What is the real estate market like in Hawaii?
How do I determine the value of a property I’m considering purchasing?
Do I need to use a realtor to buy or sell a property?
If I don’t use a realtor, what other options do I have?
What is the foreclosure process in Hawaii?
What kind of energy tax credits are available for Hawaii homeowners?
I live out of state. How can I invest in Hawaii real estate?
Who pays realtor commissions in Hawaii?
Who pays escrow costs in Hawaii?
How often do I need a termite inspection?
Should I buy property along the coastline?
Wow, starting with a fastball like that, are we? As you can imagine, there’s really no way to directly answer that question. As with many markets, the landscape varies from place to place. That being said, it should be no surprise that the average single-family home in Hawaii sells for far more than the average property on the mainland. Why? Well, everyone wants to live in Hawaii!
From the urban life of Honolulu to the greenery of Kailua to the ‘country’ feel of the west side and the high-end market of Hawaii Kai, the Oahu real estate market is very diverse. The average first-time homebuyer on Oahu is buying a single-family home for between roughly $375K and $450K as of this writing (October 2010), if that helps paint a picture for you. Both homes and condos are selling in about 30-40 days on market. Neighbor islands? It’s a different scenario because there are fewer buyers and homes can frequently sit for longer periods on the market. Make sure to price your homes effectively.
One thing I hear consistently from my friends on the mainland is that real estate in Hawaii must naturally be prohibitively expensive. While ‘expensive’ is a relative term, I always try to clear up that mistaken notion. The fact is that there are deals everywhere and if you are an educated shopper with a decent income, you are likely to find a home to your liking in your price range.
For some quick local Oahu market stats from Zillow, click here for Honolulu, Kailua, Kapolei, Haleiwa, and Waianae. Big Island: Kona and Hilo. Maui: Kihei. Kauai: Lihue. Check out the Market Statistics page for more neighborhood real estate statistics.
Aaaah, here we go. Basically, you’re asking how to run what realtors call a CMA (comparative market analysis) or what we investors nickname ‘running comps’. This is something I feel you MUST learn how to do yourself. Do not take anyone else’s word on the value of a property. Learn how to do it yourself. Here’s what you need to do:
- Find an online source of recently sold listings. You can ask your realtor for this information or go to a site like Zillow.com to do your own research.
- Find at least 3-5 properties (more if you can find them) that are within 0.5 mi driving distance of your target home, have sold in the last 3 months, and are +/- 10% of the square feet of living space.
- Make adjustments for the conditions of these properties as compared to that of your target property.
- Average them out and come up with your comparable price. This is what your house should be worth on the market.
- If you can’t get 3-5 properties that fit the above criteria, then loosen up a bit on those limits until you do (within reason).
Warning: I’ve had a few other people run comps for me and have been given a list of properties that were 1000 sqft different than the house I was looking at! The “C” in CMA stands for Comparative — remember this. A 2000 sqft house is not really a good indicator of what that 1000 sqft house you’re eyeing up is worth, right??
I’ve already written a post on this subject, “What is My Hawaii House Really Worth?”
No, you do not. Although most real estate transactions are conducted the traditional way via realtors, it’s not your only choice. There is no Hawaii state law that mandates you use the services of a real estate agent to buy or sell a property. If you are educated about the processes involved, then you may consider working without a realtor and putting the saved commission fees back into the deal to buy or sell at a more favorable price to both parties.
However, working with a quality real estate agent can also be extremely valuable. If you do not have the time to do the research, if you don’t know your market, if you do not understand or are scared by legal contracts, or if you just want another set of experienced eyes on what is a very big decision for most people, then working with an agent may be your best option. Just be sure you are working with someone who represents your best interests and understands your specific needs. Interview as many realtors as you must before committing to the one you want working for you. If you need a few recommendations, let me know.
Well, if you’re selling your house you can try to find your own buyer or do a FSBO (For Sale By Owner). There are real estate investors out there like myself who will pay you cash, close quickly, and take your house in its current condition. This method also saves you, the seller, 6% of the sale price in realtor fees (3% on each side).
If you’re in the market to buy a house, then you can search the online listings and contact the sellers or their realtors (if listed) directly. They may appreciate you coming unrepresented and give you a discount. Again, you can also contact a real estate investor because they often are looking to sell the houses that they acquire and will often do so at discount prices to ensure a quick sale. Let them know in advance that you’re in the market and they may be able to sell you one of their own properties.
You should first know that both judicial and non-judicial foreclosures are allowed in the state of Hawaii, although the latter is used more frequently (EDIT: laws in recent years have significantly reduced non-judicial foreclosures). The judicial foreclosure, where a court order to foreclosure is obtained, is usually only invoked when the mortgage has no power of sale clause. A power of sale clause in the mortgage pre-authorizes the lender to foreclosure in case of homeowner default on the loan. When this clause exists, the lender will pursue a non-judicial foreclosure if one is necessary.
Unless stated otherwise in the power of sale clause, a non-judicial foreclosure will follow this timeline:
- A notice of intent to foreclose must be published once a week for 3 successive weeks in a general circulation newspaper (such as the Honolulu Star-Advertiser) with the last publication not less than 14 days before the date of sale.
- Copies of the notice must be mailed or delivered to the mortgagor, the borrower, any prior or junior creditors, the state director of taxation, and any other person entitled to receive notice. Additionally, the notice must be posted on the premises not less than 21 days before the day of sale. The notice must state items such as the date, time and place of the public sale; the dates and times of 2 open houses, if any are to be held; unpaid balance on the mortgage; description of the property; name of mortgagor and borrower; name of the lender; names of any other landholders; contact information of the person conducting the public sale; and the terms and conditions of the public sale.
- The borrower may, up until 3 days before the sale, make up the arrears on the default.
- The sale is made at auction to the highest bidder.
- The lender may choose to postpone the sale at any given time of their choosing.
You should also know that deficiency judgments are allowed in the state of Hawaii and that there is no right of redemption.
- The state government gives a 35% tax break (up to $2250) for the installation of solar panels on single-family homes.
- Photovoltaic systems (PV) can return a 35% credit up to $5000.
- Wind systems return a 20% tax credit up to $1500.
For more information on this subject, contact DBEDT (Department of Business, Economic Development & Tourism). For info on green rehabbing techniques and ways to save energy, check our post on this subject HERE…
Many people today invest in regions far from where they hang their hat. Savvy investors do not even need to see properties they invest in if they do their homework properly. If you live on the mainland or elsewhere but want to invest in Hawaii real estate, you should contact some local investors who are usually looking to sell their renovated properties to cash buyers. Alternatively, you can work with a realtor who can do some house hunting for you.
Traditionally the seller pays both sides of the commission on the sale of real estate in Hawaii, with realtors on both sides usually collecting 3% of the final sale price.
Unlike realtor commissions, both buyer and seller share in the escrow costs in Hawaii, but not evenly. The normal split is the buyer paying 40% and the seller covering the remaining 60%.
That’s kind of a tough one, but a good rule of thumb is once every 5 years. Some neighborhoods are much more susceptible to termites than others (ex. Salt Lake), so your location could help determine a good time interval for you to root out those little wood-eating critters. Lucky for you, we’ve already posted about this very subject, so don’t get bugged out! Go HERE for the post…
Wow I could go on for days talking about this! In fact, I just blogged about it HERE. It’s everyone’s dream, right? Own a piece of property right along a Hawaiian beach. It just doesn’t get any better than that. Aaaaahhhhh……
Well, not so fast. You may get more than you bargained for. Trust me – I’ve done extensive research in coastal hazards right here in Hawaii and have collaborated with some of the state agencies on this very matter. There are some serious issues you must take into consideration when owning beachfront property.
- Unless you’ve been living under a rock, you know that we are in a state of global climate change. Many beaches in Hawaii are eroding at a rate of around one foot per year. The state government has passed regulations on setbacks to prevent homes from being built too close to certified shorelines and, subsequently, needing some form of government rescue or intervention.
- Some beaches in Hawaii are actually growing (accreding), according to coastal science research from UH (of which I was a part of for some time) — the western end of Kailua Beach, for example. However, that does not change your property lines at all. In other words, a growing beach does mean you gain more land. That new beach area belongs to the state, not you!
- You do not own the beach. In Hawaii, the beach itself, which is all land makai (seaward) of the state-certified shoreline, is state land. You cannot build on it (home additions, seawalls, etc.) without certain government permits which can be difficult to obtain.
- Your beachfront home is more susceptible to storms and other natural hazards than homes further back inland. Are you prepared for this? Are you insured for this? How long do you plan to stay in that home and are you willing to risk an encroaching shoreline?
More to come….