Nance Overton, RA, CDPE

Recent 3^rd quarter statistics for Kauai appear to indicate a leveling off of pricing in the market. Numbers indicate that sales are up and median pricing is also slightly up, leading to the notion that the bottom of the market may be behind us. This is great news for buyers and sellers. Buyers can take advantage of the low prices and look forward to increases in value in the coming months and sellers can finally make friends with current market value and sell their homes.

While the market stabilizes itself, the matter of the mortgage financing crunch and the possible loss of the mortgage interest tax allowance looms large. We can only use our influence as realtors with the NAR to lobby against any further injury to the housing market...but that's for another post.

In the meantime, buying while the pricing is good can only help your clients realize their dreams now. Happy selling!!

It may seem obvious to most real estate agents that Buyers and Sellers have two very different values for the same home and for very different reasons. The trick is to get the two (Buyer and Seller) on the same page. This situation is not so obvious to the Buyers and the Sellers of property...especially during the current foreclosure crisis.

As home prices continue to fall, Sellers are losing more on their investments and finding it difficult to believe that their (once) beautiful home could be worth so much less than when they bought a few short years ago. Nothing could be worse when you are losing your home and trying to short sell to avoid foreclosure. To make matters more difficult, Buyers have high expectations and are offering much less than list price.

With all the confusion and new factors involved in home sales, it's no wonder that real estate sales are becoming more complex.

Buyers

The pendulum has shifted and it is truly a Buyer's market. Of course, the Buyer's Agent wants to get the best price for the Buyer; however, there are many more factors at play now than ever before.

First, home values are still on a downward trend. The "bottom" is still not defined. That will only happen when the prices come up. Secondly, in the case of short sales, the lender has to approve the sale price or there is no deal. Many a sale has been lost because the Buyers low-balled the offer, the Seller accepted it, and the lender declined. On the other hand, the Buyer does not want to pay for a home that is still losing value.

Another very important factor is the value to the Buyer. I have seen many Buyers come in and start deducting the costs they will incur to remodel a home. It is normal to allow for major repairs when considering the amount of an offer, but remodel is the choice of the Buyer and has no bearing on the home's current value. This is the bane of the Buyer's Agent: trying to explain to a Buyer that the remodel work will likely increase the home's value, but can't be detracted reasonably from the purchase price.

So, value on the Buyer's part depends on (among other things) the following:

• how much they like the house
• what they think they'll have to do to make the house perfect for them
• where the house is located
• major repairs
• how little they think they can get away with paying - notice I said, "they think". This will tell their Agent about how long it will take to find them a home or if the whole exercise is futile.

Sellers

Sellers are just as adamant about the value of their home - whether they lived in it or bought it for investment or retirement.

Generally, homes are priced based on the current condition of the home and the neighboring comparables. The Seller's Agent will "comp out" the list price based on fair market value and what the Seller will accept. In the case of the short sale, the Seller's Agent has to be able to sell the price to the lender once an offer is received. In this case, they must also factor in what they think the Broker's Price Opinion will bear out. Ultimately, after all the research is done, the list price is the Seller's choice.

Sellers put their homes on the market for various reasons. However, now, with the increased threat of foreclosure, many are listing their homes because they can no longer make the payments and it's the only way to avoid foreclosure. Every sale is emotional to some degree. The foreclosure situation can create a more volatile emotional backdrop. Sellers are shocked at the lack of value in their home, angry with the lender, and emotionally spent from the stress. The Seller's Agent has to spend time comforting and keeping the Seller positive during the course of selling their home. Here comes a potential Buyer, and the Seller sees someone who is ready to pounce on his misfortune.

Of course, not all short sales are quite so raw, but this situation is common. Nerves are frayed and the thought of someone else taking advantage of their situation is, frankly, hurtful. Ultimately, the Seller bases value on their home with the following considerations:

• how much they like their home
• the improvements they have made to the home
• their neighborhood
• major repairs they either can't or don't want to handle themselves
• how much they think they should get for the home (there's that "they think" again).

The Bottom Line

Of course, neither of the lists above is complete, but I believe they are major factors in determining the value of a home. No matter what side you are on, it is important to remember the other side's point of view. This can help the two sides come to a meeting of the minds more easily. In the case of short sales, it is truly important for Buyers to be more sensitive to the Seller's situation. It makes the whole transaction proceed more smoothly.

Buyer Be Educated, Seller Be Prepared

If you are looking for a home but you think you can't quite qualify, please check out the Mortgage Credit Certificate site at http://hawaii.gov/dbedt/hhfdc/homebuyers/MCC_html. Basically, this credit reduces the amount of taxes you pay to the federal government so you have more income to qualify for a loan.

There are strict requirements, but if you qualify, you could be on your way to owning your own home! Check it out and please remember to share the info with a family and friends.

Each state has different requirements and time lines concerning the real property purchase process. A major part of this process is, of course, the loan process. As real estate agents, we must be certain to educate our buyers on this process and its importance with regard to the purchase transaction. This is especially important for those of us doing business in resort or vacation areas frequented by buyers who do not live in the state where they are buying property.

Therefore, in order to have your buyers as educated as possible, one of the first things you want to discuss with your buyer is getting pre-approved. This saves everyone a lot of time and allows the buyer to understand that the loan process is key in getting an accepted offer as well as staying compliant with the purchase contract timeline.

While it's understandable that some buyers may hesitate in starting the loan process -- maybe they are concerned that the inspection will reveal some devastating damage or they are still looking at other properties -- various contingencies are dependent on the timely completion of each task within the loan process. It is important to let your clients know that it is easier to cancel the process than it is to start the ball rolling.

To help make sure the buyers are aware, I have added a flow chart of my state's loan process to my buyer's packet. This allows me the opportunity to go over the various informational documents with the buyers when I give it to them. Not only am I perceived as well-informed, the buyers understand what's important.

Buyer be educated. Seller be prepared.

..."after all, he has all the info on the property and knows what the seller will accept! I'll get a deal!" Really? Under no circumstances will a listing agent tell a buyer or a buyer's agent how low the seller is willing or able to go. This is confidential information and would violate the listing agent's fiduciary responsibility* to the seller. So, there is no special deal or discount because the listing agent is "in the know." In addition, the listing agent can tell you and your agent everything you want to know about the property. This information has no bearing on representation.

If a buyer enters a purchase contract without representation, he should be very careful. The listing agent is not your friend, no matter how friendly he may seem. Remember that this is a business transaction and has nothing to do with friendship. OK, if you and the listing agent are friends, you should get yourself another agent, otherwise you risk losing a friend - just a personal thought here.

The bottom line is the listing agent has no responsibility to the buyer. Period. That is the main reason why a buyer should always have his own agent. By the way, this is also true if you are buying a property being sold by the owner. The buyer's agent can help you understand all the details and caveats of a sale, negotiate a price that you find acceptable, and protect your interests.

*a relationship imposed by law where someone contractually acts on the behalf of another's rights and assets

Buyer be educated. Seller be prepared.