“I’d like to buy a house on Maui that needs tons of work, is in a horrible neighborhood, and I’d like to pay much higher than market value for it,” said no one, ever. (Except maybe a few people who bought property in early 2007).
Okay, so if you count yourself as someone who wants to find a bargain, you have to understand that you are one of perhaps several hundred thousand other people who are watching the market and hoping to find the bargain. The Real Estate Market in today’s world is very honest. Technology has democratized access to real estate information, and with our MLS auto notification systems, we can keep you on top of the latest and greatest properties on Maui.
Unless you have the other necessary ingredients outlined below however, your chances for successfully acquiring the bargain will be close to nil. This blog post is the story of one of my greatest Buyer Representation triumphs of 2013.
How Did We Do It?
The answer is simple and something your grandmother might tell you. Preparedness, perseverance, and patience. (And a little luck). There is no easy way to find a bargain on Maui contrary to what the sleazy infomercials and Real Estate Investment Courses would have you believe. There are really strong strategies, however, that I will outline in this blog post. I cannot guarantee that you will find a bargain, but if you employ these strategies you will dramatically increase your odds at finding a bargain.
Preparedness
While I love and respect all my clients, it’s kind of a treat to find a buyer client who is completely prepared. So it was a delight to meet Marsha B. (Name changed to protect my client’s confidentiality.) Marsha literally walked up to me while I was painting the front screen door of one of my Wailuku listings. She looked at that property but felt it wasn’t a fit for her. She agreed to let me set her up on a MLS Auto Notification and when this Wailuku foreclosure came on the market she was ready to jump.
Her preparedness consisted of the following:
- Marsha was fully Pre Qualified by not 1 but 2 local lenders. It turns out that at the time of this transaction, the local lenders were the only people that would lend on this condominium complex. It’s always best to speak to a local lender who understands the peculiarities of the Maui market.
- Marsha was available to look at the property right away.
- When it came time to submit her loan application, she had all her tax returns and documents ready to roll for the lender.
- Marsha was fearless – and understood the buyer protections of the purchase contract. I helped her understand the ways that she could “bail” on the deal if she changed her mind and she felt completely comfortable moving ahead with the offer, knowing that she was not being roped into anything out of her comfort zone.
- Marsha’s agent (me!) showed her recent comparable sales in the complex and helped her understand market value of the complex.
Perseverance (and Vision)
The property while in reasonable shape was not very pretty to look at on the inside. Disgusting carpets, dirty walls, nasty broken light fixtures. Marsha was unfazed by all of this and had the ability to see through the surface ick and imagine how easily the property could be beautified. We had fun talking about ripping out the carpets and doing polished concrete floors.
We also heard that there were many offers being submitted, so Marsha decided to offer a significant amount over the bank’s asking price. Again – kudos to her for understanding the reality of the market place and realizing that even offering many thousand dollars more than the asking price, she was still poised to purchase a property at what we both considered a “bargain” price.
Take a look at the chart below that shows the sale price of comparable units over the last 12 months:
Kehalani Gardens Sales
Patience
Marsha had plenty of patience in going through the bank’s over 50 pages of additional disclosures and addenda. It caused both of our eyes to bug out, but we got through it. There was also a broken water line that needed to be fixed before the lender would lend on the property. This, and many other unforeseen hurdles, caused both of us to breathe deeply and hope for the best.
Results
Marsha succeeded in buying this property and still had enough money to buy new appliances, apply a fresh coat of paint, and acquire some cool furniture to buff out her new Wailuku residence. Kehalani Gardens is in a fantastic location and is a beautiful, well-maintained complex.
As I said before, I cannot guarantee that I can find you a bargain, but I can guarantee that I will do my very best to prepare you for the possibility!
Liam S. Ball, R(S)
808.280.7809
liam@hawaiilife.com
Pam Deery
October 3, 2014
Great article Liam; thank you for clarifying the “obvious to realtors only”. The most frequent calls we get from prospective new clients is the “bargain of the year” purchase. So many buyers sit on the fence waiting for the needle in the haystack they miss the current opportunity to purchase what in hindsight will likely prove to have been value purchase. Well written!
Pam Deery
October 3, 2014
Great article Liam; thank you for clarifying the “obvious to realtors only”. The most frequent calls we get from prospective new clients is the “bargain of the year” purchase. So many buyers sit on the fence waiting for the needle in the haystack they miss the current opportunity to purchase what in hindsight will likely prove to have been value purchase. Well written!
Liam
October 3, 2014
Thanks Pam. It was definitely a case of good timing and great buyer! Also I believe the Bank had done the appraisal before the market resurrected itself so by the time the property hit the MLS, it was quite under priced.
Liam
October 3, 2014
Thanks Pam. It was definitely a case of good timing and great buyer! Also I believe the Bank had done the appraisal before the market resurrected itself so by the time the property hit the MLS, it was quite under priced.
Tracy Stice
October 3, 2014
Liam, This certainly is a rare case. Most of the time I don’t waste time with these type of buyers unless they are willing to sign a buyer representation agreement. It is nice your client was loyal and stayed with you.
Getting buyers to overbid is a great idea because if you tie it to a loan contingency and the bank appraisal comes in low, you can use the appraisal as a bargaining chip. I did that in May for a REO house and cottage in Makawao. We were pretty close to closing and the appraisal came in $25,000 low. The bank lowered the price to the appraisal value. There were 8 bids on the house and my client won and then got a $25,000 reduction because of the appraisal value. There are lots of ways to skin a cat !
Tracy Stice
October 3, 2014
Liam, This certainly is a rare case. Most of the time I don’t waste time with these type of buyers unless they are willing to sign a buyer representation agreement. It is nice your client was loyal and stayed with you.
Getting buyers to overbid is a great idea because if you tie it to a loan contingency and the bank appraisal comes in low, you can use the appraisal as a bargaining chip. I did that in May for a REO house and cottage in Makawao. We were pretty close to closing and the appraisal came in $25,000 low. The bank lowered the price to the appraisal value. There were 8 bids on the house and my client won and then got a $25,000 reduction because of the appraisal value. There are lots of ways to skin a cat !