In the current “Buyer’s Market”, everyone is on the hunt for the best possible deal. Which leads us all to the question…. what exactly is a “deal” when it comes to buying property in today’s Hawaii real estate market?
I think we all have an intuitive feeling that there’s some sort of accepted benchmark of value for any given property at any given time, and so the further the purchase price is under that accepted benchmark, the better a “deal” it is.
But looking for a benchmark of value in this market is very strange business, akin to falling down the proverbial rabbit hole. We know that values are dropping, but how much? There isn’t enough sales activity in most sectors to provide accurate “comps” – that is, if we knew one property sold for $”x” amount recently, then a similar property would also be worth $”x”, or $”x” minus “x”%. But honestly, how much validity does a comparable sale have from 9 months ago, or even 4 months ago, especially given how quickly economic conditions AND perceptions have been changing in the world?
Sellers who really want to know the worth of their property can hire a professional appraiser for about $500 or so – although, they shouldn’t expect it to be accurate for very long, in our declining Hawaii market.
Some Buyers, when placing offers, attempt to use the old “backward time continuum” technique – that is, if sales in some areas are closing at 2004 prices, then buyers assume that the entire market is at 2004 prices.
Unfortunately, this logic doesn’t hold water as explained in a recent Hawaii Life article Big Island Home Sales, The Sky Is Not Falling. The thoughts conveyed in the article are reflected in the Kauai real estate market which consists of countless micro-markets, each one acting somewhat independently of the other. The supply of and demand for some market sectors just doesn’t correlate to other sectors (resort condos are not as active as entry-level homes, for example).
What about short sales and REO’s (bank-owned properties)? Aren’t they always deals? In a word, no. While in general they seem to be better priced than standard listings, they have a similar amount of variation, and can come with several disadvantages as well – waiting for weeks or months for offers to be accepted, As-Is stipulations, absence of Seller’s Disclosure Statements, unreasonable time-lines, etc…
Sometimes a property’s listing price may seem unremarkable, but there will be other clues of possible “deal-hood”. Maybe there will be multiple price reductions, maybe extended Days on Market (DOM). We love to see verbiage in the listing remarks along the lines of “highly motivated Seller”, “will look at all offers”, “Seller must sell”, etc… A glance at recent closings shows sales prices within 5% of listing price, with the occasional 10-20% margin! So, some Sellers are really coming down, but Buyers won’t know that unless they enter into negotiations.
If you’ve read this far, I think you’ll be getting the drift that deals sometimes aren’t as obvious to spot as we would like; it often takes some serious sleuthing and a lot of patience. And the assistance and guidance of a Realtor is an invaluable tool. Happy hunting!
