In this post, I discuss some the trends that I am seeing in with mortgages and how this relates to real estate sales in June 2020.
As an overview, if you are looking to buy a home, plan on the lending process taking a lot longer than it normally does. There are some lenders at lower price points that are moving much more rapidly. However, as the loans get larger, I am noticing that they are taking a little bit longer to complete. Part of this delay is that the lenders are asking for a lot more documentation. They are specifically checking on employment due to the effects of the COVID-19 pandemic. They want to make sure that once they give you this loan you are still going to have a job and be able to pay the mortgage. In the end, lenders are being much more cautious. Another factor is that many parts of the lending process are working from home, which is slowly down the overall process.
If you are buying or selling a home, recognize that the process may take longer than normal and may require an extension to complete. Transactions right now are also including a COVID waiver, which usually provides the buyer with an additional 30 day window to complete the lending process based on current circumstances. It is important to understand that the process may take longer than normal. With those expectations are set in advance, the process will complete, it just may take slightly longer than you have seen in the past.
Another area where I have seen a lot of interest from clients is refinancing. This is a great time to take advantage of low interest rates. However if you are going to refinance, you should plan on being in your home probably for at least another two to three years unless you already have significant equity in the home. This time frame will likely be required to recoup the closing costs required to complete the refinance. Realize that if you try to sell your home before regaining any equity lost or prior to your home value increasing, you may have to bring additional funds to close your mortgage at the time of the sale. In the end, every situation is slightly different and you should talk directly to your lender about different scenarios for refinancing.
The last item that I wanted to discuss was forbearance. Forbearance is a temporary agreement between a lender and a borrower to temporarily suspend payments on a loan. A lot of people right now need forbearance on their loans due to the COVID-19 pandemic. If you think that you may be in this situation you should contact your lender to fully discuss your options. Also recognize that asking for forbearance will likely impact your ability to obtain a loan on a separate property.
In summary, the process of buying and selling homes continues throughout the current economic environment. Just realize that it may take longer than normal. And finally, you should contact your lender directly to discuss various options and fully understand what will be required for either a purchase, a refinance, or a forbearance situation.
I get questions all the time about building an ADU on a property. So you might ask what is an ADU? ADU stands for Accessory Dwelling Unit.
It is an individual home on a single-family lot. It can be attached or detached and it must have a kitchen, a bathroom, and sleeping quarters. Essentially it has to be its own individual unit. Previously if you wanted to have an additional unit on your property you had to build them for family members. That is how Hawaii real estate developed the concept of the O'hana unit.
In 2015 the City and County of Honolulu loosened the restrictions on who can live in these units and created the Accessory Dwelling Unit or an ADU. So you can now build an additional unit on your property for non-family members that can rent if desired. However, in order to build an ADU on your property you must live in a residential zone. Additionally, some specific communities have prohibitions in their covenants on these types of structures.
Residential zoning is differentiated by an R in front of all of the codes. The R stands for residential. The number after the R indicates the lot size. So there are different R codes for different sized properties. You will see codes such as R5, R10, or R20. These zone codes coupled with the size of your lot will tell you if you can have one home, two homes, or have a duplex on the property. There are also many rules having to do with the height of the structures, how much lot you can cover, and setbacks. And if you are interested in seeing the zoning for your neighborhood or anywhere else in the City and County of Honolulu use this link. The chart can be found around page 50 and that will give you additional information about residential zones and what you can build on your property.
Some additional rules for ADU construction include:
- You must have parking specifically designated for that ADU.
- You have to reside on the property.
- Your property could not be landlocked so you must have either a driveway, an easement, or some way to get onto your property.
- Your property must have a minimum of 3500 square feet of land
- The size of your lot will also determine the maximum size of the ADU that you allowed to build:
- A 3500 square foot lot can build up to a 400 square foot ADU
- A lot of over 5000 square foot lot can build up to a 800 square foot ADU
If you are interested in constructing an ADU or just want to better understand the requirements the website hawaiiadu.org can provide you with a checklist and all of the information that you are going to need to start the process. After you understand the basics you will want to contact an architect or general contractor to determine the costs involved and how you will construct the ADU. You also may want to contact an accountant in order to fully understand the tax implications of renting out your ADU.
In summary, an ADU may be an option for you if you have space on your property and are looking for the possibility of additional rental income.
I often get asked the question .. What am I supposed to do when I need to sell my property?
On average in the United States it is about every 7 years that people trade properties. For a lot of us it is a lot longer than that or sometimes it is shorter. But whether it is your first property or you have not sold property for a while the the seller's transaction timeline is similar. In this post and video I discuss a little bit about what to do beforehand and then discuss the process from listing to closing.
1) Declutter: You want to remove extraneous items such as heavy furniture, personal photos, or other identifying items for your family. This includes cleaning off your refrigerator and clearing your countertops of all of your small appliances and tchotchkes. Your bedrooms should have clear nightstands as well as a clean bed and dressers. Your goal should be to depersonalize the house.
2) Clean: Next, you will want to have your home professionally cleaned. Your normal standards of clean may not be what somebody else's standards of clean are. So a professional deep clean your house at the beginning of the process so that it is as clean as it could possibly be for any showings.
3) Landscaping: On the outside you want to have your home landscaped. You want to have your sidewalks power-washed and your lawn cut and bushes and trees trimmed. Your front yard is a key first impression right of your house.
4) Repairs. You know better than anybody what is wrong with your house. So when your light switches do not work or outlets do not work have them that repaired. Get all of those little repairs done. It does not mean that the buyers are going to come in and pick it apart and not buy your house because of that one thing. But the less things you have that are wrong with the house the smoother the transaction seems to go. So do all those little repairs so they do not come up during the inspection.
Ready to List Your Property:
1) Sign Listing Documents: You are going to have to fill out about four different forms that range cover a wide range of topics such as determining the correct list price, when you want to list the property, how long to list the property, and how aggressively you want to market your property.
2) Staging. Next we will stage your property in order to make it attractive to potential buyers. This may use your furniture with small additions or it may require bringing in a professional stager to set up the property, especially if it is vacant at the time of the sale.
3) Photos. A photographer will come in take professional photos of your home so that it can show the best way that it can, especially for buyers doing their initial shopping online. We will list the property
4) List Property. Now we are ready to list your property on the Multiple Listing Service or MLS. In addition to the photo and property description we may add a video or walking tour of the property to the listing. This will depend on the exact level of marketing that we determine is needed for your property.
This sounds like a lot to do just to get your property listed. But in reality the bulk of the seller's work is getting the property ready to sell. So once the property is ready to sell then we go and we can set up showings. These showings can either be public open houses or private showings depending on the current health situation and your desires as the owner. Showings allow agents and potential buyers to walk through your home after they have seen it online. And then we hope for the actual process of selling the house to start.
Property Sale Process:
1) Offer & Acceptance: If a buyer is interested in your property they will make an offer. Once you agree to the offer and accept it, the transaction process really starts.
2) Open Escrow. Once your have accepted the offer, the the buyer will make an initial deposit and we will open escrow on the property.
3) Home Inspection: Usually within 10 to 14 days after opening escrow the buyers will come in and inspect your home with a professional home inspector. The inspector will go throughout the house, climb on the roof and in the attic. The inspector will find document any problems in your home so that the buyer has a clear picture of the home's condition before they move ahead with the purchase of your home. At this point the buyer's agent will begin a negotiation with your agent as to which repairs will be conducted by the seller or if a credit will be provided at closing for the repairs. You also have the option to see your home "as is" which tells buyers that you will likely not conduct any repairs to the property. If the buyers decided to move ahead with the purchase after negotiations on repairs are complete, the transaction will move forward with "J1" which is the paragraph in the purchase contract for the home inspection. At this point the buyer will make an additional deposit to escrow. For the seller this is a key point in the transaction as prior to J1 being complete, the buyer can back out of the transaction with no questions asked.
4) Appraisal. Unless the sale is a cash sale, the buyer will be moving forward with their lender on securing a mortgage for the property. The lender will next require that a appraisal is conducted in order to determine the value of your property. The appraisal number will tell the buyer how much the lender is willing to loan them. If the appraisal comes in higher than the purchase price, the seller will never know because the lender will move forward with the lending process. If the appraisal comes in lower than the purchase price, either the buyer will have to make up the difference or this is a potential point of negotiation with the seller. Honestly, if the property is priced correctly, most appraisals come in at or close to the list price. You should discuss likely appraisals values with your Realtor as part of determining your list price.
5) Termite Inspection. In Hawaii and many other areas, the next step will be a termite inspection. The termite inspector normally is chosen by the buyer and paid for by the seller. The goal is to find that there are no termites to be found; ground or dry wood (You can learn more about termite inspections in this post). If the inspector does find termites then this will require treatment. This can be done as a spot treatment (usually for condos) or a whole home fumigation. At the completion of the process, the termite company will provide a warranty to the buyer and lender to certify that the home is now clear of termites. Note that unless it is negotiated differently, the seller usually has to pay for any required termite treatment.
6) Final Moveout & Closing: As part of the purchase contract, the buyer and seller will agree on the closing timeline. Usually this is a 45 day process but it can be more or less depending on the specific situation. With about 10 days to go prior to closing, it is now time for the seller to kick back into gear. At this point your will have to remove all of your items from the property and have the home professionally cleaned again. Even though you did this earlier, you have had people potentially living in the home and walking through the home. Also, there are now areas that we not accessible before as the home is clear of your personal property. If you have pets, you may need to also have your carpets cleaned and sprayed for fleas or other bugs. Now you are ready to sign closing documents and complete the sale! You will also want to call any utility and set up a transfer to the new owner. At this point your are signing over the deed to your property and handing over keys to the new owner. Approximately two days after the buyer funds the loan for the property the City & County of Honolulu (or your local municipality) will record the property. Once this occurs you will receive any proceeds from the sale!
In the best case situation, this entire process can take about seventy-five days. It can be a very stressful process and if you have questions, please ask your Realtor so that you understand what is coming next.
On this post, I will be reviewing permitting process for the City & County of Honolulu.
Are you planning on renovating your home or buying and selling? If so you may want to know a little bit more about the permitting process with the City & County of Honolulu Department of Plans and Permitting. You are going to need a permit when you do anything to your home that is considered major. Some examples of when you would need a permit include:
- Demolishing a property
- Construction of a new property
- Building an addition to your property
- Adding a new fence to a property
- Major electrical upgrades to a property to include solar installation
- Major plumbing, gas or water heater installations or modifications
It is important to research when a permit is required before you start a major upgrade or installation. I have friends who built a lava rock wall around their property and it turns out the wall was not to code so they has to take down part of their wall and rebuild it. You want to ensure that you have the correct permits prior to commencing work so that you are not in the position of having to pay for additional work in order to ensure that an upgrade is built according to code.
The Department of Plans and Permitting requires physical blueprints or plans that show what work will be done to the property. You may be able to do this as an owner but many people hire draftsman, architects or general contractors to help with the process. The other thing you can do is hire an expediter. The process can take anywhere from six weeks to six months depending on the type and size of your project. An expediter may be able to get your project through the system a little more quickly.
What if you want to find out if parts of your home or a home that you are considering buying are permitted or not? You can always go to the Department of Plans and Permitting website at www.honoluludpp.org and find out which permits are attached to your property. You want to make sure that any permits that were opened on your home have been closed. If you are looking to sell your home buyers want to be able to come in and be assured that the different areas of the home are correctly permitted. They will ask that question and during the contract process a buyer can ask for a building permit package to be provided to make sure again which permits have been opened or closed. The same ideas apply if you are looking to purchase a home. You want to ensure that you fully understand the status of all permits prior to closing on a home.
If you have any additional questions please feel free to let me know or contact a draftsman, architect or your general contractor for more information.
In the last week or so, I have been getting the question: Can I still buy or sell a home during the COVID-19 pandemic and especially now that the State of Hawaii has issue a Stay At Home order? And the answer is yes.
Even during the current crisis, the City and County of Honolulu has determined that real estate is an essential service because they understand the predicament that people are in when comes to having to move. So while real estate transactions have been deemed essential we want to ensure that everyone is comfortable as either the buyer or the seller.
Some listings are owner occupied and that presents specific challenges. These listings require more communication and organization to make everyone safe. However, other homes are vacant and as a result are much easier to view. Regardless of status of the property, your primary focus should be on remaining safe throughout the process. To accomplish this we will practice social distancing and keep everything clean with wipes and hand sanitizer.
Some things that have changed are that there are no more open houses. Realtors will not be placing multiple people in a small space time. However, with some ingenuity and imagination; you can still have almost the same experience.
Virtual Tours. For years I have used virtual tours using my cell phone to take videos of homes for clients or walk them through a property with a live feed on an app such as Facebook Live or Facetime. During this tour I will walk through the house and show the client every aspect of the home. This process is just like being there and as a buyer you can direct me to go back and look at a specific room or feature until you are comfortable that you understand the home. These tours are very effective and I have had multiple clients buy homes simply using a virtual tour.
Private Showing. A private showing can be done safely but it does require some additional setup and a focus on safety throughout the tour. First, as a agent, I will go to the home and using wipes open all the doors, turn on lights and prepare the home so that you do not need to touch anything. If you do need to open something additional, we can use wipes to touch other surfaces. Additionally, throughout the tour we will be practicing social distancing at remain at least six feet apart.
Home inspectors are still inspecting homes. They are conducting the inspections by themselves and then conducting a video walkthrough with the prospective buyer at the conclusion of the inspection. And just like they have always done they will prepare a written report and send this to the client once they are complete with the inspection.
So if you need to buy or sell a home right now, remember that with planning it can be done safely even during the current COVID-19 crisis.
If you have any questions on the current process or any other real estate questions, please let me know.
Today we are going to learn about the buyer costs incurred during of the course of a real estate transaction in Hawaii.
Prior to closing the buyer is going to have to come up with money three separate times.
Up Front Payments:
1. Initial Deposit. The buyer is responsible for an initial deposit that is paid to escrow when the contract is accepted and the buyer and the seller have decided to move forward together with the transaction.
2. Home Inspection. The buyer will pay for a home inspector to inspect the home on behalf of the buyer and let you know anything that they think could be improved or is wrong with the property.
3. Additional Deposit. Once you as the buyer complete the inspection and decide you want to move forward with the transaction, an additional deposit is often required. Just like the initial deposit, this is paid upfront to escrow.
The rest of the fees will all be charged on what is called a final settlement statement that is provided by escrow at closing.
Escrow is the company that collects all the documents and fees, handles the disbursement of funds, and records the title with the City and County. All of these fees that will happen at closing on this final settlement statement. The remainder of the deposit that you will need for your loan will be brought to the closing table, or within two to three days of closing. You will pay that remainder that you need for your loan as well as any loan fees or additional payments that are required by your lender.
1. Points. If required by your lender on your specific loan points are a certain percentage or amount of the overall loan. This will be determined with your lender.
2. Insurance. Usually one year's worth of insurance for the property is required to be paid at closing. In Hawaii all properties have hurricane insurance and basic property insurance. Additionally, depending on the specific area where you buy, you may also be required to have flood insurance.
3. Association Fees. If you buy a home in a housing association or a condo, you will be required to pay some association fees upfront. You usually pay about a month or month and a half in advance on your condo fees or HOA fees.
4. Property Tax. In Hawaii, we pay property taxes six months in advance. So, the seller has already paid property taxes for a certain amount of time. Whatever the remainder of that six months is, the buyer will pay the pro-rated taxes at closing.
5. Escrow Fees. The last three kind of smaller charges are the escrow fees. The escrow company collects all the documents and the fees, and they charge a fee for that. Title is the property deed that you will need for the property that will be transferred to you as well as the insurance policy on the title. This policy ensures that the title is free and clear of liens and other problems in order to protect you against any title claims. Finally, there is a recording fee. This fee is paid to the City and County to record the property in your name.
In summary buyer costs during escrow happen in two phases. There are three fees upfront. The rest of the fees are handled at the very end in the final settlement statement when you close on the property.
If you have any questions about the buying process, please feel free to either call, text or email me.
When it comes to paint, everyone has a different opinion, but there are some things you cannot argue about when it comes to paint:
1. The quality of your product
2. The application of the product to make sure it looks smooth and even
3. The tools you use to make sure that application is correct
4. Paint color.
I often like to pick out specific colors for certain parts of a home as well as softer whites. I always advise sellers use neutrals, soft whites and in the right place some soft beachy colors as well.
While I think that I know what the right paint colors and textures are; recently I had the chance to talk with a real expert. Sam Chandler runs the The Right Painter on Oahu and has been painting houses in Hawaii for over 29 years.
Sam recommends stock flat white paint colors that are not tinted. That way the homeowner can return the extra paint if it is not used. Once you tint a paint, you cannot return it to the store. He likes to stick with the flat finish because it hides all the imperfections in the walls such as drywall problems or nail holes while also providing a fresh palette. That way a new home owner will have a fresh palette in order to truly make the home their own.
Sam noted that the quality of paint is more important on the exterior of the house than it is on the interior because the exterior has to deal with the harsh Hawaii climate. Specifically UV radiation and water are the two main causes of paint failure. Paint application.
For exterior painting Sam recommends spraying and back rolling. He sprays the paint on and then rolls it out with a big roller to make a uniform finish. Spraying actually puts on more paint per mil thickness as required by the manufacturer. If you were going to brush and roll the exterior of a home, it would take you four coats to have the same amount of paint as you can get with one coat of spraying. Most situations, you can spray. However, there are some locations where this will not be possible and you will have to use a brush and roller and put on the extra coats. So, do not be afraid if your painter has a sprayer out, but make sure they have a roller going behind the spraying or the paint will flash over time. Once the paint starts to fade, you will see marks because they did not use a roller behind the spray finish.
As with any home remodel or repair, ensure that you do your research before hiring. Make sure that you check their references and If you have the an opportunity go look at their work before hiring them.
If you have any questions on need help on finding the right person for your home, please let me know and I can provide you references for professionals who have worked on my home and my client's homes.
Are you wondering what's happened with the O'ahu real estate market over the course of the last year? If so, below is a quick 2020 market update.
I am discussing the year from December 2018 to December 2019 and what has happened over the course of the last year. Now, I am not going try to weigh you down with a lot of boring statistics: I would rather speak more generally about trends, and what your interests are if you are a buyer and a seller.
If you are specifically interested in moving from one part of the island to another, please contact me and we can talk about specific neighborhood statistics, and then that will help you determine what your buying power is or what you may want to list your house for.
If you are a seller, the one thing you care about is "how much can I sell my property for?" So generally speaking, over the island, for single-family homes (SFH), the value of homes has gone down about 4% over the last year. As a reuslt, homes are sitting for a longer period of time. For condominiums, they are up about 4%, but they are also sitting for a longer period of time than they were in 2018. Overall, there is more competition in the market. There are more homes and condominiums listed than there were previously.
There are two pieces of advice I give sellers constantly. Number one, make your property look the best it can, because you do have more competition, so you want to catch the eye of a buyer. The other advice is price it right! The theory of "I'm going to price it high and then negotiate and see what's going to happen," no longer applies. Make sure your Realtor is pricing your property correctly to move, to be attractive to buyers because the longer your property sits, the less attention it will get.
Now on the other hand, if you're a buyer, this is a great time to buy. There is more inventory on the market. There is more that you have to choose from. Prices are a little lower. Sellers are getting a little bit less and even the offers that are coming in are being accepted at a little bit less than the listing price.
So, please feel free to contact me and I can discuss these trends in more detail. I am happy to provide any information you need.