A West Hawaii Home Buyer’s Strategy For Summer 2012: Cash is King Equals Discounts at the Bottom

My last blog, Investors Shift Their Focus to Hawaii Real Estate During 2012 Summer Months, mentions investors historically sell off stocks in May due to historically under performing earnings; the Wall Street Journal chronicles May 2012 historical investor exit from the stock market as pending U.S. presidential election and European economic concerns weigh on many investors.

Seeking portfolio diversification investors find deals in Hawaii Real Estate and opportunity and location are key. With market bottom prices and one of the best quality of lifestyles in the world, Hawaii and the Big Island have never been more appealing – and so accessible.

How Does an Investor Maximize Their Play into the Hawaii Real Estate Market?

1. Start with CASH. According to MLS, 60% of 2012 sales have been cash. Why pay with cash when money is so cheap? Discounts. The average deal receives a 3% discount over financed deals, however, much larger discounts are out there, as the MLS chart shows below, one transaction received a 58% sold to list price. You can leverage your property after the fact if you wish with cheap money, but come into the game with your green talking loud and clear.

2012 CASH Sales in West Hawaii

2012 Financed Sales

2. Offer a quick close – 30 days or less. Sellers get very excited of the thought of cash in their bank account in 30 days or less, and are more likely to come off their ‘bottom line’ sales price in exchange for a speedy transaction

3. Offer very few contingencies. A clean and simple purchase contract is very appealing to sellers, as the sellers’ perception is that its less likely to ‘fall out of escrow’. True or not true, from a negotiation standpoint, an offer with few contingencies puts the buyer in a position of strength.

4. Don’t be put off by list prices – many sellers are ‘testing’ the market and don’t want to lower their price in the hopes they may ‘catch’ a buyer on the upswinging market. The fact is, they may be willing to sell for much less. If the property has been on the market awhile, or sellers have little or no debt, submittal of a strong offer containing the above components could secure you an excellent deal.

5. Don’t get emotional – it’s very difficult not to when buyers are convinced this is THE property for them or THE best deal. As an investor, remaining level-headed and being prepared to walk away from the deal will work in your favor during negotiation.

While the bottom has been found, many of the best deals have been picked over, but there are still some out there. According to West Hawaii Association of Realtors President, and Hawaii Life Broker in Charge, Katie Minkus, “From where I sit, I think those buyers looking for a screaming deal “should’ve” bought last year – in 2011. Seems to me, we’re going to have an inventory/price adjustment problem soon. Cash continues to be king.”

Remember to come in strong in the beginning, check your emotions at the door, and let the cash burning a hole in your pocket do the talking. Now, go find yourself a deal in paradise – happy summer shopping investors!

Coming soon: Part 3 – “Sell in May” – A Seller’s opportunity…