Category: Maui Home Buyers Tips
There were two articles in the Maui News over the last few days that discussed the challenges condo associations are having with delinquent association dues. The Sunday article detailed how associations were subordinate to primary mortgage holders. This leaves associations in a difficult position for recovering unpaid dues on properties going into foreclosure. While associations may recover some back association dues from the buyers of foreclosed and bank owned properties, the sum is capped at $3600 by Hawaii state law. That may be well below the amount owed. This in turn poses budget challenges. The article in today’s paper delves further into how past dues are causing issues with the financial viability of a few island condo associations. Associations are taking measures to cut expenses, but still having a tough time managing their budgets.
With condo sales constituting a significant part of the Maui Real Estate market, the articles are something of an eye opener. To be clear, not all condos are having problems. One of the condos that is a focal point in the articles is said to have strong finances overall. It is also notable that the articles preserve the anonymity of struggling associations. That raises the question of how the average condo buyer knows if they are purchasing at a complex with a troubled association? If you are financing your transaction, your lender may have some insights. Condos that have financially troubled associations may be flagged by banks. Banks are looking at the health of associations as part of determining whether they will finance a transaction. You may want to ask your lender if they are aware of any financing challenges in the complex. If you put a condo under contract, you also have a contingency period that gives you the opportunity to read and review the condominium documents for the property. Documents of particular importance include recent association meeting minutes, proposed budgets, financial statements and reserve studies when available. If you have questions on the content of the condo documents, contact the association. If the documents are not to your satisfaction, you may cancel the contract during this contingency period without penalty.
Condos remain a viable form of ownership for many buyers. The challenges of today’s market just demand greater due diligence in your purchase. Contact us today if you have additional questions on purchasing Maui Condos for Sale.
This week I talked to a couple of potential buyers who expressed interest in the entry level condominium market. As with any buyers, one of my first bits of advice is to get pre-qualified with a lender. Talking to a lender helps to assess your financial position for purchasing a home or condo. It also gives you a sense of what you might expect for monthly payments at different price ranges. In a sign of the times, there is now a new reason why it is in the interest of an entry level condo buyer to get pre-qualified.
The entry level condo market has been hit harder by foreclosures than any other segment of the market. This segment saw speculation, sub-prime financing and economic hardship contribute to a growing pool of foreclosures. Many of the complexes that saw a spike in foreclosures have also seen an increase in delinquent maintenance fees. When maintenance fee delinquencies reach a certain point, banks will raise a red flag on a complex. They fear the stability of the association and restrict or prohibit lending within the complex. It appears that there are some entry level condos on Maui that are falling into this category. A lender should be able to provide some insight on condos where there are restriction on lending. This will allow allow a condo buyer to focus their search accordingly.
On Friday, the president signed off on an extension of the first time home buyer tax credit that will continue the program through April 30, 2010. The legislation also expanded the credit to include existing homeowners of five or more year purchasing a new or existing home between November 7, 2009 and April 30, 2010. The National Association of Realtors has additional information on the guidelines for the first time home buyer credit and the expanded credit on their website. Maui first time home buyer’s should also be aware that the county of Maui is offering a new program that gives grants and assistance to first time home buyers. This program has been in effect since November 1, 2009 and has a limited supply of funds. Buyers are encouraged to act quickly to apply for this program before funds run out.
Last year, congress passed legislation that would provide a tax credit for first time home buyers in an effort to spur activity in the housing market. The credit was increased and improved upon for 2009. The following are some basic facts on the tax credit:
- The credit allows for a maximum direct deduction of $8,000 for first time home buyers. A first time home buyer is defined as a person who has not had an ownership interest in a home in the previous three years.
- The tax credit allows for a maximum deduction of $8,000 from your tax liability. For example, if you owed $10,000, you would be able to deduct $8,000 and end up with a remaining tax liability of $2,000.
- The size of the deduction is based in part on the purchase price of the home and the income of the buyers.
- The credit is applicable for buyers purchasing their principal residence.
For a more in depth review of the tax credit, check out the National Association of Realtors FAQ on the tax credit. This comprehensive resource has information on income restrictions, applying for the credit and real life examples.
If you are a first time home buyer thinking of taking advantage of the $8,000 tax credit, the window of opportunity is starting to narrow. The credit is good on home purchases completed between April 9, 2008 and December 1, 2009. Financing for most transactions takes between 45-60 days. Interested buyers should have a property under contract by October 1st at the very latest to make sure you complete the transaction in time to remain eligible for the credit. Contact us today if you are a first time home buyer on Maui who needs assistance with their purchase.
Over the last year or so, Billy and I have had the opportunity to work on a fair number of short sale transactions. Short sales are where the seller owes more to the property’s lien holders than its current market value. Offers need to be approved by the lien holders. One of the challenges of working with short sales is setting expectations on what to expect from the banks. To be honest, bank behavior depends on the banks involved, the number of mortgages and a whole lot of other factors. That makes it hard to come up with a “typical” short sale process. That being said, here are some observations that we have based on our experiences.
- The time frame for bank responses varies pretty widely. It appears that smaller banks tend to process short sale offers faster than larger banks. While the big banks have made improvements in their processes and efficiency, they are still overwhelmed by the volume of short sale transactions.
- A Broker Price Opinion is where a bank will hire local real estate professionals to give their opinion on the value of a property. It sounds easy enough, but assigning value in this market can be challenging. The reduced volume of transactions means fewer comparable sales are available to estimate value. Maui is already a tough market to assign value when you get outside of subdivisions as land values, construction types and materials vary considerably. This means the results of BPO’s can sometimes be a surprise.
- Banks rely heavily on Broker Price Opinions (BPOs) when determining their sales price. Most banks won’t consider offers that are well off of the BPO. A high BPO tends to lower the odds of a successful transaction while a low BPO tends to raise the possibility of a successful sale.
- After a bank approves a short sale, the buyer will have a limited time frame to close. Typically, the banks are giving 30 days from approval. If you are using financing on a short sale transaction, buyers will need to be working on their loan approval prior to bank acceptance.
The number of short sales being approved is increasing. That being said, buyer’s pursuing short sales require some measure of emotional detachment. The length of time associated with short sales and the success rate of short sale offers can be frustrating. There are no guarantees when it comes to short sales. There are however some beautiful short sale properties available on the market. Contact us today you need assistance in purchasing a short sale property on Maui.
A lot of second home owners on Maui keep cars on island. There can be a number of advantages including convenience, cost and personal vehicle preferences. I was showing a condo in Kihei on Saturday when I was struck by one of the disadvantages.
A parked car can be an appealing target for island Myna birds. Unless you want to spend the first moments of your Maui visit cleaning bird excrement, you may want to consider a way to protect your vehicle.
A good car cover is the most basic way of keeping your car clean. It is worth doing your due diligence on which car covers offer the best protection. Flimsy covers can tear apart in Maui’s trade winds. You also need to make sure that the cover does not scratch the paint on your car.
If you are particular about your car, you may want to consider something like the Car Barn. The Car Barn is a full service car storage facility. Services include registration renewal, maintenance and airport pick up and delivery.