a short sale may have legal, cash, credit and tax consequences. Prior to listing your property, you should talk to a qualified Hawaii attorney and/or a CPA. Once your property is listed it will be the responsibility of the owner / seller to communicate with the banks. You may get some assistance from a title and escrow company when you accept an offer. Your real estate agent will not be able to talk to or negotiate with the bank. The process of working with the bank can be lengthy.
For buyers interested in short sale properties, I think it important that you keep in mind that this can be a lengthy process. Bank response times on offers vary widely. Some banks have become more efficient and can respond within a month. I have seen other banks where the length to respond stretches over 6 months or more. There are no guarantees that a bank will accept an offer either. You may receive a counter from the bank or in some cases an outright rejection. Sellers may submit multiple offers to the bank so it is possible that other buyers may trump your offer. The good news is that you can structure your contract in manners such that you have no real obligation to the property prior to the banks acceptance. Even then, you are still likely to have contingency periods for inspection.
There are some well priced short sale listings on the market, so the process and the uncertainty should not necessarily be a deterrent. We recently helped a buyer close on a great short sale in Haiku. If you have additional questions on short sales and distressed properties, feel free to contact us for further clarification.