About Bryn Kaufman

Principal Broker and Creator of OahuRE.com

Mortgage Rates Are Going Up

The Fed will start tapering mortgage purchases this year. The chart below shows what happened the last time they did this.

Rates should start going up which will help to cool this overheated seller’s market.

January 2021 mortgage rates hit an all-time low. A more balanced Real Estate market would be nice, but if rates climb too much it could start to drive down prices.

Housing Bubble?

The way I see this chart is 1955-1998 homes prices increased just .1% over inflation.

Then you have a nice increase from 1998 to 2006, but then it is offset by the decline from 2006 to 2012.

Since 2012 it has been rising, and especially this last year.

Over time, home prices can’t grow much faster than household incomes, so it seems at some point it will have to decline again.

National Association of Realtors Please Stop Hiding Listings

Hey, National Association of Realtors.

Please stop the MLSs from hiding Sold, Withdrawn, and Expired listings.

This is information the buyers and sellers need to know to decide what is the right price for a property.

Buyers can’t analyze comparables with no sold, withdrawn, and expired listings available for them to see.

They are being forced to go to a Realtor for that information.

I know you think hiding information from the public benefits Realtors, but it really does not, it just makes it more difficult for people to buy and sell homes, and that is not a benefit for Realtors.

Posted in MLS

NAR Sued for Not Allowing Contact Information in a Listing.

The National Association of Realtors (NAR) is being sued for not allowing any contact information to be put in a listing.

This has been a frustration for many of our sellers who would like to put their contact info in the MLS listing in case buyers have questions.

This would also give them an opportunity to meet a buyer directly, thereby selling with no buyer’s agent and saving the 2% to 2.5% buyer’s agent commission.

I think this is a good idea. Why not let buyers contact the agent directly or the seller if the seller desires. These are the two people who know the most about the property.

When the MLS hides information from the public, it is normally not in the public’s best interest. They hide information because they believe it helps Realtors.

Posted in MLS

National Association of Realtors (NAR) sues Department of Justice (DOJ)!

Well, that is an interesting twist, normally it is the Department of Justice that files the lawsuits.

Monday NAR sued the DOJ for investigating NAR.

NAR says they filed “a petition to quash a request by the Department of Justice that reneges on the terms of a settlement agreement that was approved by the DOJ in November 2020.”

I do think there are things NAR could do better at.

For example, stop the MLS from hiding sold, withdrawn, and expired listings so buyers and sellers can do accurate comparables without having to use a Realtor.

Allow contact information of the listing agent or seller in the listing so buyers can call the people who know the most about the listing. It makes sense to be able to speak to the people who know the most about a property, assuming they are willing to talk to buyers.

Allow the buyer’s agent commission to be negotiated and make sure the MLS follows this rule. For some reason, everything is negotiable other than the buyer’s agent commission.

Show what the buyer’s agent commission is so buyers understand better what the seller’s costs are.

Remove the rule that prevents non-MLS listings such as For Sale by Owner listings from being shown on the same screen as MLS listings. This rule hides all other listings that choose not to use the MLS. Right now it is either list on the MLS or your listing is not getting much exposure.

Allow Realtors to post another agent’s listing on Social Media if they think their buyers would be interested in seeing or hearing about it.

If I spot a good deal and want to post it on Social Media so my buyers will know about it that would be an ethics violation for me.

Posted in MLS

Real Estate Tax Credit

You could be eligible for a very nice tax credit if you own your home and no other Real Estate, and your Gross Income is under $60,000. Many retirees can take advantage of this as they don’t count assets, only income. You might have millions in your retirement account, but as long as you are able to take under $60,000 a year or less you would qualify.

The deadline for the application is the end of September, and you have to apply every year.

For more information see this page and scroll to the Real Property Tax Credit Information and Application links.

Can I Pay the Buyer’s Agent 0% Commission?

The answer is yes, you can put 0% commission into the MLS. However, is that really something you want to do?

So far no one that has sold through us has tried it. The reason is if you eliminate agents showing your property, you won’t have as much demand for your property, and the lack of demand means you might have to sell for less.

The question is how much less. If you save 2% to 2.5% buyer’s agent commission but sell for 4% less than you would have with more demand, the bottom line is you lost money.

There is no sure way to know if this will happen, so most sellers elect to pay the buyer’s agent commission to increase demand and hopefully sell faster and at a higher price because of that demand.

Keep in mind about 10% of our sellers don’t pay a buyer’s agent commission because there is no buyer’s agent. This is different than putting 0% in the MLS for the buyer’s agent commission. In this case, they offered to pay the buyer’s agent 2.5%, but a buyer came to us through our Website or through Zillow and they did not have an agent and were willing to let us represent them in the purchase. You can learn more about this option from our blog post titled “How to Eliminate the Buyer’s Agent 2.5% Commission“.

Backup Offers From a Seller’s Perspective

Our recommendation is not to take a backup offer and here is why.

When you take a backup offer, you as the seller have locked yourself into accepting that offer should your current escrow fall out. You could get an all-cash offer for a higher amount and it does not matter, you have given up the right to take a better offer.

However, the buyer in the backup position is not locked in at all. They can cancel at any time, and as a matter of fact, even if they have lost interest in your house, they do not have to cancel, they could just leave it in place and when you finally put them into escrow they still have the 7 to 12 day inspection period to cancel for any reason.

It also excludes you from going out to multiple buyers if you fall out of escrow to see if you can get a higher offer. Many times when buyers have another chance to buy a property they will increase their offer as they know last time they were too low.

I heard of one situation where the seller regretted putting an offer in a backup position because they have a higher cash offer. Now the seller is trying to get around taking it by withdrawing the listing and a lawsuit was filed by the buyer saying the seller must take their offer.

So in my opinion, why exclude yourself from taking a higher offer, and lock a buyer into a backup position, when they have no obligation to you and can cancel at any time.

You might wonder why some Realtors recommend taking a backup offer. They recommend taking it because it is better for them, not for you. They know if the current offer falls out, they don’t have to do any work as the backup offer automatically goes into escrow, and you can’t change Realtors. Once a backup offer is in place they lock their commission into place, even if they mishandle your current escrow and it falls out.

They are not recommending this because they think it will get you the highest-priced offer should you fall out of escrow. They know you are being locked in to the backup offer and can’t accept a higher offer even if it is all cash.

How to Get Your Offer Accepted When There Are Multiple Offers

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It is frustrating to lose your dream home when there are multiple offers. Here are some tips to help make your offer the one that is accepted.

Summary Check List

  1. How Many Offers Are There?
  2. Anything Special the Seller Needs?
  3. Understand Comparables Sales
  4. Decide on What Price to Offer
  5. Add an Appraisal Clause
  6. Add an Escalation Clause
  7. Pre-Approval
  8. Add the As Is Addendum – Learn More
  9. Cover Letter
  10. Agree to Not Ask for Repairs nor Credit During the Inspection
  11. Pay for Survey
  12. Pay for Termite Inspection
  13. Remove Cleaning Request
  14. Shorten Unilateral Extension
  15. Faster Close
  16. Rent Back Option

How Many Offers Are There?

First, you need to ask how many offers they have. The more offers, the higher your offer price must be. If just one other offer, you might win by going a little over the asking price, but if there are three or more offers, you will have to go a lot over the asking price to have a good chance of having your offer accepted. To get this number right, you have to know when they will review all offers. Perhaps when you make your offer, there is only one other offer, but they are waiting four days to review offers, and by that time, it looks like there will be ten offers, so you have to adjust your price accordingly and submit a new offer. Note that the more offers they have, the higher over the asking price you have to go.

Anything Special the Seller Needs?

You also want to know if there is anything special the seller needs in their offer. Perhaps a fast close, or rent back, or a long close, etc. If you can put those things in upfront, it makes your offer more attractive.

Understand Comparables Sales

You must understand the comparable sales because there is a chance the home was priced under the comparables, which is why there is so much interest. Comparable sales are critical to both buyers and sellers, which is why on OahuRE.com’s website, we emphasize making it easy to see similar sales, including not just sold listings but withdrawn and expired listings too.

Add an Appraisal Clause

If you know homes in that area are selling for $1,050,000 and the seller is asking under $1,000,000, there is a good chance the winning offer will be around $1,050,000 or higher. If you know the comparables well, you can determine the home’s value and offer accordingly.

When sellers get multiple offers over what they felt was their market value, they will be concerned about the appraisal. What happens if the appraisal comes in close to the asking price even if the offer is a lot higher? An appraisal clause is essential in a multiple offer situation. This clause states how much over the appraised value you are willing to pay. Depending on your down payment, you might need to put more money down if the appraisal is low.

For example, you might say you are willing to continue with the purchase as long as the appraisal is no less than $20,000 under your offer price. This means if you offer $800,000 and the appraisal comes in at $780,000, you won’t ask the seller for a price reduction, and you do not have the right to cancel. You can write it up where you will pay up to $20,000 over the appraised price up to your offer price. This way, if the appraisal comes in at $770,000, the seller knows you will buy the home for $790,000. You can see why the appraisal clause is attractive to sellers.

We are also seeing appraisal clauses with no limits. For example, the clause just states the buyer will continue with the purchase regardless of the appraised price.

I have seen many sellers go with the offer with the highest appraisal clause, and they counter that offer to match the highest offer they received that did not have the best appraisal clause.

Add an Escalation Clause

The way the escalation clause works is you state you will pay up to $X over the highest competing offer, and the seller will have to present that offer to you as proof of the higher offer.

Normally I don’t recommend an escalation clause because most of the time they do not work. However, I see many Realtors using it, but as we sell a lot of properties representing sellers and I see it failing most of the time.

There are times when it can be helpful. For example, with a high-priced property, if you are going to escalate $50,000 or $100,000 over the highest offer, that will catch the seller’s attention and could work. This assumes you already have an appraisal clause in place, and a large down payment so they understand you can easily afford to pay $50,000 to $100,000 more and it will not push you out of your comfort zone.

What I have noticed is normally, the seller will go with the highest offer. The reason for this is they have a feeling by pushing a lower offer higher, they are pushing the buyer out of their comfort zone, so they are more likely to ask for credit or cancel during the inspection. The higher offer is already comfortable enough to make that offer, so they do not have to push them outside their comfort zone; therefore, they are less likely to ask for credit or cancel during the inspection.

However, if your offer is close to the highest offer, it has the best appraisal clause and has the escalation clause, then there is a good chance the seller will activate the escalation clause and accept your offer because they like your appraisal clause.

Buyers should not think they can offer a lower price because the escalation clause is in place. That is a strategy that will not get your offer accepted.

Pre-Approval

A pre-approval is a must-have item for any offer, and without one, the seller will not even consider your offer. It is nice if it states your credit, income, and cash were verified so the seller has confidence your loan will close. Also, Realtors and sellers prefer working with local banks vs. mainland banks, which could be important.

Cover Letter

You could include a cover letter, perhaps with a picture of your family, but this is not a huge factor in the seller choosing your offer. These letters are not recommended by the National Association of Realtors because of potential discrimination issues, so some seller’s agents might not accept them, but you can always submit one and leave it up to the seller’s agent if they will present it.

With our $3,500 Flat Fee Selling Option, sometimes the sellers prefer to do the showings themselves rather than use a lockbox, and in that case, they meet all the potential buyers. They tell me they have good feelings about certain buyers, so if you get a chance to meet the seller, keep that in mind. The last thing you want to do is give any negative feedback or energy about the house. Nothing turns sellers off faster than a complaint about their home.

Additional Things to Do

There are other smaller things you can do such as; add the As Is Addendum, agree not to ask for repairs or credit during the home inspection (you still have the right to cancel), pay for the survey, pay for the termite inspection, remove the cleaning request, shorten the unilateral extension period, offer a faster close, and offer a free rent back to the seller if they need a couple of extra days to get out of the home after closing, and put in a seller credit they can use for their closing costs. However, these things are icing on the cake. The appraisal clause and the price you offer will be the two biggest factors in their decision.

How to Get Your Money Back When Canceling Escrow

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How to Get Your Money Back When Canceling Escrow

Many times buyers have to cancel during the escrow process. The most likely reason for canceling is they are not satisfied with the inspection. Another reason could be they do not like something they found out on the disclosure statement. The 3rd big reason for canceling is they can’t get the loan.

If they have not breached the contract, then the buyer is should get their money back. For example, if they cancel using one of the reasons above, within the time frames allowed in the contract, then they should get all of their money back.

However, if they miss a deadline they no longer have the right to cancel using that contingency. For example, if the inspection is over, they have accepted it by default and they can no longer say they did not like the inspection and want to cancel.

If the Buyer and Seller Can't Agree on Releasing the Deposits Mediation Is Used. Most Times 
They End up Splitting the Deposits.

This sounds easy enough, but it can be tricky in certain situations. For example, say there are 3 days left on the inspection, and the buyer requests some repairs. Now the buyer is waiting for the seller to get back to them. If the seller does not respond within 3 days, then the buyer has lost their ability to cancel because the inspection period is over. To prevent this the agent needs to keep track of the deadline and if it is approaching they need to try to extend the inspection period. If the seller does not respond to the extension request the buyer can decide to cancel or continue, but if they continue past those 3 days with no extension then they have lost their right to cancel because of the inspection period.

In some cases, there are still other ways the buyer can cancel even if their inspection period expired without a resolution. For example, perhaps they did not yet get the disclosure, or they have 10 days after receipt of disclosure to decide to continue or cancel. This gives them another out, so even if the inspection period expires, they could use the disclosure contingency to cancel. However, if the seller gets the disclosure to them day 1, then normally their disclosure contingency will be over before the inspection ends.

The finance contingency sounds simple enough in terms of a reason to cancel. If you can’t get the loan a buyer feels they have the right to cancel. However, there are deadlines in the finance contingency, and if you miss a deadline, just like the home inspection contingency, you lose your finance contingency. This is very tricky because the buyer’s agent might claim the buyer must cancel because of financing, but the seller’s agent might claim they lost that right because they did not deliver the conditional approval on time. So buyer’s agents have to watch this one closely to make sure the buyer stays within the timelines in the contract so they do not lose their ability to cancel if they can’t get the loan.

In our Standard Addendum, we added a paragraph to help with the finance contingency cancellation. It states if you can’t get the loan, you can cancel and get your money back. There are no time constraints in this paragraph, so it runs throughout the escrow and if it is part of the contract the buyer can cancel at any time if they can’t get the loan.

Escrow Will Not Return the Buyer's 
Deposits Without the Seller’s Approval

One other very important point to understand about escrow giving the buyer’s money back. Escrow is a neutral 3rd party. They will not make any decisions on the contract and who is right and who is wrong. So they only refund the buyer’s deposits if the seller also signs off on it.

This can be a problem at times. For example, say the buyer can’t get the loan and the buyer’s agent says everything was done on time so the deposits should be refunded. However, the seller’s agent disputes this and says the buyer lost their ability to cancel so the seller will not sign to give the buyer’s money back.

As escrow will not decide who is right and who is wrong they will hold onto the deposits until an agreement is reached. Many times this type of thing goes to mediation to help resolve it, and many times the deposits end up being split in some way between the seller and buyer to get them released.

Escrow Will Not Return the Buyer's 
Deposits Without the Seller’s Approval