If you have not bought or sold property in Hawaii, chances are nearly zero that you have ever heard of HARPTA. That raises the question, “What is HARPTA?” HARPTA, or the Hawaii Real Property Tax Act, is an important piece of legislation that can impact a seller’s proceeds at the closing of a sale. This law affects non-resident property sellers in the Aloha State. 

Whether you’re considering selling your Maui home or have already started the process, understanding HARPTA ensures no surprises when your sale closes. In this comprehensive guide, we’ll break down everything you need to know about HARPTA, who it impacts, and what it means for your sales proceeds at closing.

Key Takeaways:

1. HARPTA Overview: HARPTA (Hawaii Real Property Tax Act) is a state law requiring a 7.25% withholding on the sale price of Hawaii real estate by non-resident sellers to ensure proper tax payment on capital gains.
2. Who HARPTA Affects: It primarily impacts non-resident property sellers, including individuals, corporations, and trusts not based in Hawaii.
3. HARPTA is Not Your Final Tax: The 7.25% withholding is not the final tax liability. The 7.25% withhold is on the total sales price. The actual tax is 7.25% on the gains from the sale.
4. HARPTA Exemptions: Hawaii residents, sellers participating in a 1031 tax-deferred exchange, and sellers losing money on a sale may be eligible for an exemption.
5. HARPTA vs. FIRPTA: While HARPTA applies to non-residents selling Hawaii real estate, FIRPTA is a federal law targeting foreign sellers of U.S. property. HARPTA has a 7.25% withholding rate, while FIRPTA’s is 15%.

What Exactly is HARPTA?

HARPTA, or the Hawaii Real Property Tax Act, is a state law designed to ensure the state can collect taxes on capital gains from property sales, even when the seller is not a Hawaii resident. The state legislature passed the law after the Hawaii Department of Taxation struggled to collect capital gains taxes from non-residents.

It requires withholding a portion of the proceeds from the sale of Hawaiian real estate by non-residents. Specifically, HARPTA applies a withholding rate of 7.25% of the sales price, collected at closing, to ensure tax compliance on property sales.

Who Does HARPTA Affect?

HARPTA primarily impacts non-resident sellers of Hawaii real estate. If you’re not a resident of Hawaii and you’re selling property in the state, you’ll likely be subject to HARPTA withholding. 

A non-resident seller can be an individual who resides outside of Hawaii, a corporation or partnership formed outside of Hawaii, or a trust or estate with non-resident trustees, executors, or administrators.

Understanding HARPTA Withholding

Under HARPTA, the standard withholding rate is 7.25% of the total sales price. This amount is withheld at closing and remitted to the Hawaii Department of Taxation. 

For example, if you’ sell a property for $500,000, the amount withheld would be $36,250. It’s important to note that this withholding typically exceeds your final tax liability. Instead, it’s an estimated payment to ensure compliance with Hawaii tax laws.

The state legislature did not arbitrarily choose the 7.25% number for HARPTA. It mirrors Hawaii’s Capital Gains rate of 7.25%. Of course, that tax is on just the gains from the sale. That’s why the HARPTA withhold is typically much larger than the actual tax.

Exemptions on HARPTA Withholding

While HARPTA applies to most non-resident property sales, there are certain situations where you might be exempt from HARPTA withholding. Potential exemptions include the principal residence exemption, like-kind exchanges (also known as 1031 exchanges), sales where the seller shows no gain, and sales where the seller may have to bring money to the table for closing.

Immediate Exemptions

If you are a Hawaii “resident” selling your home, your sale is not subject to HARPTA. If there is a non-recognition provision in the IRS tax code regarding gains from your sale, you are not subject to HARPTA. The most common non-recognition provision is a 1031 Tax Deferred Exchange. Other examples include foreign sellers from countries with tax treaties prohibiting withholdings and the transfer of property between spouses related to a divorce settlement. The third example is the sale of your main residence over the last year when the sales price was $300,000 or less.

Sellers in the above scenarios need to fill out an N-289 form. Sellers should receive the form via escrow shortly after they go under contract. After the seller completes the form, it needs to be approved by the buyer before being remitted to the state.

Exemptions Requiring Review and Approval

Suppose you aren’t eligible for a waiver for the reasons above. In that case, there are other circumstances where you may be exempt from HARPTA withholding subject to the review and approval of the Hawaii State Department of Tax. The main reason is that you did not see any actual gains from your sale. If you are selling your home for a loss, you can file form N288B.

You must submit the form to the state no later than ten business days before the scheduled close of the transaction. We advise sellers to notify escrow as soon as they open escrow so all parties may submit the form with plenty of time to spare.

The seller should also include the closing statement from when they purchased the property and an estimated closing statement for the current sale. If you made improvements to the property that could impact your tax basis, you should include invoices and contracts from contractors. If you rented the property, include a depreciation schedule in your accompanying documentation.

You can also submit an N288B form if the sale proceeds are insufficient to cover your HARPTA withholding. If you need to bring cash to close to cover your HARPTA obligations, the State Department of Tax may approve a reduction of your withholding.

It is worth reviewing your sales situations with a CPA familiar with Hawaii tax laws prior to listing your property. They may be able to let you know if you are eligible for an immediate waiver or in a situation where you could apply for a waiver.

Who is Responsible for HARPTA Being Withheld?

One of the peculiarities of HARPTA is that the buyer or purchaser of the property is responsible for ensuring that funds and paperwork are remitted to the state when the property sells. Yes, you read that right. While the withheld funds come from the seller’s proceeds, the buyer must ensure the seller’s funds go to the state. That said, buyers can rest assured that the title and escrow company works hand in hand with the buyer and seller to ensure that the state receives the necessary payment and paperwork at closing.

The property buyers should retain copies of HARPTA related forms after closing for proof of compliance. Failure to submit appropriate paperwork to the state or to withhold funds comes with stiff penalties. Trying to evade the holding is a Class C felony with the potential for significant fines and jail time.

Obtaining Refunds on HARPTA Overpays

As mentioned above, the amount withheld for HARPTA typically exceeds the actual tax liability on the gains from a sale. There are two ways to get a refund.

The first and most basic method is to file a Hawaii State Tax return as soon as possible the following year. Depending on when your sale closes, you may not be too excited to leave your funds tied up with the state for an extended period. To get your money back faster, you can file an N288C for an early “tentative refund.” You can submit your N288C form as soon as you receive an acknowledgment from the state that they received your withholding payment.

Typically, it takes 60-75 days to receive your refund once you submit your N288C form. It is important to note that if you file an N288C, you must still file a Hawaii income tax return the following year.

Steps to Comply with HARPTA

The bulk of the work to comply with HARPTA occurs during the initial and final stages of the sale. The good news is that the title and escrow company works hand in hand with the sellers and the buyers to provide appropriate forms and ensure HARPTA is withheld. Here are the five steps a seller should follow to comply with HARPTA.

1. Determine Your Residency Status: Confirm whether you’re considered a non-resident seller under HARPTA. This is crucial as HARPTA only applies to non-residents.
2. Work with escrow to determine what HARPTA related forms to fill out: Escrow provides sellers with a copy of the N-289 form shortly after buyer and seller agree to terms, and escrow opens. If you aren’t eligible to file an N-289, you may be eligible to apply for an exemption via an N-288B form.
3. Withholding at Closing: If you’re not exempt, ensure escrow withholds the correct amount (7.25% of the sales price) at closing. Have escrow file an N-288 form with any withholding remitted to the state.
4. Apply for a Refund (if applicable): If the amount withheld exceeds your actual tax liability, you can file a “tentative refund” with the Hawaii Department of Taxation using form N-288C.
5. File Hawaii Tax Returns: After the sale, file the appropriate Hawaii tax returns to report the transaction and any gain or loss. If you did not fill an N-288C form, you will receive a refund from the state if your HARPTA withholding exceeded your actual tax liability.

By following these steps, you can ensure compliance with HARPTA and avoid any potential issues during your property sale in Hawaii.

HARPTA vs. FIRPTA: Understanding the Difference

It’s common for sellers to confuse HARPTA with FIRPTA (Foreign Investment in Real Property Tax Act). While both involve tax withholding on property sales, they serve different purposes and apply to different groups.

HARPTA is a state law that applies to non-resident sellers, including U.S. citizens living outside Hawaii and has a 7.25% withholding rate. 

On the other hand, FIRPTA is a federal law that applies to foreign sellers (non-U.S. citizens or resident aliens) and typically has a 15% withholding rate, with some exceptions. Most foreign sellers are subject to both HARPTA and FIRPTA.

Navigating Potential HARPTA Challenges

Dealing with HARPTA can present several challenges for non-resident sellers. One common concern is cash flow, as the 7.25% withholding can be substantial. Suppose you are planning on redeploying the funds from your sale. In that case, it is important to factor in the amount deducted for HARPTA or the time necessary to obtain a “tentative refund” via an N288C or from filing your tax returns.

Remember that HARPTA is separate from federal tax obligations, so ensure you address state and federal tax requirements.

Tips for a Smooth HARPTA Experience

To make your HARPTA experience as smooth as possible, consider these additional detailed tips:

Work with Experienced HARPTA Professionals 

Engage a real estate agent and tax advisor familiar with Hawaii’s unique tax laws. Look for professionals who have a track record of handling HARPTA transactions. 

An experienced real estate agent can guide you through the selling process with HARPTA in mind, while a knowledgeable tax advisor can help you navigate the complexities of Hawaii’s tax laws, potentially identifying exemptions or strategies to minimize your tax liability.

Keep Detailed Records 

Maintain thorough documentation of your property purchase, improvements, and sale to calculate your tax liability accurately. 

This includes:

• Original purchase documents and closing statements
• Receipts for all capital improvements made to the property
• Annual property tax statements
• Documents related to any previous refinancing
• Records of depreciation taken (if the property was used as a rental)

Detailed records can help you establish your cost basis, potentially reducing your capital gains and, consequently, your tax liability.

Contact The Maui Real Estate Team

If you have questions about HARPTA or any other facets of the sales process, Contact the Maui Real Estate Team. If it is a tax question, we would be happy to direct you towards a qualified CPA to address your questions if you don’t have a tax advisor already.

Three months into the year and interest rates continue to fluctuate. In January it seemed like rates were heading downward steadily. February saw an increase in rates. The banking crisis earlier this month caused rates to adjust downward again. Last year, there was a lot of ink spilled and key strokes dedicated to predicting rates. Most predictions proved to be wrong. At this point, prognostication on rates seems like a fool’s errand. That said, I wanted to talk about one of the better bellwethers for mortgage rates, the ten year treasury bond.

In the financial world, a bellwether is an indicator of something bigger. For the bond market, the ten-year Treasury bond is the go-to indicator of how things are going. When investors are feeling good about the economy, they tend to buy more bonds, which drives down the yield (i.e., interest rate) on the ten-year Treasury bond. Conversely, when things are looking a bit shaky, investors tend to flock to the safety of Treasury bonds, which drives up the yield.

So, what does all of this have to do with mortgage rates? Well, the yield on the ten-year Treasury bond is a key indicator of where mortgage rates are headed. When the yield on the ten-year Treasury bond goes up, so do mortgage rates. When the yield goes down, mortgage rates tend to follow suit.

Think of it like a game of follow the leader, but with money. When the leader (the ten-year Treasury bond) goes up, the followers (mortgage rates) try to keep up. And when the leader goes down, the followers slow down too.

What Does This Mean for Buyers?

Consider this as more of how does this work vs a how to post. I’ve read in some places that following the ten year treasury closely may give buyers a sense of when to lock their mortgage rate. I have to say, I am a little skeptical about that. While the two are closely correlated, there may not be enough lag between the change in treasury bond yields and the change in mortgage rates. It’s a pretty busy world out there and unless you work in finance, you also may not have the time to closely monitor treasuries. This is where I would lean on a knowledgeable mortgage professional rather than tracking things yourself. Let your mortgage professional give you guidance on when to lock your rate.

If you browse through enough home or land listings on Maui, you may encounter some terms that may leave you scratching your head. Words like residential condominium, condominium home or CPR seem out of place when it comes to home and land listings. That said, these aren’t typos. Residential Condominiums are an increasingly popular form of ownership. This post attempts to define residential condos and answer some of the most frequently asked questions we receive from prospective residential condo buyers.

Frequently Asked Questions on Maui Residential Condos

What exactly is a residential condo?

I think it is safe to say that most understand how condos work in an apartment building setting. At a basic level, Residential condos takes the same principles and apply them to land that is zoned to allow multiple structures. For example, zoning rules for an agriculturally zoned lot allow the potential for a main house and a cottage. With the residential condo process, the main house and a surrounding area of land becomes one unit of the condo. The cottage and a surrounding area of land becomes the other unit of the condo.

I have seen the term CPR before in listing remarks. What does that mean?

CPR is not just an abbreviation for cardio pulmonary resuscitation. In a Hawaii real estate context, it is an abbreviation for Condominium Property Regime. The CPR process is how condominium homes are created. A CPR is the legal mechanism where a single property can be divided into two separate units of ownership. Each unit of ownership has its own deed, it may have its own mortgage and it has its own Tax Map Key.

How does a CPR process differ from a subdivision?

A CPR is not the same as a subdivision. The CPR process takes one property and divides it into two or more separate units of ownership. The process does not create additional entitlements to build more structures. For example, if you subdivided a five acre piece of agricultural land into to two lots, each lot would then have the potential for a home and a cottage. If the same five acre parcel were to go through the CPR process, one unit might have the rights to build a main house and the other unit may have the rights to the ohana unit.

Do I Own the Underlying Land with a Residential Condo?

The owners of the condominum units collectively own the underlying land. That said, limited common elements may be designated for the exclusive use of each unit. Exclusive is the key term. That means your partner in the condo can’t just meander into your yard area when they see fit.

Do Residential Condos have Common Elements?

Sometimes. The most frequent common elements relate to water and access. Two or more condos will sometimes share a single water meter. Two or more units might share a driveway or a portion of a driveway. In some cases, they may share both. Some residential condo properties on island have an area of common land shared by all of the different condo owners. There are some condo developments on island where almost all of the property is considered to be common element. In those cases, each unit may have a very small limited common element around the structure.

Do Residential Condos have Maintenance fees?

It is typical to have a nominal maintenance fee. Most frequently, the fee goes towards liability insurance for any common areas and the maintenance and maintenance reserves for those common areas. The larger and more elaborate the common area, the higher the fee. If there is nothing shared between the units of a condo, there may be no fee at all.

Are There More Rules with Residential Condos than a conventional home?

That depends on the intention of the people who created the condo. Some condo associations impose rules above and beyond county zoning. That said, most of the residential condo bylaws create no additional rules or regulations above and beyond county code.

Can any property go through the CPR process?

Some homeowners associations restrict CPR properties. For properties with existing structures, all homes need to go through miscellaneous inspections with the county. The structures need to comply with county zoning with all necessary permits in place. If the improvements on the property aren’t fully permitted, that could delay or prohibit the CPR process.

Is there a difference between a CPR property that is vacant land and a CPR property that has homes?

At a base level, they are similar. It is the same general process. I know some attorneys believe that CPRing raw land (sometimes called a spatial CPR) carries a little more risk. The risk is that one unit owner’s construction efforts could impact the construction efforts of the other unit owner. An owner who builds too much home or uses too many water fixtures could limit the plans of the other owner.

Typically, units of land sold as CPRs come with defined entitlements. Again, I will use an agricultural lot as an example. One unit of land receives entitlements to build a main house. The other unit of land receives entitlements to build an ohana of 1,000 square feet or less. If the ohana unit owner were to build first, and to build a structure larger than 1,000 square feet of living space, the owner of the main house unit may find themselves in a situation where they aren’t able to build over 1,000 square feet.

There is also some risk if the two unit owners share a county water meter. If the first person to build goes a little overboard with the number of plumbing fixtures for their unit, it could leave the other owner with fewer fixtures than anticipated.

I know of just one circumstance where the ohana side of the CPR overbuilt. I haven’t heard first hand of any issues with someone hogging all of the water fixtures. That said, I want to help illuminate potential risks even if they aren’t likely to occur. Condo documents should spell out the entitlements available to each unit. They should also offer some means to mitigate against the above risks. If there are any questions about the documents, hire a Hawaii Real Estate attorney to assist with document review.

Is there anything else I should know about the process of buying a residential condo?

There are a couple of things to note. If it is the first time the condo is being sold, the buyer has a 30 day rescission period. Not all attorneys are equal when it comes to the creation of condominium documents. More specifically, some do a great job and others write confusing documents with too many loop holes and ambiguities. Repeating the advice from the question above, it is worth the investment to hire a qualified Hawaii Real Estate attorney to review the condo documents. They can answer the legal questions about the condo documents that are outside the scope of your Realtor’s services.

Why do people choose to CPR a property?

There are a number of reasons why people choose to condo.

• Statistics show that the CPR process creates equity. The sum of selling the units of a CPR minus the cost of the CPR exceeds the value of a whole property that has not been through the CPR process.
• Not everyone wants or needs all of the building entitlements that come with a property. Some don’t want or need an ohana on their property.
• The units of a CPR tend to create more affordable options for buyers.
• CPRs allow for the split of a property in a tenants in common situation or among family members.
• It does not typically require the improvements necessary for a subdivision.
• It is typically faster than the subdivision process.

Are there any downsides to CPRing a property?

• We mentioned the potential risk with a spatial CPR above.
• The CPR process requires some sort of ongoing relationship between unit owners.
• There is the potential for shared liability with building or zoning violations. The County could attribute the violation to the whole property instead of citing just the specific unit.
• Taxes could go up on the property if you retain both units. This is particularly the case if you have a homeowner tax assessment.

Hopefully, this answers some of our reader’s questions on CPRs. Special thanks to Jacob Wormser, Attorney at Law. His letter to prospective condominium clients helped clarify some of my own questions on the CPR process. Still have questions? Contact the Maui Real Estate Team and we will do our best to provide answers or direct you to the right resources if we can’t do it ourselves.

Published August 13, 2019

Hawaii Real Estate Terms and Their Canadian Equivalents

With relative strength of the Canadian economy and the Loonie, we continue to enjoy working with a substantial number of Canadian Buyers and Sellers.  Canadians and Americans usually become fast friends.  We share a border, similar values and for the most part we speak the same language.  However, there are some differences in terminology and process when it comes to real estate transactions.

I wrote a previous blog post that served as A Primer for International Buyers. In this post we are going to specifically focus on some of the different terms used in some provinces of Canada and what they translate to here in Hawaii.  We understand that condominium and real estate laws do vary by province and we are by no means Canadian real estate experts, but we do hope that this may help shed some light on the differences in real estate terminology. Without further ado:

Canadian Term	Maui Equivalent
Strata Fees	Maintenance Fees
Garburator	Garbage Disposal
Freehold	Fee Simple
Hydro	Electric
Subjects	Contingencies
Washroom	Bathroom

.

Aside from these minor differences in the terminology, there are also differences in the purchase process as explained in the Primer for International Buyers.

To highlight a few of those differences:

1. Buyers usually take a minimum of 10 to 14 days to remove their inspection contingencies (subjects) via the use of professional property inspections which may include home, pool, mold and other inspections if necessary. We know the best inspectors on Maui and can coordinate the inspection process for you. There are no laws in the Hawaii that prevent a Seller from transferring a property that is not up to code or that has defects. In other words, it is a Seller’s legal obligation to disclose these, but not necessarily fix them. This can become a negotiating point during the escrow process. If a Seller asks a Buyer to sign an “as-is” addendum, this is a statement that the Seller is unwilling to make any improvements to the property.
2. Financing in the US is often done via fixed rate mortgages that amortize over a period of 30 years. Many Canadians opt to use their own financing from Canada for US properties, however, if you decide to finance here on Maui, we have lenders with years of experience helping our many Canadian clients obtain loans. Note that they will most likely require 35% down payment and full income documentation for at least two years. The documents needed include T-1’s, T-4’s, corporation and business returns, and current pay stubs.
3. Signing documents. Some documents will have to be notarized by a US notary. The instructions will likely direct you to do the signing at the US Embassy. That will likely require scheduling an appointment and can be time consuming. If you live close enough, it may be easier to make the drive across the border to a US Notary.
4. Closing. Many of our Canadian buyers have already returned home prior to closing. Once appropriate documents are signed, notarized and returned to escrow, closing takes place two days after all funds are received.
5. Utilities. We’ll provide you with the appropriate phone numbers to change all utilities into your name including electric, telephone, liquid propane, cable, alarm and any other services. It is often customary for Maui Electric and some of the other utilities to require security deposits for Buyers just establishing credit in Hawaii.

We hope to hear from you soon. As always, feel free to Contact The Maui Real Estate Team with questions or check out this week’s new listings.

Finally, if you’re still reading this post, we think that you ought to choose a Realtor with at least a modicum of understanding of Canadian Culture and perhaps a bit of a sense of humor. To that end, we recommend that you screen your prospective Realtors with The Following Test.

The new Hawaii Association of Realtors purchase contract that goes into effect on May 1, 2012 is dramatically different than the current purchase contract. The new purchase contract is meant to flow and read more naturally; groups like contingencies and provisions together; and more clearly defines roles, responsibilities, time frames and obligations of Buyers, Sellers and their Realtors.

I would imagine that the first 30 to 60 days after implementation will involve some back and forth between brokerages as we adapt to the new purchase contracts. The Maui Real Estate Team is taking a proactive approach to understanding how the new purchase contract impacts Buyers and Sellers by taking the following actions:

1. Attending the Realtors Association of Maui training session the other day.
2. Discussing the implications of the new purchase contract with our corporate attorney.
3. Spending several hours this weekend analyzing the changes.
4. We will have a company meeting / training session regarding the new purchase contract.
5. We will create a Buyer’s Guide to the New Hawaii Purchase Contract and a Seller’s Guide to the New Hawaii Purchase Contract which will be available to registered users of The Maui Real Estate Team’s website in the next 30 days.

As with any document that has undergone a major revision/ re-write, the new document isn’t perfect. In fact, in some ways it is more complex and requires more written communications between Realtors, Buyers and Sellers.  The new Hawaii Purchase Contract requires Sellers to be more organized and diligent in their approach to selling their Maui properties.  For instance, upon closing, under the “cleaning clause”, carpets are now designated as needing to be professionally cleaned.  An odd addition, but one to be aware of.  Did someone on the purchase contract committee have a cousin in the carpet cleaning business?

As for Buyers there are potentially additional “Buyer safeguards”, some of which require intimate knowledge of the new purchase contract.  However, there are also different “options” for cash transactions which need to be carefully handled.  There is also the mention of several types of resources that Buyers should use whenever purchasing a home, condo or land on Maui.  We are in the process of updating our list of resources.

If you are thinking of buying or selling Maui property at this time, please consider contacting The Maui Real Estate Team for a free consultation regarding how the new Hawaii Purchase Contract will impact your purchase or sale.  Our experience and insights will help you minimize headaches and surprises and help you execute your real estate transaction without a hitch.

(NOTE:  This turned into a longer blog post than originally intended…and could have been longer.  It is a complex subject, that deserves a lot of attention).

People often ask us what is my home, condo or land worth?  After all, we are supposed to be the experts…right!  This is a tricky question for several reasons, one of which is that there are so many definitions of value. The advent of AVM’s (automated valuation methods) has added to the complexity of this answer.  Most fundamentally, real estate is difficult to value because it is not considered a “liquid asset”.

In order to address the question “What is my home worth?” properly, it is a good idea to understand the definition of the many different ways properties may be valued.  Here are a few of the terms you will hear and a little about each of them.

– Appraised Value – The appraised value of a property on Maui (assuming we are talking about a single family home, piece of vacant land or condominium) is the unbiased value according to a qualified appraiser after a site visit and thorough analysis based on property facts, analysis and market trends.  Although I am not not an licensed appraiser, my understanding is that a professional appraiser utilizes a formula that includes a combination of the cost approach and a sales comparison (or comparable sales) approach to determine the Appraised Value.  There is a third component used in commercial and investment properties called the income approach which utilizes Net Operating Income or NOI and return to establish the value.

Appraisals are a fair and often very accurate way to get an understanding of the value of a property.  Unfortunately, appraisers cannot capture some of the intangibles that improve the value of a home / property.  Appraisers are also biased by trends and external pressures.  Many appraisers now are being extremely conservative with their appraisals since they were blamed as co-conspirators in the housing bubble.  It is unfair to assign blame to appraisers for the housing bust.  Suffice it to say that there are honest appraisers and dishonest appraisers just like in every business / profession whether it be real estate, lending, law, medicine, finance etc.

– Assessed Value – Here is fairly generic definition of Assessed Value followed by definition by Maui County.  Assessed Value is the dollar value of real property assigned by a public tax assessor for the purpose of taxation.  In Maui, according to the official County of Maui website, assessed values are defined as “100% of fee simple market value using the cost and market approaches to value.”

People often confuse the Assessed Value of their property with the Appraised Value.  Appraised Value and Assessed Value are very different animals, or as we say on Maui, Pineapples and Mangoes.  Assessed Value is a number we see as property owners at least once per year, approximately March 15 on Maui.  One would think that it is an accurate number since it is used as a basis for taxation.  The theory sounds great, however, I have seen a lot of extremely poorly assessed properties on Maui.  Furthermore, Assessed values tend to greatly lag the market (good during good times and bad during bad times).  I would use Assessed Value as a benchmark or a data point, but never anything more.

– Automated Valuation Method – Unless you have been living under a rock (or on a rock if you live on Maui) you’ve probably heard of Zillow.  Zillow is website which uses a proprietary algorithm to provide an automated calculation of the value of a property.  That calculated value is called a “Zestimate”.  I have seen some really bad “Zestimates” on Maui (35% error) and some fairly accurate ones.  There are a few other sites that provide a similar service.  AVM’s are controversial in that they may work fairly well in a homogeneous neighborhood or condominium complex, but they cannot address the fact that no two properties are alike, and cannot provide the context that a human expert such as an appraiser or real estate professional can provide.

– Market Value – The intersection of the highest price a buyer is willing to pay and the lowest price a seller is willing to accept.  With substantially tighter lending and appraisal guidelines these days, appraised value comes into play.  Unless the transaction is a cash purchase or has an extremely large down payment, the appraised value and market value are going to have to match.

So what’s your home worth?  If I had to choose between the first three methodologies, and had the available funds, I would certainly choose Appraised Value.  In addition, I would seek the opinion of an experienced, licensed real estate profession to obtain a Broker’s Price Opinion / Comparative Market Analysis.  When I am given such an assignment, I utilize all of the tools at my disposal to help determine the Market Value, including using the three aforementioned methods, my local knowledge and business experience.   At the end of the day, the answer is best determined by the market.

Please contact me or any of The Maui Real Estate Team professionals if we can help you answer this question or you would like to discuss anything else related to the Maui Real Estate market.