Kauai Paradise Homes -- Blog

Aloha,

Well it seems that fractionals are making a comeback on Kauai.  Actually, when you think about it, a fractional share in a fee simple condo or home provides you all the amenities during your two months for 1/6th of the maintenance, taxes, insurance, etc.  When you plan vacation on Kauai and you have a limited amount of funds to invest, a shared can offer you a larger space for less money.  And, if you're not going be there for the 60 days you have, let your friends or family have some fun there as well!  If the property is in a vacation destination area (as most are) you could rent out a week here and there during your time period.  In addition, Kauai is a highly desired vacation destination, so you could also trade all or a portion of your 2 months for a vacation almost anywhere else in the world!  Just a few thoughts.

In fact, check out this little dream condo -- oceanfront with the best time periods still available for $175,000 each:  MLS #210669.  Of course, there are other fractional listings available, this is just an example.

Now, there are many more questions than can be answered in a blog.  If you think you might be interested in a shared interval, please feel free to download this handout for more information: Fractionals in Real Estate

Some basic facts:

• Most fractionals are sold on a cash basis. 
• Generally, you cannot finance a fractional (shared interval) with a conventional mortgage loan, so if you are interested in fractional ownership, please contact your lender first to find out what loans may be available for you. 

If you are interested in fractionals, please feel free to contact us for more information.  We can help you make owning a small piece of paradise in Kauai a dream come true!  

Nance Overton, RA, CDPE
RE/MAX Kauai
808.346.0872

Al Overton, RA, ABR
RE/MAX Kauai
808.652.8431

Potential buyers ask this question a lot: "Can I vacation rent this property?"  Most often, if the property is in a popular area, like Hanalei or Koloa or some nice quiet rural area, you might think the answer would be yes.  And, in fact, just a couple of short years ago, it would have been yes.  Not so fast...

Under the current Ordinance 864, passed in March of 2008, only certain areas of the island are zoned as Vacation Destination Areas (VDAs).  This means that, unless a property outside of a VDA was a LEGAL vacation rental prior to the new law and registered as such by the county's deadline, it can no longer be offered as a vacation rental.  A "legal vacation rental" means that the owner paid transient accommodations, general excise, and federal income taxes on it.

Let's back up a bit for those who have not considered this option before.  A (transient) vacation rental - or TVR - is a property that is rented for under 6 months.  Most TVRs rent for a few nights to a couple of weeks.  Many investors find this to be an attractive alternative to long-term rentals, as it more readily allows them to use their own property when they visit the island. 

So now, when you talk to your agent about property on Kauai, be very clear as to your intention for the property.  If you want to move here or just use your home as a 2^nd home, there should be no issues.  Even if you intend to long-term rent the property you purchase, you need not worry about the new TVA Ordinance.  However, if you are interested in vacation renting your property, please be clear with your agent.  S/He can verify any home on your list is a legal vacation rental already, or in an area zoned as a VDA, such as Princeville and Po`ipu.  

For me, 2010 has started out with many first-time homebuyers eager to take advantage of the lowered prices, low interest rates, and the extended tax credit.  In the interest of helping new homebuyers, I have decided to start the year with a series of blogs dealing with the most basic information new homebuyers need.  

The best thing for any homebuyer is to be educated.  Sometimes you feel like it's the luck of the draw when you start looking for your first home.  Therefore, the first and foremost thing you need is an agent to represent you.  Here's why:

1. It costs you, the buyer, NOTHING to have an agent represent you.  The seller pays the Buyer and Seller agents from the proceeds of the sale.
2. Your agent has many resources to help you find exactly what you are looking for.  While the internet is a great tool, there are still things only your agent can provide you.  Having an agent is being fully informed.
3. Your agent provides you with their negotiation skills.  S/He can help you negotiate the best deal with the seller. 
4. There's more to a good buy than the property's sale price.  What if something is broken or not up to code?  Should you hire a home inspector and, if so, when?  Who pays for termite inspections?  Do you need a Termite Inspection?  What other things can you write into an offer to purchase?  Your agent can help guide you in getting the best value for your money.
5. A Purchase Contract in real estate is a binding legal contract, so you don't want your first experience buying a home tainted by a poorly written contract. 
6. Never say never, but under no circumstances should you use the seller's agent.  The seller's agent represents the seller, NOT you.   It makes sense that if the seller has an agent you should too.  This way, people who understand the market and have their client's fiduciary interests in mind represent both parties. For example, if someone sued you, would you use their lawyer to represent you?  No!  Even if you are looking to buy a home being sold by the owner (with no agent), have your own agent represent you. 

I recommend that you find an agent you like and can work with and stick with him or her.  Most agents spend a lot of time searching on your behalf and driving around to show you properties.  They do all this without any reimbursement from you.  Therefore, if you suddenly bought a home through another agent, you have done your first agent a disservice.  It's like having a nice dinner in a restaurant and then tipping the waiter in the other section.  Not very respectful of your agent's hard work, is it?

Of course, sometimes you just aren't satisfied with your agent for whatever reason.  Maybe there is a personality clash or maybe s/he just doesn't seem to understand what you need in a property.  If you decide not to use the agent for some reason, let them know you're moving on so they will stop working on your behalf.  Also, let your new agent know what you've seen and that you were working with another agent before, as there are ethical rules involved in taking on clients who have worked with other agents.  Your new agent should have all the facts about your home search to date.

Interview agents like you would interview your doctor or someone doing work for you.  It is a business relationship and you have know that s/h understands your specific needs and wants, can answer your questions, and is dedicated to finding you want YOU want, not what s/he wants to sell to you.

Finally, don't be afraid to ask your agent anything about the process.  They are very experienced and can either answer the questions themselves or guide you to someone who can.  If you are ever unsure or curious about anything to do with the process, ask.  It can never hurt and will most likely save you from issues later.

In the coming weeks, I will answer some of the basic, general questions first-time homebuyers tend to have.  These will not be specific to your state.  All realtors are licensed in their own state, so I cannot answer questions that concern legal practices outside of Hawaii. 

If you are buying your first home, congratulations and good luck!  Remember; find an agent before you buy!  

Yesterday I actually sat down and read one of those blast emails I get from mortgage lenders every week.  This one touted a new loan program referred to as a "Buy Down" loan.  The first thing I thought as I read it was, "Here we go again!" 

This loan was explained as follows:  On a 4.5% 30 year loan of a "3-2-1 Buy Down loan program, the first year, you pay a 1.5% rate on your principle, the 2nd year, your interest rate goes to 2.5%, and the 3rd year, it goes to 3.5%.  After that, for the remainder of the loan, the rate sticks at the original locked in rate of 4.5%.  To further the craziness, this loan actually qualifies the borrower at the 1.5% rate.  The key is to outwit the more restrictive Fannie Mae & Freddy Mac DTI (debt-to-income) ratio.  RED FLAG!!  Did we NOT learn anything from the last boondoggle of ARMs?  Do we really want to spend another $700B (maybe $2 or 3 trillion) to save these idiots from themselves again?  

What happens to the new homeowner after the 1st year when the rate goes up?  What about the year after that?  Shall we continue to support the banks in every way except with our bank accounts?  At this rate, It will soon get to the point where we will be putting what little money we have left under the mattress again!

I am surprised that it's legal after all that has happened, Where is our FDIC and Treasury Dept when we need them?  Where are the banking regulators?  The FNMA requirements are reverted to the times when people had to actually QUALIFY for a loan they could afford.  Not afford now and foreclose later based on faulty lending practices. Are Lenders so desperate to drum up business that they continue to put forth programs that are bound to fail and keep us in the recessionary phase even longer? 

Another question:  How is it that mortgage brokers do not take responsibility and refuse to sell these products to their clients? I for one want to be able to look my clients in the eye and say hello when I see them in the store or on the beach!  If I proposed a loan like that, I would have to hide from everyone I did business with!  As a real estate agent, I cannot recommend that any of my buyers take on a loan like that. Agents, be aware of more than the current rates!  If your clients fall prey to crafty loans, the mortgage lender won't be the only one off their Christmas Card list!  

The Pacific Business News has reported that home sales on Kauai have soared in the last month as prices drop.  PBN reports "Home sales on Kauai rose by more than 50 percent in November and condominium sales more than doubled, while prices dropped by almost a third." 

This is not just great news for the Kauai real estate market, but for buyers as well.  Prices here are dropping, but interest rates also remained low this week.  While the market values are shifting downward, property taxes will also start to drop at next year's assessment, provided the base rates remain constant.  This presents great opportunities for those buyers who have yet to put an offer in on a home or condominium.  All in all, it looks as though real estate on Kauai may take an upturn in activity!  Great news for all concerned.  Happy Holidays!!

Last week, Reuters reported that the US Treasury has a new plan called the "Home Affordable Foreclosure Alternatives Program" that would cause the lenders to speed up their process in handling short sales.  This is a major leap forward for homeowners, realtors, and anyone involved in the short sale of properties.  The most important parts included the following:

1. Lenders would be required to respond to a short sale request within 10 days.
2. Once completed, the homeowner would be fully relieved of the debt
3. Lenders would not be allowed to lower Realtor commissions (after all, we agents do a lot more on these transactions than most!)

This program is supposed to streamline and simplify the short sale process.  My question is: how do we make sure this piece of legislation gets into the books?  Of all the bills I have heard about over the last year and with all the money congress is spending this could be one of the few programs that could actually help our economy recover. 

Then, the President got in the mix this week and bawled out the banks for freezing our economic recovery.  He called on them all to start lending money.  Of course, he was largely referring to small business loans, but that will trickle on to all facets of the economy because more money for more small business growth leads to more jobs, which leads to more income and the ability to - you guessed it - buy homes.  Ultimately, since the lenders were a major force in causing the dominoes to fall, they need to help pick them up.

While real estate sales remain slow in comparison to previous years, we are noticing a steady increase in overall sales over the course of the year.

The following graph shows news escrows by week for the 37 weeks through October 25, 2009. As the graph indicates, while we have experienced the normal spikes due to the holiday and seasonal increase in visitors, the average upward trend is fairly steady.

Many things can be read into the data below. One can surmise that this trend in buying reflects the increase in short sales and foreclosure properties and the lowering of property values. Obviously, the more foreclosures and short sales there are, the lower the property values fall.

The bottom line is that home prices are coming down slowly and you can find some attractive deals on the island of Kauai!

Aloha!

As a relatively new CDPE designate, I look upon this economic situation as an opportunity. It's not all about making money. We certainly won't get rich on short sales. Rather, this is an opportunity to help people, homeowners, get out of a bad situation.

Most homeowners facing foreclosure never anticipated this outcome. They bought a home thinking they have finally reached a part of the American Dream, only to find out that when the ARM expired, they were in "lender hell."

As realtors, we are in a unique position to assist people in this "lender hell" to see the light at the end of the tunnel and the hope that they can somehow, come out on the other side with minimal damage to their lives. At this point, for realtors, it is no longer about just making a living, it's about making a difference.

I, for one, am proud to be a part of the solution.

-Nance Overton, RA, CDPE

Aloha,

I am pleased to announce that I have recently completed the exhaustive training for and received the prestigious Certified Distressed Property Expert (CDPE) designation. This designation is my opportunity to better serve Kauai homeowners facing foreclosure. Being among the initial group of real estate professionals attending the first class to be held in Hawaii, I am one of the few currently positioned at the forefront in the solution to the foreclosure crisis in Hawaii.

My understanding of the foreclosure and short sale processes are strenghtened. I have the knowledge and tools to assist homeowners in their darkest hour: when they are faced with losing their home to foreclosure. My commitment to serving the people of Kauai in their real estate needs has been increased to an all new level.  

So many homeowners here in Hawaii have no idea that there are other options open to them. They start missing mortgage payments, they hunker down and wait for the foreclosure notice, then they just give up and let their home go to the highest bidder. If I hear from a homeowner soon enough, we can try to avoid the foreclosure and save them the embarrassment of future credit and tax ramifications that many people aren't even aware of.

My Broker, colleague, and I are proud provide the community on Kauai with free seminars to discuss the options available that can help them avoid foreclosure. If you live on Kauai or own a property in Hawaii, please feel free to come to the seminars or call me for assistance.

It's all in your perspective.  If you are the seller and you are selling at or below the price you bought it for, it's most certainly a fire sale! However, I'm inundated with buyers that think they can get a property that was assessed at over a million dollars last year for a couple of hundred thousand! Not happening here, not yet.

Don't get me wrong. I am fully aware that housing prices are plummeting on the mainland. But let me tell you that I live on an island - the Garden Island, to be exact - in Hawaii. Most of these islands are 5-star vacation destinations. So, when I get an inquiry from someone looking for a 2 bedroom/2 bath condo on the beach in Poipu for $60K (yes, sixty), I have to shake my head.

And then it happened - well, almost. Two condos (neither 2b/2b OR on the beach in Poipu, mind you) came on the market for $59,000 (yes, fifty-nine) a few days ago. Now, these condos are assessed at over $200K and they are not distressed properties, so one has to wonder what these sellers are thinking? The easy answer - since these are not my listings - is the sellers are very motivated and just want to dump the properties. Someone savvy buyer will make a killing, I'm sure.

The other aspect though, is these prices will undoubtedly cause all the others (right now there are about 31 listings in this complex alone) to start falling. In addition, those who cannot afford to cover the reminder of their loans will be hard-pressed to convince a buyer why they should pay $200K more than the ones that are listed at 59K. Even after they are sold, they will skew the numbers for a long time to come. This could also prompt other sellers around the island to start selling for as low as they can go...whatever that might be. Now, this is not necessarily a bad thing. It may actually get the ball rolling again - which would be a good thing. We all know that a stagnant housing market is no good for anyone. And investing is a tricky business at best. But, with prices starting to fall (if that's what happens) investors and homeowners alike will come back and start buying again.

So, I guess I must ask the question: is the fire sale starting??

(Since I wrote this -- one of the two listings has gone under contract. Cash deal, no doubt! Kudos to the agents involved!!)