Aloha!

Thank you for stopping by!  I hope to feature both real estate and lifestyle information regarding living on this wonderful island, and particularly on the Windward Side.  

The towns of Kailua, Kaneohe and Waimanalo all have their own personalities.  Hopefully, you get a chance immerse yourself in all they have to offer! 

There is so much to do, see and experience!  My hope to to give you a little taste here.  Please read on...

Thank you ~ Jill

April 12, 2021

What is an Appraisal Clause?

With a seller's market like it is right now in the Spring of 2021, many of my clients have used appraisal clauses on their offers in order to help them get their offer accepted in a multiple offer situation.  For that reason, I get asked all of the time to explain how an appraisal clause works. So I wanted to spend a few minutes explaining the basic details about appraisal clauses and how they work.

In order to understand the appraisal clause, we have to start with the appraisal. This is the valuation that is conducted by an independent appraiser and is the value of the home which will then be used by your lender for determining the amount of a mortgage that they will provide to you. In a standard offer, if the appraised value is lower than your offer price, then their are two options. The first is that your agent can negotiate with the seller's agent for a lower price that either meets the appraised value or at least comes closer to it.  The other option is that you will have to make up the difference in the appraised price and your offer price by bringing more money to the closing table. This will also be the case if you negotiate a lower price if it is still higher than the appraised value. Remember that your lender will not base your mortgage value on anything greater than the appraised value of the home.

How does an appraisal clause work?

In a seller's market with lots of offers, a seller may not be willing to negotiate the price based on the appraised value of the home. An appraisal clause can help you get a head start on other potential buyers by signally early how you will handle a low appraisal.

Option 1: All Out Appraisal Clause: This type of clause states that no matter what is the appraised value of the home, you as the buyer will make up the difference and pay what you offered for the home. For example, if you have an offer price of $1 million and an appraised value of $900,000 then your appraisal clause states that you will bring the extra $100,000 to the table at closing in order to close the transaction.  This full price appraisal clause is obviously enticing to the seller as they know that they will receive the full offer price, especially if it is possible that the appraisal price will be lower. 

Option 2: Capped Appraisal Clause: This type of appraisal clause provides a cap above the appraised value that the potential buyer is willing to spend. For example, your appraisal clause could state that you will pay the appraised value plus $10,000 up to a cap of $950,000. While this type of appraisal clause works best for a buyer with certain budget limits, depending on the market, it may make your offer less appealing to the seller. 

But remember, the appraisal clause only kicks in if the appraised value is less than the offer price.  As you consider an offer for a property, it is important that you look closely at your finances and discuss options such as appraisal clauses with your realtor so that you can make the best possible offer.

Hopefully this provides you with an understanding of appraisal clauses.  If you have additional questions, please feel free to reach out and ask!

April 11, 2021

What is an Acceleration Clause?

Right now in the Spring of 2021 the real estate market on Oahu is a crazy seller's market. Most homes are having anywhere from 10-30 offers depending on the part of the island and the price point.  For that reason, many of my clients have been asking about acceleration clauses so I wanted to spend a couple of minutes explaining "What is an acceleration clause?" While I am not a huge fan of these clauses, it is important to understand how they work and how they can be used to help you get your offer accepted in this type of market.

In simple terms, an acceleration clause is often used when a buyer knows that there will be multiple offers on a property. The clause will state that the buyer will pay some amount of money over the highest price offer. In effect, the acceleration clause states that you will beat any other offer for the property. 

Example:

Lets use a $1 million property as an example so the numbers are nice and round.

- Assume that the offer price for the property is $1million

- Lets say that your acceleration clause states that you will pay $25,000 over the highest offer price.

- You offer $1.1 million for the property that has multiple other offers

- Lets say that in this example the highest other offer is $1.15 million

- With your acceleration clause you are now saying that your offer is $25,000 above that higher offer for a new offer price of $1.175 million.

Now this gets really tricky if there are multiple offers with acceleration clauses. As you can imagine, these offers are great for sellers as they can quickly increase the offer price for their property.  The other complication in this equation is that unless you are looking to make a cash offer, you also have to think about the likely appraisal price for the property. For that reason, many times your acceleration clause may also have an accompanying appraisal clause. I will answer your questions on that clause in an upcoming post.

As you may have figured out, the reason that I am not a huge fan of acceleration clauses is that they can quickly increase the value of your offer and may result in you have to make a much larger down payment depending on the appraised value for the property.  If you really think that this is the right property for you, then an acceleration clause may be appropriate. However, this needs to be a very strategic decision and much be discussed in detail with your realtor before you decide to use this type of clause in an offer.

Hopefully this provides you with an understanding of appraisal clauses.  If you have additional questions, please feel free to reach out and ask!

April 6, 2021

Best Parts of Living In Oahu Hawaii

 

As a local real estate agent here in Oahu, I feel it's my job to give the uncensored truth about all things Oahu, yes, that includes the bad with the good! So, this is the kick off video to my show, and will give you the lowdown on what it's all about! Check out the video and let me know what you think! Or tell me what kind of content you'd like to see next, you can expect a range of videos about Oahu coming soon!

Feb. 1, 2021

Fun Vintage Home Features

There is just something about older, vintage homes.  They often have unique features that set them apart from their neighbors and definitely from the newer homes being built across the island today.  On Oahu, the majority of unique, vintage homes can be found in the Manoa area. This area has many homes from the early 1900s that still retain many of their original features even if the electrical or plumbing has been updated over the years to a more modern standard. 

Often these homes have special nooks, alcoves, and storage areas that you would never find in a newer home and just add so much character to the home. In the Manoa home highlighted in the attached video, you can see examples such as a unique cutout in the pantry, a hidden ironing board, and best of all a special puka to reach into the hall linen closet from inside the bathroom.  These are just a few of the many examples of features that you will find hidden throughout the many older homes on Oahu.

While many of these homes may need some updates, do not just pass them buy because of their age. Their unique designs may offer just the feature that you are looking for to add some fun to your home!

 

Jan. 21, 2021

2020 Windward Oahu Real Estate Wrap-up

Aloha!

In this post I want to discuss some of the statistics that we saw in the Windward Oahu real estate market during the crazy year that was 2020 as well as look ahead at what to expect for 2021.

2020 started off like a normal year in Oahu real estate and then we hit March and the beginning of the COVID-19 pandemic.  At that point the market slowed significantly for the next month or so.  And then about mid April the market began to pick up again. A lot of potential buyers decided that they wanted something different in their home life after spending so much time at home. Many people decided that they wanted more space or a yard.  And in some cases some homeowners decided that they did not want to deal with home maintenance anymore and wanted to downsize. At the same time interest rates began to drop and have remained at all-time lows.  As we hit the second half of 2020 this market accelerated for single family homes became a true seller's market with demand significantly outpacing the available supply. 

Overall Oahu Market Trends for 2020

For the overall Oahu market the median price for both single family homes and condos increase however the most significant trend is in the days on market and new listings especially for single family homes. Both of these numbers were down significantly and highlight the sellers market where not as many homes were available throughout the year and when they did become available, they sold quickly.

 Kailua Market Trends for 2020

In Kailua the same trends continued. Low inventory and high demand for single family homes resulted in a median price increase of 10%. These homes sold quickly and there were significantly less new listings than in 2019. Condos in Kailua did not see the same trends. The demand for condos was not as intense and that resulted in stable prices and longer days on market when compared to 2019.

Kaneohe Market Trends for 2020

Kaneohe saw similar trends for days on  market and new listings, specifically for single family homes but did not see the same median price increase as in Kailua.  However, Kaneohe was still showing the same overall decrease in inventory and properties were moving quickly once placed on the market.

 Expected trends for 2021

Right now most predictions for 2021 show that these trends will continue. Interest rates remain extremely low and the number of potential buyers is still far outpacing the available demand.  If you are thinking about selling your primary home or an investment property, this may be the time to do so as this is truly a seller's market and should continue at least for the early portion of 2021.

If you have any questions on these numbers, your specific neighborhood, or any general real estate questions, please let me know! 

Posted in Market Updates
Jan. 17, 2021

St Joseph and Your Real Estate Transaction!

Have you ever wondered what St Joseph has to do with a real estate transaction? In this fun post I discuss just that!

According to Christian theology, St Joseph is the adoptive father of Jesus. In that way he has become the patron saint of families as well as the person you looked for when you were in need of shelter because he had provided shelter for his young family. This is how St Joseph came to become involved in real estate!

The story goes that if you bury a statue of St Joseph in your yard it will help your home sell.  This story has become so prevalent that you can buy small St Joseph statue kits online for ~ $10-$15.  What you do is take the statue and wrap it in the small cloth included in the kit. You then bury the statue in your yard next to your FOR SALE sign.  Additionally, the statue must be buried upside down and facing your home. Next you say a prayer for assistance and your home will sell quicker! So you may ask, I am selling a condominium, can I still do this?  And the answer is YES!  Just use a flowerpot, put it somewhere that works for your property and you can do the same exact thing.

Now once your home sells, you just need to dig up the statue of St Joseph and put it in a place of prominence in your new home. Hopefully it bring you good luck in the future.

There are people that swear that the statue of St Joseph helped them to find a buyer for a difficult-to-sell property.  Even if you do not believe the story, I hope that you found this fun and entertaining!

 

Jan. 9, 2021

Knob and Tube Electrical Wiring

If you are looking at older homes you may run into knob and tube electrical wiring that is still in use from the original installation of the home.  Knob and tube wiring was the standard in the U.S. from about 1880 through the early 1950s.  I have come across many older homes in Hawaii that still have knob and tube wiring.  As you can see from the video, this type of wiring can be quickly identified by the porcelain knobs that wires and porcelain tubes which protect the wires as they pass through wood framing.  This type of wiring is not allowed by current electrical codes and you should consider having it replaced by a certified electrician if it is in your home.

Risks of Knob & Tube Wiring:

  - Knob and tube wiring does not have a ground wire.  This lack of a ground significantly increasing the chance of an electrical fire and damage to appliances and other sensitive equipment in your home.  

  - Any knob and tube wiring found in your home is old and the wiring insulation was made of much less resistant materials than today's wiring.  It is much more likely that the insulation and actual wiring have been damaged over the years.

  - The insulation used on this older wiring is not resistant to moisture and is considered a fire hazard.  Additionally, many homes have had electrical modifications over the years which may increase the risk from knob and tube wiring.

  - Due to the increased fire and electrical damage risk, many insurance companies will not insure a home that still has knob and tube wiring installed.

What to do if your home or  home that you wish to buy has knob and tube wiring:

First of all you should have the home's knob and tube electrical system evaluated by a licensed electrician to determine if it is safe and if replacement is required. Based minimum seventy plus year age of these systems, they will likely recommend replacing the system.  While replacing knob and tube wiring is expensive, not replacing increases your risk of fire, can complicate real estate transactions, and may prevent you from obtaining home insurance or paying a much higher rate for insurance. 

If you have questions about your home consult a licensed electrician or I can recommend one for you.

Nov. 14, 2020

Selling a Property if you are not a Hawaii Resident - HARPTA & FIRPTA

If you have or are thinking of buying or selling real estate in Hawaii, you may have heard of the confusing terms HARPTA and FIRPTA and wondering, what are these and how may they affect me?  In this post, I will explain some of the basics and direct you to the resources from the State of Hawaii for additional details.

While HARPTA and FIRPTA are applicable for all real estate transactions in the State of Hawaii, in reality, they only apply when non-Hawaii residents sell property in the state. Both of these are not taxes, but rather withholdings that the State of Hawaii uses to make sure that non-residents pay all applicable taxes from their property sales. For more details on these withholding, this Department of Taxation Fact Sheet provides many answers.  Additionally, all of the forms which I reference here can be downloaded from the Department of Taxation web page.

HAPRTA - Hawaii Real Property Tax Act

HARPTA is a withholding of 7.25% of the sale price of a property.  Note, that this is not the gain from the sale but the overall sale price.  As the vast majority of property sales are conducted through escrow, the escrow company will handle all the required paperwork and withholdings as part of the transaction. Technically, HARPTA applies to all property sales in the State of Hawaii. However, once Hawaii residents submit Form N-289 to escrow, they will be exempt from HARPTA withholdings. So, in reality, HARPTA withholdings only apply to non-Hawaii residents who sell Hawaii property.

This large withholding can often be a large amount and a shock for many people as they get ready to sell a property. However, it is possible in most cases to get some if not all of this withholding back from the state. Since the goal of this withholding is to ensure that non-residents pay all applicable taxes to the State of Hawaii, the most common manner of recovering portions of the HARPTA withholding is through the filing a Hawaii income tax return the next year. Additionally, there are special forms that can be filed for an exemption from the withholding (Form N-288B) or an early refund (Form N-288C). If you think that you will qualify for the exemption you should ensure that these forms are filed early in the property transaction to ensure that they are adjudicated prior to the closing of your sale.

FIRPTA - Foreign Investment in Real Property Tax Act

FIRPTA is similar to HARPTA but applies to non-U.S. citizens who sell property in the State of Hawaii. The FIRPTA withholding is 15% of the sale price. Additionally, in almost all cases the sale is also subject to HARPTA since the seller is also not a Hawaii resident.  So for a non-U.S. citizen, the overall withholding is usually 22.5% of the sale price.  

If you are a non-Hawaii resident and thinking of entering the Hawaii real estate market, it is important that you have an understanding of the HARPTA and/or FIRPTA withholdings but you should not be scared by them. They are designed to ensure that non-Hawaii residents pay all applicable taxes from their property sale or other income from the state. If you properly file these taxes, you will not be paying any additional tax as a non-resident, you will just be paying it early like an estimated tax.  Of note, this type of withholding for non-residents is not unique to Hawaii and used by some other states as well for the same reasons.

If you have additional questions, see the Department of  Taxation Fact Sheet or contact your Realtor, escrow agent, or accountant for additional details.

 

Oct. 31, 2020

Should I Sell a Property With Tenants?

 

If you are thinking of selling an investment property you are probably wondering; Should I keep attempt to sell the property while still having my tenants there? In most cases the answer to that question is no and in this post I will discuss a couple of the primary reasons why.

It can be very tempting to want to keep your tenants until the property is sold.  Keeping the tenants until the property is sold will help you to cover your costs and maximize your rental income.  However, this may cause problems with the sale of your property and may negatively affect your sale price.

In my experience, the two key factors when it comes to tenants are availability and  presentation.

Availability: When you put your home on the market, you will usually have more success when the property is available to potential buyers to see on short notice. However, if you you have tenants, your agent is required to provide the tenants with a 24-48 hour notice prior to showing the property to potential buyers. This has a high likelihood of causing problems because the schedules for the buyer and the tenants may not align for a multitude of reasons. You want the buyers to be able to see the property for you to be able to get into contract quickly. You can mitigate this somewhat by having an open house and concentrating potential showings to the open house. However, the probability of your buyer coming to the open house and immediately making an offer are lower than for a buyer who makes a specific appointment to see the property.  Even potential buyers who come to an open house often want to see the property again if they are truly interested.

Your home does not only need to be available for showings. Once you are into contract to purchase the home, you still will need to arrange times with your tenants for a home inspection, a termite inspection, the appraisal, and many other times that the new buyer will need to come into the home. Many of these items can be very difficult to schedule when balancing the schedule of your tenant, the new buyer, and the other professionals involved.  

Presentation: Having tenants also affects your ability to properly present or market your property. For examples, tenants may not leave the property as neat and clean as you would like it. When it comes to home buyers, first impressions are incredibly important.  Walking into a home that is overly cluttered or has a smell from recently cooked food may be enough to turn that buyer off from your property. A negative impression may also affect their offer price if they do decided to make an offer on your home.  

If you have clean, friendly, flexible tenants none of this may be a concern. However, in my experience, tenants are often not amenable to your requests and may be upset that the property is up for sale. If you have the ability to have the tenants leave after their lease expires but before you are ready to put your home on the market, you will have an opportunity to clean, paint, repair, and stage the property. You can have the home looking its best before you are ready to present the property to potential buyers. Additionally, buyer's agents can bring their buyers at a time that is convenient to them and also allows for short notice showings from buyers in the area looking at other homes. If this happens you can be confident that the property is clean and ready to present to potential buyers.

You can definitely list your property while still having tenants, but recognize that there will be some challenges. Whereas, with a property that is vacant, you can be flexible to buyers schedules and know that the property is ready at all times. By making everything more convenient to your buyers, you increase your chances of maximizing your return on your investment property as the buyers will know that there will be less potential issues throughout the transaction.

 

Aug. 29, 2020

What is a CPR?

I have had a number of clients who are looking at properties in Hawaii and see the property listed as a CPR and ask "What is a CPR?" A CPR stands for Condominium Property Regime that is a mechanism sometimes used to subdivide a larger property into multiple separate homes. 

When a lot of people think of condominiums, they think of the classic vertical high-rises with units stacked upon each other. Those individual units are individually owned. With those condominiums there are common elements such as hallways, reception area, pools, and outdoor spaces that are shared by all of the owners. The condominiums have homeowners associations, condominium rules and bylaws, homeowners's dues, and owner's meetings. 

A CPR is just liked those vertical structures except that the idea is flipped on its side in a horizontal direction.  For example, if you owned a parcel of land that is 20,000 square feet in size and wanted to subdivide it you likely will not be able to based on zoning restrictions.  However, one way to still divide the land into separate properties is to make the overall parcel a CPR.  In this example, you could take the 20,000 square foot lot and divide it into four separate 5000 square foot lots with separate homes on each.  Each of these homes is an individual property but they share common elements such as a a driveway, a water easement, fencing, or common ground areas.  Another possible example is a duplex CPR in which the homes share a roof line or a wall but other than that are separate properties.

CPRs have many of the same elements as traditional condominiums such as bylaws, dues, and an association.  Each home is a separate property with its own Tax Map Key that the owner fully owns and is responsible for insuring and maintaining. However, there are also common elements laid out in the CPR incorporation documents.  If you purchase a property that is part of a CPR, you are also agreeing to abide by the rules determined by the other owners.

A Condominium Property Regime may be the right vehicle for you to hold ownership in land and property in a single family home.  This setup is not right for everyone but it if you are open to this arrangement you may be able to find the perfect home for you.

If you have any additional questions on CPRs, please ask and I can point you in the right direction!