The implication, of course, is that you have a top price. I believe that it's a real mistake to set a top price when buy­ing Honolulu real estate. The reason is that at least half the deal is terms. What if the seller wants more than you're prepared to pay, but offers you such favorable terms that it's a bet­ter deal for you? Setting a top price could keep you from making this deal. Be flexible. Remember, buying real estate is always a combination of price and terms. Sometimes you may actually want to offer far more than your "top" price, to get the better terms!

If we all bought for cash, then price would be everything and we could set a top limit. But the truth is very few peo­ple pay cash for homes. Almost everything is financed. And therein lie all kinds of opportunities.

For example, let's say that you want to buy a home, and you don't want to pay more than $125,000. But the seller wants $130,000 and won't budge.

You aren't paying cash; you're getting a mortgage. So, instead of getting a new first mortgage for the entire amount, ask the seller to carry back a second mortgage for 20 percent of the sales price (you'll put 20 percent down and you'll get a new first mortgage for 60 percent). Yes, you'll pay what the seller is asking, $130,000. But you want the seller to carry the second mortgage at an inter­est rate of 4 percent.

Now, is that a good deal for you? Chances are the new first mortgage will carry an interest rate of close to 8 per­cent, depending on the market at the time. Your second will be for half that amount. Think of the interest you'll be saving. On a $20,000 mortgage, that's $800 a year. In 7 years (statistically about as long as you'll keep the house), it will be $5600. It's almost the same as paying $5000 less for the property!

Is it a good deal for the sellers? Could be, if they are hung up on getting their price. I've seen many sellers accept onerous terms, just so they could say they didn't budge below a certain amount. No, you didn't get your price; but you did get the house, and the terms you got offset the extra amount you paid. It's definitely a win-win situation.

The moral of this story is to be very careful when talking about top-price offers. You should never determine in advance what your top price is. Just get a feel for what the market value of the house is and what you can afford to come up with in terms of the down payment and monthly payments, then see if a deal to satisfy all can be negotiated.