You’re starting to put together some of the necessary information for purchasing a home. You have an idea of the kind of home, neighborhood, price range and other factors but there are some terms that keep popping up that you don’t fully understand. What is the difference between “fee simple” and “lease Hold” or oceanfront versus beachfront property? Here, I’ll try to enlighten you on some of these terms and other tips for buying a home.
Fee Simple Versus Lease Hold
Although fairly common in the real estate world, the terms fee simple and lease hold are foreign to the average home buyer. Simply put, these terms refer to the two ways a Hawaiian property owner holds a title to property.
Fee simple is the most common way that real estate is owned in the United States and is a kind of freehold ownership. Moreover, fee simple ownership represents total ownership over a piece of property limited only by certain government powers like taxation. In effect, fee simple ownership means that you own both the land and all improvements on the land.
On the contrary, leasehold is another type of ownership where you pay for the right to occupy some land for an agreed length of time. In this case, you own only the improvements on the land, rather than the land itself. Generally, the land where the improvements sit is owned by a third party who owns a long term lease on the land and collects monthly rent for you to use the land.
Clearly, many buyers prefer the fee simple ownership situation because they are more confident with their rights over the land. Because leasehold ownership started in 1961 and the majority of the leases were 50 year terms, these leases are going to come to terms very shortly. If you enter into a leasehold agreement you need to be careful that you fully understand the terms of the lease and when the lease is up for renegotiation.
In theory, the market value of a fee simple property and a leasehold property are the same but there are certain factors that make a real world difference. Future lease payments and the growth rate of comparable Maui real estate have a moderate effect on the value of leasehold properties.
Oceanfront Versus Beachfront Property
We all want to live by the water, don’t we? Sitting on your patio, sipping cocktails, and entertaining guests while the sun descends over the ocean is our ultimate Hawaii dream. And so we come to talk about the difference between oceanfront and beachfront property.
So let’s talk about beachfront; and these properties are exactly what the name implies. A beachfront property would be adjacent to one of Maui’s sandy shores. Essentially, you would be able to walk from your house directly onto the beach.
Oceanfront property on the other hand are homes that are adjacent to the ocean but do not have a beach. This means you are right on the water but you likely have some rocky coast or cliffs in front of you rather than a soft, sandy beach.
Regardless of whether you have oceanfront or beachfront property, your property line stops at the vegetation line, the point where natural vegetation ceases. Typically, the vegetation line is a few feet past the highest tidal point. Under Hawaii law, any area between the vegetation line and the coast line is public property and fully accessible by the public.
Residential Versus Vacation Condos
Next we can take a quick moment to talk about the difference between residential condos and vacation condos; and this is an important distinction since you can save quite a lot on property taxes for residential condos. The main difference between the types is how you use the land. Residential condos are your primary or secondary residence while vacation condos are used for the purpose of renting out to secure income. Certain bylaws may restrict using condos as vacation property so be sure to speak to your Realtor® about your options.
Property Tax Exemption
The Maui County property tax exemption is available to anybody who has bought or is planning to buy a new home and will make that home their principle residence. This is available for any residential property type, whether single family dwelling or condominium, so long as you plan to live here full time and it is your primary residence. Secondary residences, vacation homes, and investment properties are not eligible for the property tax exemption; however, if you have recently purchased or are going to purchase a new home, you can save yourself as much as a third of your annual property tax.
Getting the property tax exemption is simple. Just ask your Realtor® to provide you with the property tax exemption form and they may even fill it out for you. The property must be your primary residence and the forms must be completed and filed before December 31st of the previous year to qualify for exempt status in the following year. In other words, to qualify for the property tax exemption in 2011 you must submit your forms before December 31st, 2010.
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Perhaps one of the biggest obstacles faced by potential home buyers is finding appropriate properties. There is a wealth of information available to prospective buyers, but knowing where to look for that information can be tricky. In the past, we relied heavily on real estate agents to guide us in the direction of suitable properties but as technology has improved many buyers try to gather information before they visit a real estate agent. Indeed, online searches can provide many of the details about a property that we could only get from a real estate professional even 10 years ago. Most home buyers are becoming much more sophisticated in their knowledge of available properties and so can you. Currently, you can search for a new Maui home in a number of ways: the MLS System, available listings on local real estate websites, and other online tools.
MLS System
The MLS System is your most comprehensive tool for accessing information about various properties. MLS stands for the multiple listing service which includes information about every home listed for sale by a real estate agent in Maui. In the past, most of this information was available only to real estate agents, but there are a number of online searches that can give you much of the information you need. In fact, many local real estate websites have links to their own Maui listing service where you can conduct a search of all properties in an area.
You also have the opportunity to refine your search in a wide variety of ways:
- Property Type
- Location
- View
- Land Tenure
- Price
- Number of Bedrooms
- Number of Bathrooms
- Interior and Land Area
These MLS searches are truly remarkable in the sense that you can be very specific or very broad in your search. For example, you can search all 2 bedroom properties in Maui listed at under $500,000 or you can be incredibly detailed in you search and choose a bank owned beach front property in the district of Haiku with a golf course view. For many prospective home buyers, an MLS search is a great starting point for their property search.
Listings on Real Estate Websites
In addition to an MLS search, you can also check local real estate websites for their own listings. Most sites, like mauisales.com, offer a page that lists their best properties as well as some pertinent details about these properties. Some real estate sites will even let you search their properties in a similar way as the MLS search.
You can refine your search by property type, price range, and location or you can browse all the listings of a particular Realtor®. Whether you want to work with a particular local Realtor® or you just want to get a sense of what properties are available in Maui, this is another great source of information. Even a simple Google search of “Maui Realtors®” will put you in contact with various agencies on Maui.
Other Online Tools
Once you have done some research about the homes that are available in Maui, you’ll have a sense of what your money can buy and where you should focus your search. Obviously, different regions of Maui offer different property types and depending on your budget you may or may not be keen to buy in a particular area. You should start to rely on other bits of information to help you in your search. At this point, you’re ready to start talking to real estate agents. But you can also use the tools they provide on their websites.
At mauisales.com you’ll find a weekly newsletter that should provide you with market information, highlighted homes, and specialized properties.
Moreover, they have comparable sales tools that allow you to compare sales figures against a set of criteria.
The value of the comparative sales tool is that it allows you to see a wide range of examples of a particular type of property, along with their list price and sales price. Therefore, you’ll be able to get a very good idea of what you should expect to pay for that type of property.
Finally, mauisales.com also provides you with detailed information about all of their properties. Through their “Property Details” button on the listing page you can find information about the location, tenure, status, and property type in addition to detailed remarks that give you a more intimate picture of the property.
You may also find information about the listing history, the interior and exterior features of the property, and a detailed location map. You’ll even find property details that may include a floor map, community and neighborhood information, amenities, photos, and more.
So while you may not know much about Maui properties at the moment, you can learn a great deal with just a bit of time on the internet. Use the resources available to you to make yourself a savvier home buyer and to get more involved in the home search process.
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Maui County is the collection of 4 separate islands in the state of Hawaii: Lana’i, Kaho’olawe, Moloka’i, and of course Hawaii’s second largest island Maui. The region is known for stunning landscapes and tropical weather and as such has become one of the top tourist destinations in the United States. Recently, real estate in Maui has begun to see a resurgence and if you’re interested in Maui properties, the Smith Team can give you valuable insight into different regions on the islands.
Sub-regions
Maui is divided into several distinct sub-regions that are defined by major geographic features like mountains or valleys. Generally speaking, each region is met with a unique climate and these regions can be broken down crudely as follows:
- Windward lowlands
- Leeward lowlands
- Interior lowlands
- Leeward High-altitude mountain slopes
- Leeward Low-altitude mountain slopes
- High mountains
Climate
As with all the Hawaiian Islands, Maui’s climate is defined by a two season year. Most of the regions throughout Maui will have mild, consistent weather patterns characterized by warm temperatures and high humidity. However, geographical idiosyncrasies in Maui allow for much more variability in weather patterns than other Hawaiian Islands and rainfall, cloud cover, and winds can differ markedly across regions. Indeed, more than any other of the Hawaiian Islands, Maui’s weather is influenced by marine environments. Weather patterns tend to be determined by elevation and the effect of trade winds and because of the rugged topography of Maui weather patterns are highly variable.
Since the climate in Maui is dependant on the geography, we see patterns emerging in each of Maui’s distinct sub-regions. In the windward lowlands, which are generally below 2,000 feet and located on the north and north-east sides of an island, the weather is moderately rainy as the trade winds bring showers. It’s not uncommon to see overcast skies and temperatures tend to be very consistent.
In the leeward lowlands temperatures during the day are slightly higher while evening temperatures are cooler, on average. For the most part, the weather is dry but it is not uncommon to see periodic rain showers that follow the wind patterns. The interior lowlands are marked by more variable weather and this region will share weather patterns with other lowland sub-regions. Strong afternoon showers and hot afternoon weather is quite common.
The highest rainfall averages come in the leeward high-altitude mountain slope regions. Cloud cover is predominant and extensive rainfall is observed year round. The temperature is usually quite mild while humidity is relatively high. On the leeward low-altitude mountain slope side there is also more rainfall but less than on the windward side. Higher temperatures and cloud cover are also common.
Finally, the high mountains of Maui exceed 3,000 feet and as your elevation increases, rainfall decreases quite rapidly. Relative humidity is fairly low but you also see the lowest temperatures in Hawaii. In fact, air temperatures can drop below zero.
Throughout Maui, rainfall is much more common than you would expect. Nevertheless, showers tend to be light and they don’t last long. Thunder and lightening are very rare and during the summer we see dryer weather due to the dominant trade winds.
Economy
In Maui, there are two predominant industries: agriculture and tourism. In recent years, the government has been trying to encourage technology companies to invest in Maui because its business environment is ideal for expansion in such industries. Still, coffee, macadamia nuts, papaya, tropical flowers, pineapple, and sugar are the major exports of Hawaii and this holds true for Maui as well. Maui Land & Pineapple Company and Hawaiian Commercial and Sugar Company are the major agricultural players in Maui. Some 37,000 acres of sugarcane are produced by Hawaiian Commercial and Sugar Company making it the largest operation of its kind in Hawaii. In addition, Maui has become an important location for space research and is home to advanced satellite tracking facilities as well as research and development facilities that are world renowned for data collection and communication support.
As of March 2009, the unemployment rate spiked to a staggering 9% due to growing economic concerns throughout the country and the world. However, over the past several months the island has seen dramatic improvements in industry that suggest unemployment rates will start falling very soon.
Tourism
Tourism is obviously one of the leading industries on the island. The major tourist destinations in Maui include Hana, Lahaina, and Haleakala National Park. Maui is blessed with curving roads, soaring mountains, black sand beaches, and luxurious waterfalls making it a dream spot for any tourist. Visitors tend to congregate around West and South Maui and 2004 figures show 2,207,826 people visiting Maui. By far, domestic tourists make up the bulk of visitors to the island but there is also a thriving cruise ship industry.
Maui Landsat satellite photo source: [1]
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Some good news about home sales has come from the Realtors Association of Maui as figures continued to rise last month. In fact, the sale of single-family homes rose 25 percent compared to a year ago while condo sales jumped a staggering 82 per cent. These increases were unexpected, but welcomed, to say the least.
More importantly, there is some early evidence that prices are starting to rise too. In fact, the average price for a condominium was actually 9 per cent higher in March 2010 than the same month a year ago. The figures show a total of 70 single family homes were sold this March which is 14 more than the total from the same month in 2009. The number of condos sold nearly doubled from 67 last year to 122 this year.
This all means that the first quarter of 2010 saw house sales rise an impressive 42 percent from 121 sales last year to 172 this year. As far as condos are concerned, the figures were also impressively high. In the first quarter of 2009, 259 sales were recorded while this first quarter saw 291 sales finalized.
Without question we are seeing the signs of recovery in Maui real estate. Recently, experts at the University of Hawaii affirmed that the market is rebounding. Economic indicators are improving and this can be seen in the improved sales figures during the first quarter of this year. Still, experts are predicting peaks and valleys in this recovery and the market will likely follow economic trends.
Fortunately, tourism is picking up dramatically and there looks to be an even larger number of visitors coming through as the summer heats up. Obviously, this will lead to increased spending and hopefully a positive impact on the job market. Construction looks to be rebounding the most slowly as the recession maintains its foothold.The national economy is on the rise and with an increase in tourism and the real estate industry improving the light at the end of the proverbial tunnel is certainly in view
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Buyers and sellers alike will love the new Comparable Sales feature on the Smith Team website. Whether you’re trying to decide a fair offer for a property or you want to know how much you can expect to sell for, the Comparable Sales feature will be an invaluable resource for you.
This new feature compiles sales figures for similar properties matching your selected criteria. Most importantly, these figures will represent the sales by all agents, not just the Smith Team. The Comparable Sales feature therefore will give you a fairly good idea of the price for a particular type of property in a particular region. Sellers will be able to determine a fair asking price while buyers will be able to determine a fair offer. In addition, you’ll be able to get a sense of market conditions at a given time.
Most importantly, the feature is simple to use. Once you find a property of interest, you’ll notice the “Comparable Sales” button just above the remarks section.
Click on this button and you’ll be taken to a list of similar sales reported over the last 6 months on the MLS. Our Comparable Sales feature is easy to use and puts valuable sales information at your fingertips.
Some of the information you’ll get from the Comparable Sales feature include:
• Close date
• List price
• Sold price
• District
• Address
• Number of bedrooms and bathrooms
• Square footage (living and land)
• Views
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Every year the Hawaii Business magazine painstakingly researches the sales figures of Realtors® throughout the Hawaii area and reports the Top 100 Realtors® in a special real estate issue of their magazine. Despite a struggling real estate market, certain Realtors® have managed to find success even in some of the most difficult areas and Ken Smith is an example of a Realtor® who has been able to maintain strong sales figures. But Ken isn’t alone in taking credit for these accomplishments; indeed, the entire Smith Team, namely Ken, his two sons Greg and Jeremy, and his daughter-in-law Melissa have all contributed their skills and resources to make this team a success.
The Top Realtor list is compiled for Hawaii Business magazine by Grant Thornton LLP, one of the leading global tax, audit, and advisory firms in Honolulu. By collecting data about various Realtors®, specifically their total sales volume in the single family and condominium home resale market, the list is created and represents one of the only objective reviews of Realtor® performance. The public listing is an acknowledgment of the fine sales skills of the top Realtors® in Hawaii.
Moreover, the list is meant to represent only sales by primary listors and original developer sales are not included in the figures. In 2009, the Smith Team accumulated a total of $19.27 million in sales and securing them a spot on this year’s list of Top 100 Realtors®. These Realtors® will then be celebrated at an exclusive event at the Royal Hawaiian Hotel.
Perhaps most importantly, this honor acknowledges the hard work and dedication that Ken Smith and his team put into their work. Despite falling sales figures in the overall real estate market, the Smith Team has been able to successfully sell homes throughout Maui. Even in the most trying of times, they work tirelessly to meet the needs and expectations of their clients. The Top 100 list released by Hawaii Business magazine proves that the Smith Team has the skills to negotiate fair sales even in the most difficult economic climate.
As the real estate market in Maui and throughout Hawaii climbs its way back from these more trying times, look to Ken Smith and his team to improve on their successes. The next several months should be a very interesting time in Maui real estate and there’s no doubt that the Smith Team will be leading the charge toward recovery.
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The past couple of years have marked trying times in the state of Hawaii but many will be happy to hear that leading economists are pointing to early signs of recovery. The University of Hawaii Economic Research Organization announced that despite low visitor figures, Hawaii is on the path to recovery.
As the tourist industry continues to slump, experts from the University are predicting a 2.9 per cent gain in arrivals for 2010 along with improvements in gross domestic product (GDP). Indeed, figures for Hawaiian GDP call for a contraction of about negative 0.2 per cent this year but point out that this is actually an improvement on the 1.3 per cent contraction that was estimated for 2008. Likewise, 2009 saw a GDP contraction of 0.4 per cent so while economists are cautiously optimistic there are early signs of improvement. Moreover, by 2011 these same economists predict GDP growth of 0.5 per cent.
The past year has certainly been a turning point for many businesses in Hawaii. The mostly unexpected economic downturn has prevented development and wreaked havoc with the tourism industry. Yet, as world and national economic conditions continue to improve, leading economists see bright things for the future of the Hawaiian tourism industry. At the moment, Hawaii is still suffering from serious state budget woes and job loss statistics whose impact is just starting to be felt.
Still, the University of Hawaii Economic Research Organization sees improvement in jobs figures in the near future. This year may see continued job losses, up to about 0.8 per cent, but as tourism improves the main job sources in Hawaii (retail, the visitor industry, and government) will see more jobs returning to the market. And while noticeable increases in jobs isn’t forecasted until 2011, visitor spending, construction employment, and building permits all seem to be recovering suggesting more future jobs.
Even inflation has been halted by the struggling economy, but the University is expecting a slight bump in inflation this year.
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Have we hit bottom yet? That is one of the most frequently asked questions we get.
For the answer to this question, one should look at the statistics and see how they compare to past cycles. When you do that, we believe the data suggests signs that this current phase has indeed bottomed out.
For those of you have the time and interest, we highly recommend you listen to the Video presentations on the State of Real Estate 2010 by an esteemed panel of experts. Once you have done that, we would appreciate your feedback, and the conclusions you came to.
We don’t expect to see a quick recovery on Maui due to the large number of foreclosures that are still in the pipeline, but at least the light and the end of the tunnel has gotten much brighter.
Have a wonderful week!
Mahalo Nui Loa,
The Smith Team
P.S. New Website Feature - We are very excited to announce that you can now pull up Comparable Sales information on our website. Once you do a search based on the criteria you selected, click on any one of the properties that came up and hit View Details. You will then see links in the Property Information Section (Just Above Remarks) as well as above the photos. The comps shown will be to all sales within the last 6 months reported in our MLS. Also, after being down for awhile, we again have the information from the Public Tax Records for all properties on our website. Click here for a sample.
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Have you noticed that our introductions seem to be getting shorter and shorter? The reason is that as the market has improved, we have become so busy, it is a full time job just keeping up with the e-mails, offers, and escrows.
Don’t get us wrong. We are not complaining. In fact, we are delighted by the tremendous increase in e-mail inquiries and new business.
Sometime within the next week, we are hopeful to roll out a new upgraded version of our website that will allow you to search sold comps going back 6 months. We are in Beta testing right now.
It is desire to provide you with the most up to date and complete information possible, so you can make an informed decision on buying and selling real estate on Maui. If there are any specific requests you might have, please let us know.
Have a wonderful week!
Mahalo Nui Loa,
The Smith Team
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Obviously, the resort real estate market throughout Hawaii has seen better days but some indications are suggesting the worst is over, or at the very least is nearly over. There are still gains to be made but some analysts are reporting that the evidence points to the market hitting bottom in the final quarter of 2009.
For three years from the beginning 2005 to the end of 2007 resort real estate in Honolulu was flying high. Resort residential real estate brought $2.5 billion or more in each of those years while 2008 saw that number drop to $1.7 billion and an even further drop to $1.3 billion in 2009. These real estate woes were experienced country-wide in conjunction with failing financial markets.
However, signs of a turnaround seem clear. While average prices dropped nearly 20 per cent over 2009 resort real estate prices continued to rise and this despite a major drop in the number of sales. However, these figures give conflicting pictures as developers hurried to complete project all over Hawaii and many of these units had been sold in advance for higher prices. In fact, some of these units would have been sold as far back as 2006 when the markets were booming.
As the past 2 years have made their mark on the financial and real estate markets, average prices are starting to be a little more realistic. Some of these properties that were sold aren’t manageable by the buyers anymore so they go back to the developer and it returns on the market as a resale. Even if the units are brand new, they’re selling for less.
In 2009, the average closed price actually dropped compared to the 2008 figure of $1,552,536 to $1,240,831. Typically, the resale market isn’t affected by developer closings. Most of the drop in prices seems to have happened between the middle of 2007 and the middle of 2009 but they’re starting to stabilize. In fact, as these prices have leveled out, sales have increased from around 125 per quarter to nearly 200 in the final quarter of 2009.
In addition, there appear to be a lot more people in the market looking for a great deal. These bargain hunters have money to spend and they may be the motivating factors in market turnaround.
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