20% Rebate for Buyers
$3,500 Flat Fee for Sellers
2% Full Service for Sellers
Why is buying a foreclosure risky?
How much should my additional deposit be and when do I make it?
How much should my earnest money deposit be and can I use a personal check?
If the OahuRE Team represents both the buyer and the seller, how does that work?
What time of day is the deadline and what happens if the deadline is a holiday?
What is the acceptance date for an offer and why is it important?
When I submit an offer, is the seller required to respond to my offer?
Are verbal agreements allowed for parts of the offer?
Why are some inclusions missing on the offer?
Can I buy a short sale or a foreclosure for a lot less money?
When do I have to put my deposits into escrow and what form of payments are acceptable?
What should I know about making a cash offer?
Does the pre-approval have to match the offer?
What is the difference between a pre-approval and a pre-qualification letter?
Do I have to show proof of cash? If so, what is the easiest way to do this?
What is the difference between assessed value, square foot value, appraised value, and market value?
Can I increase my offer after it was not accepted?
How to get your offer accepted when there are multiple offers!
Track how many offers there are. Multiple offers almost always sell for over asking price. The more offers, the higher over asking price it will sell for. Also, don’t assume because today there is just 1 other offer, that in 2 days when the seller reviews offers they won’t have more offers. You should either make your offer with the understanding there could be more offers, or check on it the day they will be reviewing offers and increase your offer as needed.
Put your best offer up front. You might not have another chance to increase it. Don’t use an escalation clause and then go in low--the seller will normally work with the highest offer.
Offer to add additional cash as needed if the appraisal is low. For example, you might state that you will add up to $10,000 additional cash if the appraisal is low. This way the seller can be confident your escrow will close even if the appraisal is up to $10,000 low. Better yet is a large down payment, because with a large down payment, even if the appraisal is low, the loan can still go through.
Know the comparables so you are comfortable you are not paying too much over market value. Try to use the best comparables sold within 6 months to 1 year.
Submit a pre-approval, not a pre-qual. With a pre-approval, your credit and income are checked, so it is much stronger than a pre-qual.
Understand how much additional money you will pay per month for the higher offer. When you look at it, you will find that a small increase in your monthly payment can be the difference between losing or getting the home of your dreams.
Please see this page to help you with your calculations.
We have a page setup that shows you how much more your daily payment is if you decide to increase your offer.
Many times what sounds like a lot of money is not so much additional when you put it into the loan.
For example, at 4.5%, a $5,000 increase costs you only .84 cents per day.
It is important to put your highest and best offer when competing against other offers.
You will not have a 2nd chance to increase it, if you are not the highest offer.
In addition, you should think about adding a clause that says if the appraisal is low you will put in extra cash as needed in order to continue. For example, let's say the appraisal is $10,000 too low. The lender might say with your current down payment they can't do the loan, but if you add $10,000 to your down payment, they can still do your loan, even though the appraisal is low. This is important for sellers because they do not want to go through the escrow process, only to find out you can't get a loan because of a low appraisal. Sometimes it makes sense to put a limit to how much cash you will come up with. For example, I will put in an additional $15,000 in cash if needed to get the loan through, but no more.
If there are two offers for a similar dollar amount, the one with that kicks in extra money if the appraisal is short is the offer that will be selected.
Please see this page to help you with your calculations.
Why is buying a foreclosure risky?
Buying a foreclosure can be risky because there is no disclosure and the bank does not know anything about the home.
When you buy a short sale you still get a disclosure and the owner still knows and can answer questions on the home, but that is not the case with a foreclosure.
Sometimes the foreclosed owner will steal parts of the home, for example, the plumbing or other items, on their way out.
Also, foreclosed homes tend to be very neglected homes. The foreclosure process normally takes some time, and someone who does not have enough money to pay their mortgage and knows they will be losing their home will certainly not invest money to keep the home in good condition. Things like leaks might just be left to keep leaking with a foreclosure.
However, you can get good deals, but you have to be ready for the unexpected when buying a foreclosure. Having a professional home inspection can help prevent surprises.
The first thing to check is to see if you will be the only offer or are there going to be other offers.
If there are other offers, the strategy for winning is completely different vs. when you are the only offer. It also depends how many other offers there are. The strategy for winning when there are 5 or more offers is different than winning when there is one other offer. The rule of thumb is the more offers there are, the higher over the asking price you have to be to win. A strong pre-approval is required. A pre-qual is not strong enough when there are multiple offers. If you have a large down payment or are paying all cash, that helps, but price is still the number one factor.
If you are the only offer you can offer, less and perhaps get a counter offer. However keep in mind at any time if the seller does get a higher or better offer, they can take that offer instead. Making an offer to the seller does not obligate them to do anything.
To come up with the right price, comparables need to be analyzed, and a price based on the latest comparables and the current market conditions can be offered.
You can also look at past sales history in the neighborhood to get an idea of where things are selling for. If the average sold ratio, which is the sales price divided by the asking price, is 95%, then making an offer in that range has a good chance of being accepted. If you see a range from 90% to 100% and you are offering in the 80% range, the best you can hope for is a counter offer, and most of the time, if it is out of the range, the seller will reject the offer and not counter.
You also need to pay attention to the days on market, including any past history where it was listed under a different MLS number. A seller who is a week or two on the market is going to hold out for a price close to their asking price, where a seller who has had no offers for 90 days will be more flexible.
How much should my additional deposit be and when do I make it?
The additional deposit is normally 1% and you can also use a personal check. It is not made until you have approved the inspection. Once you have approved the inspection, it is then due.
How much should my earnest money deposit be and can I use a personal check?
We normally set the earnest money deposit at .5% and you can use a personal check for your payment. Once in a while we are countered higher on this amount but for most offers it works well. The exact amount can be found in section D-2 of your Counter Offer or if there is no Counter Offer on your Purchase Contract. If you are mailing or dropping your check, please put the property address on it so they know where to apply it. We will provide escrow with the signed contracts.
If the OahuRE Team represents both the buyer and the seller how does that work?
If the OahuRE Team represents the buyer and the seller then we remain neutral and give our best advice to both parties. We will provide comparables but let you come up with the price you want to offer.
We have done this many times and it works well. It is attractive to sellers because they get an additional discount on our commission. Buyers like that their offer is more likely to be accepted because of the commission savings the seller receives. So for a buyer it makes their offer more attractive without having to increase their offer price.
What time of day is the deadline and what happens if the deadline is a holiday?
The deadline is 11:59pm on the day it is due. However, most agents are not working at 11:58pm, so it is a good idea to coordinate with your agent to make sure they get the signed document before they go off line for the evening.
All the deadlines in the contract other than closing go by the day regardless if it is a holiday or weekend. So if your inspection deadline ends on Christmas Day, that continues to be the deadline. However, the closing deadline can only be on a day where you can record with the City, so if your closing day falls on Christmas Day, then it automatically gets extended to the next day when the City is open for recording again.
What is the acceptance date for an offer and why is it important?
The acceptance date is the date a signed contract is delivered to the other party or their agent. It is important to note it is not the date the contract was signed, and it can be delivered and accepted by the agent, even if the agent does not get it to the buyer or seller right away. The reason this date is important is many of the deadlines in the contract are based on the acceptance date, so it is critical to have this date right.
Is the seller allowed to accept another offer even though they countered my offer and are waiting for my response?
Yes. A counter offer can be withdrawn at anytime, so until a contract is signed the seller has no obligations other than to let you know the counter offer is being withdrawn. This is important to remember because if you take too long to respond to their counter and they get a better offer, you might lose the chance to accept the counter offer.
When I submit an offer, is the seller required to respond to my offer?
No. The seller can take another offer and not respond to yours, even if your offer came in first. The seller has no obligation to you until a contract is signed.
We ask they respond in 48 hours, but many times the response does not come that fast. Reasons include the seller wants to wait until they do an Open House or to see if they get more offers. Sometimes they are traveling or busy with something else where they feel they need some extra time. If the seller needs more time, the best thing to do is to wait patiently because the only other option is to withdraw your offer.
Are verbal agreements allowed for parts of the offer?
No. If you have a verbal agreement you have no agreement at all. Many times verbal agreements are not honored and there is no recourse. So if you want to make an agreement about something make sure to get it in writing and signed and make it part of the contract.
However, when negotiating a counter offer, many times emails are used to go back and forth to try to reach an agreement on terms and price. Once an agreement is reached, a contract must be signed to make it official. This is acceptable and normally faster than having to review and sign a written counter offer each time. Just remember that once an agreement is reached, both parties must sign to make it enforceable.
Why are some inclusions missing on the offer?
Most of the time they are missing because the listing agent and seller forgot to add them in. Once in a while they are missing because they do not work or the seller is taking them so they don't want that item listed as an inclusion. For example, you might see a dishwasher in place but perhaps it does not work. The seller will not include it with the sale so this way during the inspection if you ask for it to be fixed the seller can say it is not included with the sale.
Can I buy a short sale or a foreclosure for a lot less money?
Sometimes you can get a good deal on a short sale and a foreclosure, but don't expect to get a steal. Remember that the market is all about supply and demand, and there are a lot of buyers in Hawaii and the supply is fairly tight.
We have seen situations where a home that is priced low receives over 30 offers and sells for 10% over asking. The point is, the market determines the price, and buyers are willing to pay fairly close to fair market value, so if you see a property priced under that, there is a good chance it will sell for over the asking price.
This is why you won't get a steal, because if it is priced that way, you won't be the only offer.
In addition, you can study past sales in the area to see what percentage of asking price sellers are willing to sell at. Sellers feel their asking price is right, so on average you will find they sell at around 95% of asking price. If they are overpriced, they will eventually have to reduce their price and to sell, and then they will still sell around 95% of asking.
For example, say a seller is asking $1,000,000. You might feel the right price is $800,000, or 80% of their asking price. If you offer that, most likely they will say no. Perhaps it is only worth $800,000, but the seller still feels their $1,000,000 price is right. Eventually they might drop the price, perhaps to $850,000; now the same $800,000 offer would be close to 95% of asking price and probably would be accepted.
When do I have to put my deposits into escrow and what form of payments are acceptable?
The earnest money deposit can be put into escrow the day you open escrow and a personal check is fine. We have you hold on to that check until escrow is opened, then escrow can pick it up from you, you can drop it off, or you can mail it.
The additional deposit is due after you and the seller have signed off on the inspection. A personal check is fine. It is important to wait until the seller signs the inspection too, especially if there is a credit or repairs on the inspection sign off that they have to agree to. You don't want to put additional money into escrow only to find out the seller is not agreeing to your request for credit or repairs.
The final deposit must be a wire transfer or a cashier's check drawn on a bank located in Hawaii. It is due 3 to 4 days before you close.
What should I know about making a cash offer?
Cash offers are more attractive to sellers than offers with a loan. This is because offers with loans can have issues with the lender that can cause the offer to fall out. In addition cash offers normally close in 30 days or less, and can close as fast as 10 days. Offers with loans normally need 45 days to close because of the lender.
When making a cash offer, it is important to put if there are any contingencies on getting the cash. For example, if you have to sell a property first, you need to put that on the contract, or if some of the cash is coming from a family member, you should put that too. The reason is this gives you an out should something happen, for example the property does not sell, or the family member changes their mind.
Instead of a pre-approval, you should send proof of cash with the offer. This is normally a copy of a bank statement. You can white out the account numbers but your name must be on the statement. Another option is to have your banker write a letter saying you have the cash available. This option is good if you have more cash than the offer amount and you don't want to show the seller that you can easily pay more.
Keep in mind an offer with cash from a home equity loan is not a cash offer, it is an offer with a different type of loan. In this case instead of a conventional loan you are using a Home Equity Loan and that is how the offer needs to be written up.
Does the pre-approval have to match the offer?
Yes, it should match the offer.
If it is too low, then the seller will think you are not qualified.
If it is too high, the seller will know you can easily afford more and perhaps counter higher.
If you make a counter offer, you do not have to get a new pre-approval done right away. Once you reach an agreement and go into escrow then you can generate a new pre-approval.
The assumption is that the difference between your original offer and your new higher counter offer is not that great so you would still be approved.
What is the difference between a pre-approval and a pre-qualification letter?
A pre-approval is much stronger than a pre-qual, so you are more likely to have your offer accepted using a pre-approval.
This is especially true if there are other offers.
With a pre-approval, your credit rating is checked, and many times they will ask for copies of pay stubs and other documentation.
With a pre-qual your credit is not checked and you provide no documentation, so everything is just provided verbally. This is why a Pre-Approval is much stronger than a pre-qual.
It is critical to submit a pre-approval or pre-qual with your offer because in our competitive market, submitting without one will hurt the chances of having your offer accepted.
Also, they should match your offer exactly. If it is too low, the seller will think you can't get your loan. If it is too high, then they might feel you can easily go higher and thereby counter your offer higher.
How long should I give the seller to respond to my offer? What happens if they do not respond on time?
The normal time we give is 48 hours. Some sellers might be traveling or might want to wait until the open house is completed. In this case, the best thing to do is to give them the time needed as your only other option would be to withdraw your offer.
Do I have to show proof of cash? If so what is the easiest way to do this?
Yes, on most offers you need to show proof of cash within 5 days after the offer is accepted. Proof of cash can be a print out or scan or PDF file of your bank account or brokerage account. You are welcome to cross out the account numbers if you like. Another option is to have a letter written by your banker stating you have the cash. You can scan it or fax it to us. The amount of cash you show must cover all cash funds you will put into escrow including your two deposits and down payment amount.
What is the difference between assessed value, square foot value, appraised value, and market value?
Assessed value is the value the tax office assigns to a property for tax purposes. Keep in mind they have not viewed the property, so when you look at the assessed value please don't read too much into it. Many times it is far from accurate. To show you how much the assessed values can differ, I looked at the Metro region sales for the last 1 year. One property sold for 2.46 times higher than the assessed value, so in this case the tax office was way too low. Another property sold for just around 1/2 of the assessed value, so the assessment was almost double the market value. These differences show you just how far off the tax office can be.
Using a per square foot value can be confusing too. In general, the larger the home, the less it is per square foot, and the smaller the home the more it is per square foot. Also the price of a home is for both the land and the home itself, so you can have a home price higher than a similar sized home simply because it has more land square feet. Location is critical too. A home on a cull-de-sac with an Ocean View vs. the same size home on a busy street with no view is going to be priced different.
The appraised value is the value of the property once your lender orders an appraisal. Appraisers tend to try to have it come out at or close to the contract price, and they have a little bit of wiggle room to do so. Many times it is slightly over or under the contract price. The seller is not allowed to increase the price.
The market Value is the real value of the property and it is based on comparables. Think of it as the price buyers are willing to pay for the property. When deciding how much to offer, the best way to come up with your offer is to use comparables to determine the market value.
Can I increase my offer after it was not accepted?
Yes. There is nothing saying you can't go back with a higher offer. If you were the only offer then hopefully they would at least counter your new higher offer. If there are other offers as long as they do not have an accepted offer they are still allowed to look at all offers and your higher offer might be what they are looking for.
If your offer is not selected in a multiple offer situation, requesting to be a backup offer is a great idea. Not all sellers will take backup offers. Some will just put their home back on the market again for additional offers if they fall out of escrow. However, if you have a backup offer in place the current offer in escrow falls out, you automatically go into escrow.
There is no risk, if you find another property, or change your mind for any reason. You can always cancel. Also, keep in mind you still have the inspection period so even if they say your offer is now in escrow you can cancel for any reason during the inspection period, so there is still no risk. For this reason we always recommend trying to get a backup offer in place. Many times an escrow is cancelled, especially if there is a good backup offer in place, as the seller is less likely to negotiate with the current offer during the inspection period when they know they have a good backup offer.