In this article I want to go through the process of buying a home in Hawaii. Hopefully you’ve heard the saying, “Real estate is local.” That principal is applicable to everything including the buying process of real estate. This is because every area and jurisdiction will have their own laws, rules, industry standards and even customs to follow. Here in Hawaii, and on Oahu, we are regulated and given guidance by various authorities at the state and the county level. I’ve personally entered into real estate transactions around the country and can tell you firsthand that everywhere is very, very different.
So, here’s the home buying process in Hawaii, broken down into 8 steps. I’m going to assume that you’ve chosen your real estate agent already. If you’re wondering about that I do have a video coincidentally titled, “How to Choose a Real Estate Agent.” (link: https://realestateofhawaii.com/real-estate-blog/how-to-choose-a-real-estate-agent/). Here are the eight steps:
#1 Obtain Financial Preapproval:
I strongly suggest, (basically require) my buyer clients to take one step further than prequalifying for a loan, and to get preapproved. Financial preapproval means rather than just verbally telling your lender your salary or annual wages, the types and amounts of loans you have, and how much is sitting in your checking account, you’ll be submitting all your paperwork so the lender can validate your income, expenses, assets and liabilities.
The reason why I strongly advise this is because you want to show the seller that you are a serious buyer. In a multiple offer situation, being preapproved can make the difference to edge out a competing offer. Think about it from the seller’s point of view. If you have two offers on the table, one says they’ll submit their prequalification letter three days after acceptance and the other offer says, “Here, I’ve been preapproved, the lender has all my paperwork, and we’re ready to move forward.” Which offer says they are more serious to move forward and efficiently closing on the transaction? Think of it like going into a job application. This is not the case all the time, but why not be prepared.
#2 Sit Down with Your Real Estate Agent:
Meet with your real estate agent to discuss why you’re moving, the price range you are in, reasons you’re buying, your home needs vs your nice-to-haves, all that good stuff! From their your agent can move forward to the next step in a more methodical manner.
#3 Select and View Properties:
Your agent will present you with homes for you to preview online. These days it’s more than just details, descriptions, and pictures. You’ll hopefully get to see videos and virtual 360 degree tours to help you get a better idea of feel and layout. At this point, if you like the property, let your agent know you want to view the property either via private showing or public open house.
#4 Submit an Offer:
Once you’ve selected your home, now it’s time to submit an offer. In Hawaii we use a fourteen page standard form purchase contract issued by the Hawaii Association of Realtors. When submitting the offer, you can propose negotiable terms that may give you advantage over other offers so make sure you ask your agent about these. Most importantly, the purchase contract has terms and contingencies that protect both parties so always keep this in mind.
#5 Negotiate Terms to Acceptance:
Once your offer is submitted, the seller can accept, reject or counter your offer. Some think the most important term is the price. That is true to some extent and there are other terms to be considered whether in a multiple offer situation or just a single offer. As such, counter-offers are quite common, not just on price.
#6 Remove Contingencies:
Once your offer has been accepted or you have accepted the seller’s counteroffer, you are now Under Contract. Now the REAL work starts. Remember the terms and contingencies we mentioned earlier, well now with the facilitation of your agent, you will begin removing the contingencies and satisfying the terms of the contract. There are quite a few time-frames and deadlines so your agent will help to you keep track and stay compliant with the deadlines.
A few mentionable terms and contingencies are the professional inspection contingency, often referred to as the J-1 contingency because it is currently Section J Item 1 on our purchase contract in Hawaii. Another term not as universal as the J-1 inspection is the Termite inspection contingency. Termites are active on all the Hawaiian Islands. Although a negotiable term, it’s common practice for the seller to pay for the inspection and the buyer to select the termite inspection company. These are just two of many terms and contingencies to be satisfied in order to successfully complete the purchase or real estate in Hawaii.
#7 Sign, Fund and Close Property:
Typically, the last actions for the buyer is to sign closing and loan documents and fund the down payment. The lender will need to also submit funds to escrow to close. Because Hawaii is a “Good Funds” state, the escrow company needs to receive all funds two days before recording. The State of Hawaii Bureau of Conveyances acknowledges and records the transfer of ownership and that is when you officially own the property. Which leads us to the last step.
#8 Get Your Keys:
Probably the most fulfilling feeling I get is handing over the set of keys to a new owner. Don’t get me wrong, I love working with investors and take pride in selling my clients homes for top dollar. There is just a really powerful feeling when you help someone find that special place. So anyways, here’s your keys, and Congratulations! You are now a homeowner in Hawaii.
So, those were the eight steps in the home buying process in Hawaii. Yes, it’s simplified and yes, sometimes things don’t happen in the exact order, and yes, there are hiccups and obstacles in the process. So, remember to be flexible, open-minded and most important is enjoy the home buying journey!
BONUS, A Tip to Get Your Offer Accepted: Consider writing a cover letter with your offer. Include a few pictures and take some time to draft not just a story but YOUR story, and why you want to call this place your home. Again, it won’t work all the time, but you’d be surprised how many sellers out there AREN’T just about the money. Which reminds me of a quote by Lisa Solomon, “A new home is a wonderful place to unpack old memories and make new ones.” Best of Luck in your home-buying search!
