* Determining Your Offer Price
* Comparable Sales in the Public Record
* Comparable Sales in the Multiple Listing Service
* Comparable Sales – Pending Transactions
* Other Factors Influencing Your Offer Price
- How much have recent comparable sold for?
- How many similar homes are for sale?
- Is this a unique buying opportunity, or will I be ok with not being able to buy this home?
- How does the size of the house and the size of the lot compare to the others in the neighborhood?
- Am I buying this home for myself to live in, or as a speculative investment?
- How motivated is the seller? Does he need to sell now?
- How long has the house been on the market?
Let’s say a seller of a house in Manoa is asking $900k for his house. You see that there are no other homes like it for sale, and the house has been on the market only 10 days. Also you notice that similar homes had previously sold for about this price. In this case you might want to offer close to or at the asking price.
In the opposite situation, a seller of a Diamond Head house has his home listed for $700k. However there are 9 other similar homes that have all been on the market for over 90 days. In this case you probably want to make an offer well below asking price. If you find out that the seller is moving to another state, that probably means he is even more motivated than the other sellers.
The public record of homes sold can be accessed through the bureau of conveyances, but it may not be very convenient for most people. Also the records are kept in other places, like the public tax records, if you can figure them out. There are many websites that offer comparable sales records, but the easiest thing is probably to contact me so that I can look it up in the MLS. The MLS also is connected to the tax records, so that even sales by owners are available.
Comparable Sales in the Multiple Listing Service
As a member of the Honolulu Board of Realtors, I have access to every listing in the Multiple Listing Service, or MLS. It shows homes for sale, in escrow, sold, expired, and withdrawn. The MLS is a very powerful took that allows me to search for dozens of criteria at a time. If you want only houses with an in ground pool, with 5 bedrooms, over 9000sqft of land, fee simple, with an ocean view, on a golf course, with city sewer, I can find it. Pretty much any combination of factors can be searched. It takes only a few clicks to get every sale in a particular neighborhood, but it can take quite a while to adjust all the different properties and find the actual value of a specific home.
When we say “Comparable” in Hawaii, we don’t always mean it. Often a house in an area like Kaimuki or Pearl City can be very unique, with not too many similar homes nearby. The compare the homes in the area even if they are quite different, making adjustments for size, quality, age, and upgrades. It’s not an exact science, but once you’ve compared a few hundred homes, you start to get very good at it.
Comparable Sales – Pending Transactions
Sometimes it’s useful to use a comparable property that is in escrow, especially if the market is moving quickly either up or down. Pending means it hasn’t closed the transaction yet, but it has a contract on it. Unfortunately most Realtors won’t tell you what price they went into escrow for, unless it’s full price. It can be useful because the most recent data is data that’s in the future!
The main reason to use pending transactions is to show that a certain list price was able to get a home in escrow. If you see that a nice house in Hawaii Kai was listed at $900k and your home is similar, then you might infer that a $900k list price would be ok for your home too. Who knows if he will actually sell for $900k, since maybe he got an offer for $850k. Still, it shows that $900k was good enough to attract a buyer.
Other Factors Influencing Your Offer Price
You have to realize that for each buyer, motivation is different. Two buyers might offer totally different prices for a house, depending on their personal motivation. A motivated buyer, such as someone who is living in a hotel while he looks for a home, is likely to offer more for the same house than a guy who just wants a bigger house, but has a comfortable house already. There can be other factors, and it helps to think through all your motivations for buying before making an offer.