“How much is this property worth?” is not a simple question. In real estate we define the property value as: The price a seller is willing to accept and a buyer is willing to offer. This answer is an after the fact answer; it doesn’t help either side get very far. The truth is there is no crystal ball because there are emotions involved. There is time and there are contingencies. One offer at a higher price may actually be worse for the seller than a lower offer. There are only tools and REALTOR experience to guide the way. No good REALTOR will give the answer; they just guide you to make good decisions.
Making Sure You Don’t Pay Too Much for Maui Real Estate
Buyers – So you finally decided to take the leap and buy that dream house. What could be more exciting and terrifying at the same time than spending hard-earned money on investing hundreds or maybe millions of dollars on that nice house, right? Your best bet is in choosing an agent to represent you. It is easy to be confused by so many options out there. You should want a web savvy agent as more than 85% of all buyers initially see their homes online. Exceptional agents have laptops, a solid system to utilize and of course, unbeatable experience.
Making Sure You Get Top Dollar for Your Maui Home
Sellers – Pricing your home right the first time will make a huge difference. You set the list price but what is the expert guidance you get to do that? Should you start with a slightly higher price just to “Test the market”? We don’t know when that perfect buyer may walk in the door; are you willing to wait years to make that happen? In most cases where the product has good comparables in the market and there is good flow of homes coming in and out, testing a higher list price is not a good idea. You need an expert who can show you what is happening in the market, who will work with you to put your home in the best presentable condition and help you evaluate your best options to meet your goals.
What is a CMA – Competitive Market Analysis?
Most REALTORs perform a CMA – Competitive Market Analysis. They’ll perform a CMA when listing a property and usually for a serious buyer to evaluate the real market value of a home. Most will hand over a summary list of similar properties from the MLS with a copy of the property listings.
I go a LOT further and provide a complete Market and Property Profile. I provide charts and graphs that address the questions and risks that you have. Click here for a complete example of the Property Profile that I typically run. Below I’ll describe the key inputs to a Property Profile and how the data can address the questions that a buyer or seller has.
Selecting Most Similar Properties
In selecting properties, I try to use similar guidelines that an appraiser would use. Where possible, bracket major attributes: (by bracket, they mean have at least one bigger and one smaller or better/worse, older/younger)
- living sq ft
- lot size
Summary Values On Front Page
- Max/Min/Average Sales Price – Based on the 3 or more similar recent sales.
- Max/Min/Average List Price – Based on the similar active/pending comparables.
- Estimated Market Value – Uses the most similar recent sales, adjustments, and weighting to establish an expected sales price. See how adjustments are done below. Especially when I haven’t seen the property, this is a range.
The market overview gives both buyers and sellers a snapshot view of what is happening in the market. Are list prices going up? What is selling? How much inventory is there? Is it a Buyer’s or a Seller’s Market? What is the Competition doing?
Basic Property Information
- List price – this is the most recent list price and the date that this price became effective.
- Original List Price – the original list price and list date.
- Sold Price – the price the property sold for and the closing date.
- Maintenance Fee – this is any maintenance fees associated with the property. Usually used for condos.
- DOM – Days on Market — Well priced properties don’t stay on the market long. Those with high DOM, indicate that the property is priced higher than the market is willing to pay.
- $/sq ft Living – given the most recent price information (sold price or list price) this is the dollars per square foot. This is used when properties vary significantly in size. There is a clause to that though because really large properties have a much lower $/sf value than smaller properties.
On the Comparison Property Pages, you see summaries that show the Adjusted Active/Sold Price – The adjusted active price is useful for sellers in establishing a list price.
Adjustments to Property Worth
The following parameters are adjustments made to create the expected value. If the comparable is better than the subject then the value is negative. If the comparable is worse than the subject property then the adjustment is positive. The easiest way to think of it is “If I took this comparable property and made it like the subject, what adjustments would be required?”
Property Type – Shows food lease terms (FS: Fee Simple or LH: Leasehold) and property type.
- SF is a single family residence.
- SFD is a residence with detached cottage.
- SHO is a single family residence with an attached ohana (living area).
- Site Size – Size and amenities of the lot.
- Construction quality– Values are taken straight from public records. Sometimes these will be adjusted if there is a big remodel.
- Age – Age of the property.
- Bedrooms and Baths
- Living Square Feet
The condition is a subjective value to describe property dwellings and their functional use on the land. Obviously most properties do not fit perfectly in one definition below but the definitions give general expectations. Plus and minus can be used to nudge to one direction or the other.
- Very Poor – Dwelling most likely needs to be torn down or major remodel to make inhabitable. It lacks building integrity and is unsafe for living. Often vacant land may be worth more than land with a very poor dwelling.
- Poor – Dwelling is inhabitable but may need some major work. Flooring is vinyl, carpet or laminate. Cabinets are low grade stock and countertops are laminate. Substandard appliances are common. There is often significant non-conforming property use.
- Fair – Classically, this is a reasonably-maintained rental property. Usually inexpensive finishes w/mix of tile, carpet, vinyl and laminate on floors. Countertops are laminate and cabinets are stock. Appliances are lower grade but functional. May be functionally obsolete (i.e. 4 bedrooms w/1 bath). There is often significant non-conforming property use.
- Average – Property is in good maintenance but may show signs of being dated based on materials used. Mix of tile, carpet, laminate on floors. Countertops are tile or laminate. Appliances are white/black and functional. Main living areas are functional in their layout and design. Most areas of property are permitted. Yard areas conform with the neighborhood.
- Good – Property is well maintained but may show signs of being dated based on materials used. There is a mix of tile, carpet and hardwood on floors. Countertops are granite or solid surface. Appliances are all matching and usually stainless. Main living areas are appealing in their layout and design. All areas of property are permitted. Yards are landscaped with automatic sprinkler systems.
- Very Good – Granite or solid surface countertops; custom cabinetry. Flooring is hardwood and/or high quality tile. Bathrooms and kitchen are upgraded in last 5 years. Appliances are < 5 years old and stainless. Usually has outdoor living space, landscaped yard and good views well integrated into living space.
- Excellent – Custom building materials throughout; floors travertine tile or exotic hardwood. Appliances are high-end stainless. Granite/marble countertops throughout. Usually has in-ground swimming pool, water features, outdoor living space and fabulous views well integrated into living space.
Views/Landscaping: We talk about the $100,000 ocean view. Yes it does exist! But not all ocean views are equal! I rank view on a 0-10 scale. With ocean views if you are standing on the property and 10% of the view is blue ocean – that is a 1. Likewise an oceanfront condo with a skinny coconut tree blocking the blue ocean, that would be a 9! For those properties without ocean views, I consider landscaping, privacy and beauty. I also consider, from what areas of the home, can you see the view? If you can’t see it without going up on the crow’s nest, it’s not the same as seeing it from the main living area!
Other Adjustments to determine Property Worth
- HVAC – any heating and air-conditioning systems in dwelling.
- Energy Features – adjusted value for solar water heaters, photovoltaic systems and other energy features.
- Garage/Carport – the adjusted value based on garage and parking configurations.
- Decks, lanai, patio -adjustments for outdoor living space.
- Fence/Pool – adjustments for special features including rock walls, pools, spas and storage areas.
- Price Date – the adjustment made based on up and downs of the market and the last date the price was established.
- Other – adjustments for any other significant attributes not covered above. Every home is unique!
Reports Found in the Most Property Profiles
- BUYER/SELLER – Chart showing Price over Living Area.
- BUYER/SELLER – Chart showing price/sq ft over time… is the market changing?
- SELLER – Charts showing Chance of Selling and how comparables in the market are financed. This helps show whether you will face an appraisal or if offering buyer credits may be an option.
- SELLER – Chart: How Long Will it Take to Sell (averages for the market)
- BUYER/SELLER: Comparison of Value against Tax Assessments. In Maui, tax assessments are adjusted every year based on analysis of values – not just a purchase price. While they are usually 1-2 years behind the market, they are an indicator. The tax price ratio is the latest price (list price or sales price) to the total tax assessed value. If all the similar comps have a ratio of 1.23-1.30 and a seller wants to list at 1.5 ratio; there is good reason to re-think that choice.
- Various other tools based on the property.
- RPR Evaluation Report – This is an auto-generated report. It brings in data from appraisals (new purchase, re-finance, evaluations) so provides another source of data.
- Zillow Zestimate – Many agents hate Zillow because homeowners see information there and if they like the answer, they take it as truth. In some neighborhoods, Zillow is pretty accurate. I personally love the Zillow technology but caution buyers and sellers that this is one source of data – one that isn’t good and understanding the things that make each home very unique!
With a detailed Property Profile in hand:
- Buyers will have a good indication of the market value of the home. Usually, appraisers are really impressed by my property profiles and I’ve successfully challenged them on a few occasions (both high and low). Something I’ve recently added to my Buyer CMA package is a sheet “How much do you want this property?” It basically gives ranges of values from “I only want the rock-bottom deal” to “I will be heartbroken if I don’t get this property.” It is a tool to help you decide what offer to make.
- Sellers have great indicators showing what the market value of their home is. They can assess the risks and evaluate the time on market to get the best value and get moving.