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
Quick Seller’s Tip-Get A Survey Before You List
I will be honest, real estate transactions can be challenging in this market. As a seller, you can take steps before you list that will help mitigate against unexpected escrow drama. If you have the means, we strongly recommend that a seller obtain a survey. We recently closed on a transaction where at first glance you would never expect survey to be problematic. The property was in a subdivision that was new within the last 15 years. There were no outward signs of any significant encroachments. When the survey was completed all parties were shocked to find a three foot encroachment. It turns out there had been an error by the original developer of the subdivision. The error was recognized in the late 1990s, but was not corrected as it was supposed to have been by the developer. While a solution was created to satisfy all parties, closing was delayed almost two months. I may have also lost a few of those scarce hairs on top of my head in the process. Unless it is a short sale or an REO, most sellers are required to do a survey. If you get it done before going under contract, you may have the opportunity to address any encroachments.
Maui Real Estate Blog
Maui Short Sale Lessons
Over the last year or so, Billy and I have had the opportunity to work on a fair number of short sale transactions. Short sales are where the seller owes more to the property’s lien holders than its current market value. Offers need to be approved by the lien holders. One of the challenges of working with short sales is setting expectations on what to expect from the banks. To be honest, bank behavior depends on the banks involved, the number of mortgages and a whole lot of other factors. That makes it hard to come up with a “typical” short sale process. That being said, here are some observations that we have based on our experiences.
- The time frame for bank responses varies pretty widely. It appears that smaller banks tend to process short sale offers faster than larger banks. While the big banks have made improvements in their processes and efficiency, they are still overwhelmed by the volume of short sale transactions.
- A Broker Price Opinion is where a bank will hire local real estate professionals to give their opinion on the value of a property. It sounds easy enough, but assigning value in this market can be challenging. The reduced volume of transactions means fewer comparable sales are available to estimate value. Maui is already a tough market to assign value when you get outside of subdivisions as land values, construction types and materials vary considerably. This means the results of BPO’s can sometimes be a surprise.
- Banks rely heavily on Broker Price Opinions (BPOs) when determining their sales price. Most banks won’t consider offers that are well off of the BPO. A high BPO tends to lower the odds of a successful transaction while a low BPO tends to raise the possibility of a successful sale.
- After a bank approves a short sale, the buyer will have a limited time frame to close. Typically, the banks are giving 30 days from approval. If you are using financing on a short sale transaction, buyers will need to be working on their loan approval prior to bank acceptance.
The number of short sales being approved is increasing. That being said, buyer’s pursuing short sales require some measure of emotional detachment. The length of time associated with short sales and the success rate of short sale offers can be frustrating. There are no guarantees when it comes to short sales. There are however some beautiful short sale properties available on the market. Contact us today you need assistance in purchasing a short sale property on Maui.
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
New Disclosure Law Going into Effect
If you are thinking of listing your property or you have your property listed already, there is a new disclosure law going into effect for the state of Hawaii as of July 1st. The law requires that sellers “make a good faith estimate of electricity cost” based on the previous three months of electric bills. This is for residential real properties that are occupied with the bills paid by the owner. Foreclosed and REO properties are exempted from the new law. Sellers who do not receive pay their utility bills directly are also exempt. Commercial properties are exempt and properties (raw land) that do not have electricity are of course also exempt. This change in disclosure law is part of a broader energy bill knows as Hawaii House Bill 1464.
Maui Real Estate Blog
Fannie Mae and Freddie Mac Continue to Tighten Loan Guidelines
I received an important update from several of my lending partners today. The change will definitely have an impact on homebuyers and sellers. So what are these changes:
- Stated Income Loans will officially be a thing of the past, at least for Fannie Mae and Freddie Mac loans. There may be some financial institutions that continue to provide these as portfolio loans.
- Debt to income ratios will be tightening.
- Second Homes will no longer be a “loan category” under Fannie Mae and Freddie Mac. They will officially lend on “primary residences” or “non-primary residences”. Interest rates for non-primary residence loans will be at least 75 basis points higher than current rates.
I will admit that the changes in loan guidelines are not a surprise to me. Two years ago it was simply too easy to get a loan. Now the pendulum may swinging the other way. I believe there are a few valuable takeaways from this important news for both buyers and sellers.
For Sellers, your audience of qualified buyers continues to shrink. Be sure you price your property carefully.
For Buyer’s, if you are considered a marginal buyer today, you may want to pow-wow with your lender and your Realtor and put together a strategy to make an offer ASAP. Or you may choose to wait until your financial situation improves.