Hawaii Randy's Real Estate Opinions: Randy L. Prothero - Hawaii REALTOR® (Century 21 Liberty Homes)

Confusing Isn't It?

The most confusing term here in Hawaii is "As Is".  If you ask several Realtors "What is As Is?" you will get several different answers.  You will also see a modern day version of the soft shoe.  I even heard the question asked in GRI classes and saw the instructor tap dance a little.

The way I describe it according to our As Is Addendum is: What you see is what you get.  The buyer however does not give up his rights during the escrow process.

• The seller must fully disclose all material facts.
• Fraud is not protected by "As Is"
• The home is sold without warranty.
• The As Is does not negate the need for a termite inspection or the survey.
• The addendum states that the seller will not be making repairs other than those agreed to in the DROA.  It also states that the buyer can reject based on the home inspection (C-51 in the Hawaii DROA). 

The last one is where the arguments breakout.  The buyer finds things he won't live with and asks for repairs.  The seller comes back with what part of As Is are you not understanding?  The buyer comes back with fix it or we walk.

I had a great example of this where I represented the buyer.  This home had been recently remodeled.  It was listed as completely remodeled and in excellent condition.  My clients saw it and fell in love.

We brought in the home inspector and love turned to like.  The remodeling was done by an obvious amateur.  The plumbing, electrical and carpentry repairs all looked nice, but not done correctly.  Our best estimate was $3500 to $5000 to correct the errors.

We responded the home inspection report by asking for a credit and sending a copy of the inspection report.

The initial response from the seller's agent was this is As Is what do you mean you want a credit? 

I invited the agent and/ or their seller to walk through the home with me, to see the identified problems.  I also reminded the agent that if this sale dies they will need to disclose these discovered problems to future buyers.  After a short period of time they agreed to the credit.  The reason we asked for the credit was we didn't want the same person fixing doing the repairs.

Now the home has closed. 

There was an enclosed back porch that had no building permit.  This was the original reason they wanted it sold "As Is".  The seller properly disclosed that and all repair items we identified were signed off by the buyer.  The only thing that the seller would be liable for later would be if the failed to disclose a material fact.

Some time ago I represented a husband and wife on the purchase of a home, we have fondly nicknamed the "Termite House".  It was commonly believed that the only thing keeping it from collapsing was the termites holding hands.

I met my buyers one Saturday while sitting in my office.  They pre-qualified with one of my favorite loan officers who just happened to be visiting my office at the time. 

An important point that will make more sense later is that English is a second language for the buyers.  Because of that I was more cautious than normal to be sure they completely understood each step of the process.

After closing the office we went out to look at eight of their favorite picks.  While on the way back to the office the husband mentioned another home that he had seen at the bottom of Snake Hill (right below my office).  We pulled up to the front of the vacant home just after dark.  I called the listing agent to see if we could go in. She gave me the specs and lock box code and we entered the home.

What we saw next was truly amazing.  This home was a patchwork of addition after addition after addition.  The home was huge.  It was also old and what many area agents would call vintage; 45 years old and all original.

This home also had one feature that not many buyers would like.  TERMITES!  Boy did it have termites.  I reached up and could put my finger right through a beam.  It was completely hollow.

The wife looked horrified!  I looked over to the husband and he was salivating. The smile on his face said it all.  He was in love.  He was already planning the repairs and upgrades.  He was mapping out who got which room.

He said the words his wife prayed she would never hear.  Let's go back to the office and make an offer.  We fired off an extremely low offer, which was quickly accepted by the sellers.

The husband was so excited he could hardly contain himself.  The wife by now was also starting to show enthusiasm.  During the home inspection it was determined that every beam in the home needed to be replaced.  The damage was even more extensive than previously thought.  After reviewing the inspectors report, my clients came back with the expected decision.  We'll take it!  They were in love.

Now I left out the most important part of this story.  My buyer planned to do most of the work himself.  I was extremely concerned.  I have some construction experience and know how dangerous replacing those beams can be.

At each meeting I questioned him about his ability to do the repairs and expressed concerns for his safety.  He was so positive, yet I was so worried.  I do not want to sell a home to get someone hurt.  The sale went smooth.  It was the fastest closing I have had where a loan was involved.

Four days after closing I visited the new home owners.  He and three of his friends had ripped out all of the cabinets, removed the fixtures and scrapped the floors down to the concrete.  In four days they had basically completed the demolition.  They also had all of the beams cut and lined up on the floors.  He had rented several ceiling jacks and they were stacked up ready to go.

I continued to feel real uneasy about their safety and again questioned him about replacing the beams.  He said he had it all under control.  I was very worried this home may get someone hurt.

Two days later I turned on the radio as I was getting ready to go to the office.    I then heard the report that made my heart stop.  

" _ _ _ _ _o Valley home collapsed yesterday on a homeowner who was doing remodeling".  I didn't catch the complete name of the neighborhood.

Was that Waipio Valley?  Oh God!  

I scanned the dial trying to get another news report.  I turned on the TV.  15 minutes of shear torture.  Oh no I may have got someone hurt, possibly killed.  Finally I got the report again.  It was not Waipio Valley!  Thank God it was not him.

Two weeks later while visiting them again I saw one of the best remodeling jobs I have ever seen.  It turned out to be one of the best values I ever sold someone.  It also aged me 10 years.

While showing properties you run into the occasional listing that makes you ask the question... What were they thinking?

A little while back I was checking on an area just above our town that has five condo complexes.  All five complexes have a series of concrete buildings with identical floor plans all built in the early 70's.  There were several 1, 2 & 3 bedroom units for sale.  They units are popular among the investors; they generally run about $50,000 to $100,000 less than those in the planned community right next to it.  The prices very by about $20,000 from the worst to the nicest most upgraded 1 bedroom/ 1 bath unit.

Let's see we there are a few they are priced ranging from $170,000 to $187,000. 

Then there are two others one listed for $129,000 and one for $249,000. 

The one listed at $129,000 was sold in 4 days for $125,000 with the listing agent representing both seller and buyer.  I wouldn't want to be that agent if the seller ever decides it was severely under priced.

The other for $249,000 was also interesting.  The highest ever closing in that complex since construction in 1973 was $187,000. 

I called the agent and asked what a $249,000 looked liked (the listing had no pictures of the unit).  I asked why this was unit so much higher than anything else ever sold?  She responded that it had granite counter tops.

Hmmm.  $1000 worth of counter tops raises the value $60,000 to $70,000.  I am putting granite in everything from now on.

The listing recently expired after one year.  And surprise, surprise, it didn't sell.

I understand how young agents will take on anything that they can get their hands on.  I also understand that those who lack sales and negotiating skills will be afraid to say anything to the seller they may not want to hear for fear of loosing the listing.  You need to insert common sense in the process.

By picking up a bad listing:

• You will do nothing to build your reputation.
• You will spend good time and money to market a failure.
• The seller will never be satisfied with the job you did, so forget about referrals.
• The time spent on this loser could have been spent finding a money making piece of business.

You will know you have turned the corner as a professional when you go on a listing call and you there to find out two things:

• Does the seller want to list with you?
• Are you willing to accept this listing?

Always remember a bad listing makes no one any money.

I hope this will help clear up some confusion among real estate professionals and the public.

In the course of doing business we constantly see phrases, terms and slang used to describe property.  Some are subjective which makes it at times confusing.  I will attempt to clear up a few and I will ask you to chime in with a few of your own.

In Hawaii we list the condition of homes and condos in one of the following categories:

Excellent Condition:

• according to seasoned agents - ready to move in and has upgrades
• according to new agents - recently painted
• according to discount brokers - recently cleaned

Above Average Condition:

• according to seasoned agents - ready to move in, no upgrades
• according to new agents - recently cleaned
• according to discount brokers - no junk cars in the yard

Average Condition:

• according to seasoned agents -needs paint and carpet
• according to new agents - needs minor repairs, paint and carpet
• according to discount brokers - needs repairs and has junk cars in the yard

Fair Condition:

• according to seasoned agents - needs larger repairs, paint and carpet, probably dirty
• according to new agents - needs major repairs, not livable
• according to discount brokers - house fell down living in junk cars in the yard

Poor Condition:

• according to seasoned agents - needs major repairs, possible tear down
• according to new agents - house burned down
• according to discount brokers - there used to be house there

Here are a few others I have heard:

• While traveling in Branson Missouri - Gentle slope means the side of a cliff
• From one of my sellers - Partial Ocean View means if you go to the upstairs bedroom and stand on a chair you can see the ocean in a distance over the homes and trees. (This was real.  I am 6'4" and with the chair could barely see it)  I did persuade him to let me leave that out of the listing.
• From an area limited services broker - Detached home with a large garage is a duplex (attached home) with a shared open carport
• From a FSBO - Newly remodeled kitchen equals new refrigerator
• From a local mortgage broker - No down payment means you get a $20,000 credit from the seller to pay closing costs
• From rookie agent -  Maintenance fee includes Cable TV means the condo has a cable outlet.
• From another one of my sellers - Professional landscaping means he paid someone to cut the grass.
• From a potential client -  Excellent conditional and worth $200,000.00 more than any other in the neighbor.  Her explanation was that her 40 year old home had all the original cabinets and appliances.  You will not find that anywhere else.
• From an area Realtor - Vintage décor means yellow shag carpet and avocado appliances.

This was a sampling of some I have run into in Hawaii.  I am sure each part of the country has some unique to their market.

The last couple of years we in were in a market where homes were getting multiple offers.  Everything sold; seller's were not overpriced they were just ahead of their time.  People of all walks of life were jumping into the profession and hitting the streets with little to no experience.

During this period there was a trend.  We saw sloppiness, laziness, foolishness and inexperience abounding.  We saw contracts riddled with mistakes, missing signatures, not legible, incomplete and filled with contingencies.  Despite incompetence they agents were somehow able to stumble around and find homes for their clients or sell their listings.  Many times the agent on the other side carried them to the finish line.

Now the market is normalizing here in Hawaii and I am seeing contracts that are even weaker and sloppier.

This is a profession.  Your clients are paying big money for their purchases and for your fees.  PLEASE learn your trade!

The DROA should be second nature to you.  If you do not know what you are doing pay someone to teach you.

If you want to help your clients learn to write clean offers.  Make every offer an executable contract.  If the other side signs you are going to escrow. 

• Make sure you have all needed signatures.
• Have a proper description of the property.
• Attach the letter from solid mortgage lender, not Bob's mortgage service that no one has ever heard of.
• Have all needed addendums.
• Generate all documents from the computer so it is legible, avoid handwritten.
• Discuss contingencies with your client before putting silly things in the offer.
• I always include a cover letter introducing my clients to the sellers.  There home is part of them, and this is personal to many sellers.  I want them to want my clients in their home over all others.

The goal is to make the offer look so strong that the other side is afraid to lose you.  You will find seller's agents will push their sellers to take a little less for an escrow that looks like it will be trouble free and likely to go to closing over one that has contingencies and riddled with land mines.

I always call the seller's agent before submitting an offer.  I want them to know my offer is coming.  You can gain valuable information from that call.

• Do they have other offers?
• What escrow agent do they prefer?
• Are there any issues we need to address in the offer?

My goal is to be sure that there will be no need for an automatic counter-offer to fix flaws.

When representing the seller never recommend a counter offer for something silly.  If you sign you have a contract.  If you so much as you change a comma or a period, no deal!  I always ask my client's is this a deal breaker?  Are you willing to risk this deal for that?  That is what you are doing when you counter.

How many times have you seen an agent insert themselves and persuade the seller to counter an offer to pick an escrow agent of the real estate agents choice?  You should be slapped for being stupid.

Here is a real life example where I was the buyer.  I am disclosing up front that I used a local Realtor.

I put an offer on a townhouse in Tempe, Arizona a few years back.  The property was on the market for more than a year.  I gave a strong offer to the seller.  They countered me for nit picky stuff.  A total of no more than a couple of hundred dollars worth of stuff and the famous; change the escrow company.  They also shortened the time line by 7 days.  Over a year on the market, no other buyers, it was vacant and somehow 7 days mattered?  I as many people hate being nickel and dimed.  I give them a solid offer.  Not too smart on their part.

What do you think I did?  I did the logical thing and I used the 72 hours they gave me to respond to look for a better deal.  I put an offer on one up the street, had it accepted and opened escrow before the 72 hours was up.

That was an expensive lesson to both the seller and his agent.

As I stopped along the way to set up road side signs a car went by.  It had surf boards strapped to the top and a group of folks heading for the beach.

I used to do that before I had a life.  Hmmm... maybe that was when I had a life.  

I bet those part time agents are at the beach, probably hanging out at my favorite spot too.  I know most of the escrow and loan officers are there or on the golf course.  It doesn't seem fair.

So I have decided.  I am heading for Waikiki on Friday morning with my family and not returning until Sunday night.  I may check my e-mail, I may write a blog just to let everyone in snow country know how warm the water is or I may not.  The beauty of living in paradise is I can drive 30 minutes and be on vacation.

Aloha to all of you fellow 7 day a week agents who never stop to enjoy paradise.  Take a few days with your family and enjoy the holiday weekend.

In Honolulu I am seeing more and more and more broker's open houses in the middle of the week.

The hard part for those holding them is the only available agents are at their own open houses.  I have received notices of more open houses for tomorrow than I can count.

Is this a trend in other states?  If you hold broker's opens have you had success?

My only success with them has been when I have a home close to base to posts signs and catch the military going to lunch.  Other than that they have not been very fruitful for me.

If you are near a military base there are many opportunities for selling homes and picking up buyers.

Active duty military not only a base pay, but a housing allowance.  In expensive places such as Hawaii they also receive a cost of living allowance.

VA Loans have been an extremely effective tool in my business.  Most of my buyers have been either active duty military or retirees.

One great resource for posting your listings if your are near a base is the DOD referral website:  http://www.dodreferral.com/index_mil.php  I post all listings in the area there.  It is free and the response rate has been tremendous.

I am completely amazed when other Realtors ask me about my car magnets, advertising, real estate shirts etc.  I am constantly asked if these things are effective and would I recommend they try the same?

The answer is no!  Just because it is right for me, doesn't mean it will be right for you.

If you have to ask, then don't do it.  Not every Realtor wants to be recognized by potential clients or other Realtors.  Not every Realtor wants to be bothered by people trying to buy or sell homes.  If that is you stay stealth.

I on the other hand hope to have the problem of being constantly bothered by folks looking for a Realtor.

I recently needed to update my signage when I got my brokers license.  I also had signs old signs with and without my designations from various times in my career.

An old trick I used in the old days of helping political candidates is to match the signs color and have the local sign maker cut vinyl tape to cover the old lettering.  Then have them run new vinyl lettering to put over it.

I applied the tape and lettering myself.  If you are not comfortable doing it yourself you can have the sign shop do it.  This also works on your car magnets.

For about $150 I rejuvenated about 25 custom signs and car magnets in one evening.