Spring may be the best season to purchase a house because of favorable weather, but it’s also a tough time for buyers due to several challenges.
If you plan to buy a luxury home in Hawaii, you should consider bidding wars to be the greatest obstacle. Competition for an already slim inventory becomes more intense between March and May every year.
For example, you may find it more difficult to buy a condominium or townhouse in Oahu. Only 16 properties went on the market as of February 2022.
Hawai’i Life, the state’s leading luxury property brokerage, shared insights on how to avoid the pitfalls of buying a house during spring.
Find Out How To Win A Bidding War
You should quote a higher figure than the asking price, although there are other ways to win a bidding war. Hawai’i Life realtor Fawn Bertram advises home buyers to:
- Keep the inspection period as short as possible
- Prepare a pre-approval letter or proof of funds before a bid
- Suggest a flexible closing date
Homebuyers in Hawaii should also arrange an escrow deposit even with the uncertainty of a bid’s acceptance.
An escrow deposit indicates a buyer’s seriousness in an offer. Likewise, Bertram recommends an extra escrow deposit post-inspection.
A bid with an appraisal clause and certain incentives for the seller increases the chances of acceptance as well. Keep in mind that you can only portray yourself as a serious buyer through positive cash flow and liquidity.
Beef Up Your Cash Flow And Liquidity
Unless you belong to the high-net-worth or ultra-high-net-worth class, you’ll need a strong financial portfolio to go toe-to-toe with other bidders.
You can’t float a bid that’s higher than the sale price without the necessary funds, including an approved mortgage loan. For example, you should pay off or minimize loan obligations to improve your debt-to-income (DTI) ratio.
A good DTI ratio doesn’t exceed 36% inclusive of all expenses, according to Fannie Mae.
If you haven’t incurred debts before buying a house, you shouldn’t spend more than 28% of your income on mortgage payments.
Let’s say you earn $10,000 every month; this means that monthly mortgage payments should be equal to or less than $2,800.
Choose Another Time To Buy A Home
If spring proves to be a more difficult time to buy a home in Hawaii than you expected, pick another time to buy a house.
According to Hawai’i Life agent Cherie Tsukamoto, homebuyers may notice fewer listings in spring. In 2021, the available listings became 50% fewer from March to May.
For this reason, Tsukamoto recommends an alternative time based on your current situation. In case spring is indeed the best season for you, be prepared to pay more.
Some of the home-buying prospects in Hawaii for 2022 include higher mortgage rates and short days-on-market for listings.
Certain areas may also command higher home prices based on Hawai’i Life’s database. In Oahu, for instance, the average home cost $1.1 million as of March 2022.
Learn More About Investment-Worthy Areas
Hawaii attracts property investors because of rapid price appreciation, especially in certain areas. Tsukamoto ranked Oahu among the best places to invest in real estate such as luxury homes.
For example, the median price of a house in Hawaii’s third-largest island cost $150,000 in 1985. The current average price as of March 2022 represented a huge increase in less than 40 years.
Home prices in Oahu and elsewhere in Hawaii may only continue to rise, particularly for luxury properties.
Matt Beall, Hawai’i Life chief officer and principal broker, anticipates more sales activity in 2022 with the return of international buyers. For this reason, prospective luxury property investors in Hawaii should expect tougher competition.
There’s a “considerable amount of pent-up demand” in Oahu, while buyers in Maui and Kauai may struggle with “inventory shortages,” according to Beall.
Choose A Top Brokerage
A reputable property broker like Hawai’i Life solves the last piece of the puzzle for buying a home during spring.
If you’re a first-time luxury property buyer, ask your Hawai’i Life agent for an analysis of comparable home sales instead of property listings.
By doing so, you’ll have a clearer perspective on your desired property’s actual market value before submitting an offer.
Click here to find out more about Hawai’i Life and how it closed transactions above $3 million more than any other firm in Hawaii since 2012.