When we represent you, we will go above and beyond to find the right home for your family. Whether you are purchasing a private residence or an investment property, buying a home in Hawaii will likely be one of the most expensive purchases in your lifetime. It is our job to not only find a suitable home, but to get it for a great price.
STEPS TO BUYING A HOME
REACH OUT TO OUR TEAM:
We will need to know some information about you:
- Your legal name.
- Your email address.
- Your telephone number.
- Your current address.
Tell us about your dream home:
- How many bedrooms best fit your needs?
- Will you need a fenced yard space for children or a dog?
- It can get warm in Hawaii, do you need AC?
- Should the house be turnkey or is a fixer okay?
- What is your preferred location?
- Do you have any special needs?
Call us at 808-800-1823 or email firstname.lastname@example.org.
GET PRE-APPROVED FOR A LOAN:
In Hawaii, all offers to purchase a home require proof of funds to show the seller that you can afford the home. If you are paying cash for the purchase, great!
If you will be using a mortgage to purchase the home, we can help you find a mortgage broker or lender to assist you in the funding process.
VA buyers are not required to to have a down payment to purchase a home. Often the interest rates for VA loans are slightly lower than conventional loans. Since VA loans do not require private mortgage insurance, the monthly mortgage payments are even lower. A VA loan provider will request the following paperwork to get pre-approved:
- Completed certificate of eligibility form (VA Form 26-1880).
- The most recent LES or pay stubs (one month).
- Last two years W-2 statements and tax returns (if self-employed).
- Last two months of bank statements (all pages).
The pre-approval paperwork is similar for conventional loans. The lender will likely ask you for the following documents:
- Copy of your driver’s license for all parties who will be on the loan.
- Copy of your social security card.
- If you currently own a home, a mortgage statement of monthly payments.
- Most recent bank statements (all pages).
- Pay stubs for the past two months.
- If you currently own a home, the property tax bill.
- Retirement and investment account statements.
- Last two years W-2 statements and tax returns.
Once you have submitted this paperwork to your lender, you will have your pre-approval letter within 2-3 days. The lender may ask for more documentation during the funding process to be certain that a mortgage payment does not create a financial burden on your monthly budget.
Keep in mind that in addition to your downpayment, there will be other costs involved in the purchase of a home. The home inspection can cost between $400 and $600, which is paid directly to the inspector during escrow. The lender will require a appraisal, which will cost between $700 and $800 and this will be charged to you at the time of the appraisal. There will also be closing costs, which are about 1.2% of the sale price. If you were to purchase a $800,000 home with 15% down. Your out of pocket costs to purchase the home would be approximately $10,850 plus the $120,000 downpayment.
If you have any questions, call us at 808-800-1823 or email us at email@example.com.
FINDING YOU HOME:
Based on the information you provided in our initial conversation, we will set up a property search on the MLS to find your dream home. These emails will come directly from the hawaiicentralmlsservice.com with a complete list of available homes that match our criteria. This site is used by realtors and is more accurate than online sites, such as Zillow and Trulia. There will be no need for you to continue a search there. Furthermore, the online sites do not show when a property is in escrow, which can create some confusion and disappointment.
Let us know if you see a home that looks promising and we will arrange a showing. Keep in mind that some homes are occupied by the owners or tenants and it may take 48 hours to gain access. We will also need to know your schedule to coordinate the showing appointment.
During the showing, there are several rules of etiquette:
- Don’t assume that you may use the restroom.
- Avoid touching personal items as we don’t want to be responsible for any damage.
- Remind children not to play with items in the home.
- Know that some sellers have security cameras to record any activity.
- If the seller is home, do not provide too much information about yourself.
The search for your dream home may take weeks or months. We will never stop looking until we have found the right home.
PLACING AN OFFER:
At last, we found a home that will be a perfect fit. Great! Now we must move fast. We already have a pre-approval letter, which shows the seller that we are prepared and ready to buy.
What price would you like to offer for this home? We can discuss the recent neighborhood sales to arrive at a number that is fair and competitive. Even though the offer price is the most important factor to most sellers, other elements of the contract can tip the scales in our favor. They include:
- The amount of the earnest money. To start escrow with $10,000 is more promising for a seller than a buyer offering $1,000 up front. Remember, it is mostly about the money.
- The amount of the downpayment. The larger the downpayment, the more convinced the seller will be that funding a mortgage will not be an issue.
- The source of the downpayment. A home sale contingency is more of a risk for a seller than a buyer with money in the bank.
- The closing date. A buyer who requests a long escrow, more than 45 days, suggests that funding may be a problem. This will be challenged by the seller.
- Other demands. It is not wise to make demands of the seller for furnishings or repairs in the purchase offer. To do so, will alert the seller that the escrow may be difficult and might ultimately fail.
The purchase contact, once signed by both parties, is a legally binding contract. We will review the contract. After you have signed, we will send it to the listing agent for review. It may be two or three days until the seller has a response to our offer.
One of three things will happen:
- The seller accepts the contract as written. Fantastic!
- The seller accepts most of the elements of the contract, but challenges some paragraphs with a counter offer. We can negotiate until we have a meeting of the minds.
- The seller rejects our offer for any number of reasons. At this point, we can ask to be in a backup position, should the accepted offer fail. In the meantime, we will renew the hunt for your new home.
THE BEGINNING OF ESCROW:
We have an accepted offer. To begin escrow, within one business day of acceptance, you must deliver a check to the escrow officer for the earnest money deposit. Once the escrow officer receives the check, escrow will begin.
Our team has an escrow coordinator, who will provide you with a timeline as a guide to the life of the escrow. The coordinator will send you documents through DocuSign that require a signature. If you are not familiar with the DocuSign application, a video tutorial is available at https://support.docusign.com/videos/New-Signing-Experience
The initial two weeks of the escrow are extremely busy. During this time, we will learn as much as possible about the home to determine if it is a good buy.
There will be numerous sources of information presented about this property. They include:
- The seller’s disclosure statement. This document will answer many questions about the home, the neighborhood, any repairs and the cost of the utilities.
- The building permit package. If there is a possibility of structures in the home built without a permit, we will request a copy of all building permits for the life of the home.
- If this is a condominium, town home or property with an Association, we will receive condo documents. These documents will include house rules, minutes of the board meetings, rules and restrictions and many legal documents of incorporation and financial information. It is important to read the house rules and restrictions as soon as possible, because some of these demands might make the home less attractive.
- We will have our home inspection. The inspection will last from two to six hours. The inspector will document all findings and provide a written report and will explain any issues of concern during the review at the home.
THE HOME INSPECTION:
The home inspection report is extensive and thorough. It is intended to give you a full accounting of the condition of the home. Some items listed are cosmetic repairs, but structural and safety issues can lead to trouble in the future.
This is a suggestion for your review of the report:
- Pay attention to the costly repairs, such as plumbing, electrical, foundation, the roof, water intrusion and mold.
- The problems that are most important include:
1. Structural issues, especially a shifting slab or significant cracking of the foundation.
2. Safety issues, especially faulty wiring or rotted wooden stairs and railings.
3. Appliances that need repair.
- We can schedule additional inspections for a second opinion for any major problems for the repair costs.
Once we have a good idea of the scope of the problem and the cost, we can go back to the seller and ask for an adjustment in price due to the condition of the home.
If we ask for repairs, the seller will do one of four things:
- Deny any request for repairs. By contract, a seller in Hawaii is not obligated to make any repairs, even if they are safety concerns.
- The seller might agree to make some repairs, but not all repairs requested.
- The seller might decide to give you a credit at closing in lieu of making any repairs. In which case, we would present our assessment of the cost to fix the problems.
- Some sellers will make all repairs requested.
The realization that your dream home has some issues is a time for reflection. At this point of the escrow, you might decide to cancel the purchase. Some problems, especially major structure issues, will never be fully resolved. There are locations in Hawaii, where the ground is shifting, there is little to prevent future problems. It is probably a wise choice, in this case, to reconsider your offer to purchase the home.
Should you decide to cancel the escrow, you will be refunded your earnest money in full after the cancellation documents are signed by both parties.
If we make it through the inspection period, the next big hurtle is the appraisal.
If you have elected to pay for your new home with a mortgage, the lender will require an appraisal. The cost for the appraisal is between $700 and $800. Although it is a closing cost, you must pay for this up front.
Unlike the inspection, you do not attend the appraisal. The appraiser generally will review the home with the listing agent present. The purpose of the site visit is to determine the condition of the home with a visual inspection. The appraiser then compares this property to recent sales in the area to assess the fair market value. The report generated takes about a week and will be sent to the lender.
If the property is appraised for more than the sale price, congratulations! When the sale closes, you will already have equity in the home.
If the property is appraised for the sale price, the escrow continues and we move closer to our closing.
On the other hand, if the appraised value is below the sale price, we have a problem. Mortgage loan providers, and especially the VA, will not give a loan for more than the appraised value. Since we are now at least two weeks into our escrow, if the seller does not want to start over again, the seller might be willing to renegotiate the sale price to match the appraised value.
Some sellers are not willing to come down to the appraised value. When that happens, there are three options:
- You may choose to bring more money to the table and increase your downpayment, while decreasing the loan amount for the difference between the appraised price and sale price. For example, if you were buying a condo for $500,000 and it appraised for $480,000, there is a $20,000 difference. You could choose to add an additional $20,000 to your downpayment. The seller will still get $500,000, but you paid more out of pocket.
- We could encourage the seller to meet us half way, so that each party brings money to the table. They lower the price slightly and you bring in a little more cash at closing. For example, you bring in an additional $10,000 and the seller drops the price by $10,000 to $490,000 instead of $500,000.
- Lastly, you can choose to walk away from this sale. Your earnest money and second deposit, if you made one after the home inspection, would be returned in full.
Hopefully, the appraisal is not an issue and we move one step closer to closing. There are two additional items to tackle before the sale is final: the termite inspection and the survey.
If you have any questions about appraisals, send us an email firstname.lastname@example.org.
In Hawaii, we have a significant problem with termites. All homes that sell here require a termite inspection two weeks prior closing. The termite inspection and any remedial treatment is a cost to the seller. If live termites are discovered by a licensed termite inspector, by contract, the seller must treat the home. If the infestation is minor, a spot treatment will fulfill that obligation. For a larger infestation, tent fumigation is required before closing.
The process of tenting a home can have unintended consequences. Most plants covered by the tent will likely be killed or sickened by the poisonous gas. The weight of the tent can also damage gutters and downspouts. In a home with extensive landscaping, some care must be taken to protect the plants prior to the fumigation process.
It is nice to know the boundaries of your property. Older homes in Hawaii often have encroachment issues because of measuring techniques used in land surveys in the past were not as accurate as today. In 1997, the Hawaii legislature passed the de minimus law regarding property lines. For a residential home, an encroachment of 6 inches into a neighboring property is not an encroachment that requires an agreement between the land owners involved. However, if there is no encroachment agreement, the property with the encroachment has the right to remove the encroachment, whether that be a wall or a fence.
The seller must pay for the survey. If the survey report shows an encroachment with any of the neighbors, it is the seller’s responsibility to compose an encroachment agreement, when all parties sign, it will become part of the deed and transfer to any future owners.
The neighbor may refuse to sign the agreement. If the encroachment is substantial, a foot or more, you have the right to cancel the contract. Otherwise, the title company may ask you to sign an indemnity agreement to not hold them at fault. Should you choose this option, the escrow will proceed to closing.
If you have any questions about encroachments, email email@example.com.
THE FINAL WALK THROUGH:
The purpose of your final walk through is to make sure that the property is in the same condition as it was during the inspection.
This is what we should check during the inspection:
- If the seller agreed to make any repairs, make sure that they are finished.
- Make sure the appliance are in working order.
- Make sure that all fixtures, including lights, blinds, curtains, built-in storage units, TV mounts and that the plants outside the house are still there.
- The property should be clean.
- Look for any damage from the seller moving out, including holes in the screen door, scratches, etc.
- Make sure the remote for the split AC, if present, are in the house as well as the garage door remote controls.
- Make sure the seller has removed their belongings from the house, including from areas in the attic space, under the house, in the garage and in the yard.
At the end of the walk through, we need to ask the listing agent about the keys. If your home has an Association, we will need a fob for the gate, keys for the club house, etc.
If we find that the seller did not complete all repairs, we have three options.
- Have the escrow company withhold funds from the seller at closing to cover the cost of the repairs.
- Ask the seller for a credit.
- Delay closing until the repairs are completed.
WIRE FUNDS FOR CLOSING:
Throughout this escrow, you had several opportunities to cancel if the seller did not satisfy your requests. Now there is a power shift and the seller is in control. If you do not follow the timeline and provide the conditional loan approval letter, or the final loan approval letter, from the lender on time, the seller can cancel the escrow and keep your earnest money. So, this is not a time to relax!
If the loan officer makes requests for additional information or documents from you to achieve final loan approval, DO NOT DELAY. Make sure that all conditions for the approval are met. The final loan approval is due at least five days before closing. The loan officer and escrow officer will be in close communication about this timing.
If it becomes clear that we will need more time to avoid breaching the contract, we will request an extension to avoid a default. We never want to be in this position and will work extremely hard to avoid this situation.
In a smooth escrow, the conditional loan approval letter and final approval arrive on time. The lender is ready to fund the mortgage. Your downpayment must be sent to escrow from your personal account.
This money should be wired into escrow several days prior to the signing of the closing documents. The escrow officer will provide you with the wiring instructions. It is important to allow two days for the wire to be received, so it is imperative that the wire be initiated sooner, rather than later to avoid any delays.
Once all the money for the sale is in the escrow account, we have one more step.
SIGNING YOUR CLOSING DOCUMENTS:
If you are paying all cash for your new home, there will be one signing with escrow to finish all the paperwork. Be sure to bring a cashier’s check to pay for your closing cost. The escrow officer will let you know the amount ahead of time.
You will sign documents regarding title insurance, the conveyance of the deed and reviewing the various costs for closing. The signing will take less than twenty minutes.
If you are using a loan for the purchase of your home, there will also be a signing with the loan officer, which can take almost an hour. In this signing, you will review all the terms of the mortgage, set up the loan payments and discuss the mortgage insurance, if it is a conventional loan, and provide a blank check to establish your automatic payments.
After all forms are signed, the documents are sent to the Title Department for review. The funds for the sale are held in an escrow account. Two days later, the documents are sent to the Bureau of Conveyances for recording. Once the deed is recorded, you officially own your new home.