Condo unit priced higher than comps, what should I offer?

Question

We are looking at STR condos in Hawaii, and really like a 1 bed/1 bath partial ocean view unit recently remodeled, offered for 500K. The agent pulled comps from the same resort, and the 6 1 bed/1 bath units sold in the past year sold for an average of 400K. The one unit that matches the same square footage and same view sold for 409K. The listing agent says the resort just paid an assessment and the unit was just remodeled, and the owner wants to recoup those costs. I get it, but pricing the unit 100K over other units does not seem sustainable. I was considering offering 450K, but even that seems high. There is no rental history available as the resort just completed construction, according to the listing agent, but I was able to search listings in VRBO to see that it would pencil out at 450K. Advice?

Greg Gaudet · Answer

Which island? Which condo building?

Kinda sounds like you're talking about Napili Surf... If so, they just did an extensive remodel on the entire project. I would hate to have been an owner there for the last 2 years, but going forward should be a lot better. Which is why no ones selling there. They want to return on the assessments they just paid and the down time (over a year) of lost rental income. Also we've had a lot of price appreciation over the last couple years. In my condos, prices are totally different today than they were 6 months ago, let alone a year ago. Maybe you can use the lack of comps in your building to your advantage to save you from paying for some of that appreciation...

You can always get it under contract and if you decide the price is too high, or appraisal doesn't come in, etc., renegotiate or walk. The HAR PC allows buyers to cancel based on financing - we usually write in "$$ by way of a new first mortgage at rates and terms acceptable to buyer". Then if we need to cancel we can usually just cite that the rates and terms we were offered were not acceptable. Talk to your Realtor.

But before you even make an offer you should talk to @Christian Cramer or Brandon Holmes, both at Hawaii Real Estate Team. They split their commission with you, so on a 500k purchase you'd get like a $7,500 check at closing. Brandon Turner used him to buy his house on Maui just to get the cash rebate.

As long as you haven't signed a buyers rep agreement you should really talk to one of them.

Abel Curiel · Answer

Hey Jennifer,

I totally agree with you, a $100K above-comp asking price is not the way to go about this!

What kind of improvements were made in the building/unit? Any new or upgraded amenities? i.e. Laundry, gym, pool, tennis court, etc.

As far as offering $450K, my advice is to look into comps from other condo units in the area. I'm not sure about your particular market, but the appraisers I work with typically pull up nearby comps from different building in order to run their analysis. This is usually done in situations like the one you're describing- where there aren't any comps in the building to justify the asking/purchase price.

If you don't already have one, hiring a buyer's agent may be helpful. They can pull up comps that you may not have access to. Sellers oftentimes compensate the buyer's agent so you may not have to pay anything for their service.

Lastly, if you're getting a mortgage, you'll be protected from overpaying. In most sales contracts, the attorney will put in a financing contingency. Part of the contingency protects your deposit in case the property does not appraise for the purchase price.

I hope this helps!

Abel

Mark Waite · Answer

@Jennifer Creager If you are looking on Maui, it’s no surprise. The vacation rental market up to around $500k is definitely a seller’s market. It’s unfortunate but the reality is that STRs are selling at a premium because of their own income potential.

I would still make offer as @Jake Stuttgen and @Abel Curiel suggested. You never know how motivated the seller is as days on market increase.

Jake S. · Answer

Hey @Jennifer Creager It doesnt hurt to offer what you are thinking. Just have your reasoning within the offer. If it's much nicer than the other units, it'll definitely cost more, now in terms of that much more, I doubt it since it's only a 1 bed 1 bath.

Condo unit priced higher than comps, what should I offer?

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