Aloha, I’m Greg from Maui Home Buyers, and today I want to talk about why you might choose to sell your house in Hawaii to a cash buyer off market, like Maui Home Buyers, versus listing on the MLS with a realtor. There’s a lot of reasons why you might choose to either list or to sell off market to a cash buyer. Most notably, if you don’t want to deal with an overwhelming process including commissions, repairs, realtors, a lot of back and forth, complicated paperwork, home inspections, surveys, and so on, that’s one big reason why you might choose to sell your Maui property directly off market to a cash buyer.
Often when a property is in bad condition it can be more favorable to selling directly to a cash buyer. In that case, if there’s an extensive amount of repairs or problems with the property it typically will not be financeable, so you won’t be able to sell to a buyer that needs to get approved for a mortgage in order to purchase it. That can often lead to your property sitting on the market for a long time waiting for an investor that can pay cash and is willing to take on the project of fixing up the house. So the condition of the property is a big factor, along with your personal goals as far as selling.
We get a lot of calls from people in different situations that are preparing to sell their property. It’s pretty common actually that we end up telling them they would be better off calling a realtor to list their home if that makes more sense for their given situation. A good example of a situation that we often refer folks to call a realtor is when they live in the home themself, so they’re not losing money every month on holding costs because their monthly expenses are covering their cost of living, the property is in really good condition, doesn’t need any repairs (or if it does, they’re just minor repairs), but it’s in really good condition overall, and they’re not in any kind of hurry to sell. In this scenario, that person might be better off just listing on the MLS because if they don’t care how long it takes to sell even if it’s 6 months or longer. In this case they don’t have to worry about a buyer backing out because they found something unexpected, such as termite damage, for example (termites are very common in Maui and all over Hawaii). So that’s a scenario where you might want to list with a realtor.
Now there’s also similar scenarios to that where it makes much more sense to work with a cash buyer. For example, we purchased a during the Covid days, in 2020. The family lived in the home, it was a newer home in the Kehalani, Wailuku area, and the home was in great condition. They took really good care of it. But the owner of the home, the dad, who was an engineer for Hawaiian Airlines, had word coming down the pipeline that they were relocating a lot of employees and doing a lot of layoffs due to Covid. He wanted to be safe so that if they were transferred over to Oahu, he didn’t want to be in a position where they would be stuck paying this mortgage while they waited for their home to sell, resulting in a heavy burden on his family financially. So in his case, it did make sense for him to sell to us directly, and we were able to come up with an offer that made a lot of sense for him and we closed in a matter of days. They chose to move into a rental where they could just stay month to month, and if they needed to move, they would basically not have to pay any housing for the time where they weren’t there. So we even helped them find another rental within the same subdivision, as that’s where they wanted to stay and it worked out perfect for them. They walked away with a comparable amount of cash as to as if they had listed and sold on the MLS.
Another scenario we recently handled was a house in Waihee-Waiehu where the owner had been struggling financially and wasn’t able to keep up with the property, to the point where they actually were living without electricity. I don’t know how long, but I suspect it may have been around six months. I could tell it had been some time. They had all kinds of lamps set up and other tools to cope without having electricity. That was really tough to see. That seller actually had listed his home on MLS with a realtor, but because the condition of the property, they never received an offer. There were a few other people living there that weren’t very compliant with the sales process, along with a big dog that had bitten people, a lot of junk cars, a lot of stuff in the house making it hard to walk through. If you did walk through the house, there was so many fleas in the carpet that your legs would be covered with fleas within minutes. So that was a scenario where listing with the realtor didn’t work. I don’t think they even got to do any showings because the residents wouldn’t let them in. And even if you did get a showing, 99% of buyers are not going to be interested once they saw the extent of the condition of the property. So we were able to work something out with the seller that was exactly what he wanted.
By that time he found us, he had been waiting for months for the realtor to find a buyer. They did get one offer, I think it was $603,000. And he found us shortly after and we were able to buy his house for all cash as is and close in a matter of days for $625,000. We hadn’t even really seen the whole house besides a couple parts of the front section so we essentially bought it sight unseen. This was a smaller workforce housing type of neighborhood, so one of the more affordable homes on Maui.
So we got him more money because if he had sold with the realtor, he would’ve sold it for $603,000, minus around 35-40,000 in commissions in that case, in addition to some more closing costs, so he actually walked away with about 50,000, if not more, cash in his pocket by choosing to work with Maui Home Buyers.
So that was a really good example of a scenario where it made a lot of sense. There’s also all kinds of situations that aren’t as dire as the that case where it does make a lot of sense to sell to a cash buyer, like Maui Home buyers. Another scenario we had was an owner that lived in California and they owned a home in Maui and they were planning to come retire in that home. But during a visit to Maui they found another property that they just absolutely fell in love with. So they made an offer (it was bank owned), and the bank told them they would accept their offer, but they had to close within 30 days.
So this seller called us and said they needed to sell because they needed the cash in order to close on the new property, but even more so, they wanted to do a 1031 exchange, which would allow them to basically defer the taxes on the capital gains on the house they were selling (because they bought it for like 500,000 and they were ended up selling for around a million). And to them, it made a lot of sense to sell to a cash buyer that they could count on the close. That also happened to be in March of 2020! So COVID was hitting right when we were going through with the sale. And so there was a lot of uncertainty in the market, and a lot of buyers backing out of purchases, but we kept our word and closed the sale and it ended up being a win-win for everybody. They were really happy in the end.
One more example I’ll just cover real quick is a rental property we purchased on Maui where the owner, again, lived on the mainland in Colorado. This was a house in Kihei, Hawaii in decent condition. It wasn’t really bad. It had a couple different rental units, and one of the rental units was pretty rough and really needed a lot of TLC. Another issue was an African tulip tree, which, if you’re familiar with the African tulips here in Maui, they are invasive and they are very problematic. This tree had grown to be over a hundred feet tall. I don’t know exactly how tall it was, but it was a massive tree and it was ripping up the driveway. The concrete was popping up about two feet up, so you couldn’t drive a car up the driveway. It was also in the back of the property, near the cottage. So it was complicated logistically to access the tree to have it removed.
Then there was another tree that was causing problems. I believe it was like some sort of mango tree that’s roots were penetrating into the main sewer drain. So that was another problem. The sewer drain was busted and was estimated to be about $20,000 to replace the entire drain pipe because it was so long. So there was a few problems but nothing major. But with the seller living on the mainland, he wasn’t able to keep up with the property as much as he wanted. He would come and visit and see it and just be disappointed and frustrated with how the tenants would maintain it.
In that scenario, there was no rush at all. We had a normal closing, took 45 days, the standard timeframe that we close sales here in Hawaii. We factored in what he would’ve sold for on the MLS, which was about 950k at the time. We both agreed that would be the fair open market value. Then we deducted the commissions that he was going to be saving, which was about 45,000, I believe was what the realtors were quoting him. And then we also deducted the cost of the removal of the trees, repairing the driveway, repairing the drain pipe, and I think there was a couple other things that basically came out to around another 50k or so.
So we ended up buying the house for the 950k minus those costs, which was 855k at the time. In that scenario, along with all the other ones, they worked out to where the seller was able to walk right away with the same amount of cash they would have gotten if they had listed the house on the market with a realtor on the MLS. But they didn’t have to go through all the paperwork, be locked into a contract with a realtor and have to be forced to pay them commissions even if the realtor wasn’t doing a good job. They also didn’t have to worry about buyers making offers and then backing out or not getting approved for the mortgage, having home inspections, etc. Often a buyer will make an offer, agree on a price with you, then have a home inspection and come back and say, “the roof needs to be repaired, the plumbing problems and all this and that.” and either ask you to reduce the price, or they’re just back out of the sale. So you end up with the same amount at the end of the day, but it’s a lot more misleading I would say. It can be hard to know how much are you actually going to get at the end of the day because you don’t know how much you’ll need to reduce the price after the inspections.
So one of the things I really love about our business is that once we make an offer and we agree on the price, we’ve already factored in all of these things. We look at a lot of properties so we can pretty much see most of the stuff that’s going to come up. Sometimes we get surprised later and it hurts us because we end up not knowing about a big problem with a house before we bought it. But generally, we factor all of this into the cost before making our initial offer. And once we make that offer, we stick to it. Aside from something catastrophic happening, we don’t back out on an agreement that we’ve decided to purchase.
So that’s my favorite part, that you know as the seller exactly how much cash you’ll be walking away with from day 1 – no guesses, no surprises. There’s a lot more clarity and it’s a lot more predictable in my opinion. It’s not the right solution for every situation. There’s a lot of situations where it can make more sense to list on the open market, but there’s a lot of situations where it makes more sense to work with a cash buyer if you can walk away with the same amount of money, with much less headaches, much less hassles, and in a much shorter timeframe. From the day you call us, we might discuss the property over a couple days, but once we make an agreement, we’ll typically close anywhere between 10 days and up to about 45, depending on your timeline, the sale will be done and over with.
If you were listing with a realtor, you would be spending a couple of weeks just getting the property ready to list. You’d have to pay for professional pictures to be taken and a lot of marketing to be prepared. You can typically expect your house to be for sale on the market usually somewhere between one to four weeks. So the first month is just getting the house onto the market listed for sale. Then you’ll have anywhere from a few weeks to a few months of being on the market having showings daily, open houses, broker’s opens, touring events, etc., until you find a buyer. Once you make an agreement with that buyer, then you’ll have a similar timeline till closing as you would with us, somewhere between 30 to 60 days generally for a closing timeline. So listing on the MLS can take anywhere from, at the very shortest, about 3 months, potentially up to a year. Although typically you should expect it to take somewhere between 3-6 months total from the time you first start the process.
But if you call a cash buyer like Maui Home Buyers, you can expect to make an agreement with us with a matter of days and then close as quickly as 2 weeks after you first call us. But generally, most of the people we work with aren’t in that much of a rush. So we’ll close sometime within about a month or two months at the most from when they first contact us. We just bought a house in Kihei where the seller had first called me two years ago. He was just doing research and checking us out even though they weren’t ready to sell. They spoke to many realtors and a few other cash buyers, and ultimately decided we were there best option.
Our goal is to serve you. So if you need us to close in 10 days we’ll make that happen (that’s about the fastest you can close in Hawaii is about 10 to 12 days). But if you’re not in that much of a rush, then that’s great. We prefer to move at a more normal pace because then we can do a little bit more research and due diligence on the property.
I hope this has been helpful. Thank you for checking us out. As always, if you’re interested in getting an offer on your property, please feel free to reach out to Maui Home Buyers. You can call, text or email us anytime 24/7 at 808-359-3121. We look forward to hearing from you! Aloha.