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Frequent Asked Questions about the Purchase Process
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What price should I offer? (top)
The first thing to check is to see if you will be the only offer or are there going to be other offers.
If there are other offers the strategy for winning is completely different vs. when you are the only offer. I also depends how many other offers there are. The strategy for winning when there are 5 or more offers is different than winning when there is one other offer. The rule of thumb is the more offers there are the higher over asking price you have to be to win. A strong pre-approval is required. A pre-qual is not strong enough when there are multiple offers. If you have a large down payment or are paying all cash that helps, but price is still the number one factor.
If you are the only offer you can offer less and perhaps get a counter offer. However keep in mind at any time if the seller does get a higher or better offer, they can take that offer instead. Making an offer to the seller does not obligate them to do anything.
To come up with the right price, comparables need to be analyzed, and a price based on the latest comparables and the current market conditions can be offered.
You can also look at past sales history in the neighborhood to get an idea of where things are selling for. If the average sold ratio, which is the sales price divided by the asking price, is 95%, then making an offer in that range has a good chance of being accepted. If you see a range from 90% to 100% and you are offering in the 80% range, the best you can hope for is a counter offer, and most of the time if it is out of the range the seller will reject the offer and not counter.
You also need to pay attention to the days on market, including any past history where it was listed under a different MLS number. A seller who is a week or two on the market is going to hold out for a price close to their asking price, where a seller who has had no offers for 90 days will be more flexible.
What is the difference between Assessed Value, Square Foot Value, Appraised Value, and Market Value? (top)
Assessed Value is the value the tax office assigns to a property for tax purposes. Keep in mind they have not viewed the property, so when you look at the assessed value please don't read too much into it. Many times it is far from accurate. To show you how much the assessed values can differ, I looked at the Metro Region sales for the last 1 year. One property sold for 2.46 times higher than the assessed value, so in this case the tax office was way too low. Another property sold for just around 1/2 of the assessed value, so the tax office was almost double the market value. These differences show you just how far off the tax office can be.
Using a Per Square Foot value can be confusing too. In general, the larger the home, the less it is per square foot, and the smaller the home the more it is per square foot. Also the price of a home is for both the land and the home itself, so you can have a home price higher than a similar sized home simply because it has more land square feet. Location is critical too. A home on a cul-de-sac with an Ocean View vs. the same size home on a busy street with no view is going to be priced different.
The Appraised Value is the value of the property once your lender orders an appraisal. Appraisers tend to try to have it come out at or close to the contract price, and they have a little bit of wiggle room to do so. Many times it is over or under the contract price. With OahuRE if it is under the contract price, you can then renegotiate a new price or cancel. If it is over, you just continue with the purchase. The seller is not allowed to increase the price.
The Market Value is the real value of the property and it is based on comparables. Think of it as the price buyers are willing to pay for the property. When deciding how much to offer, the best way to come up with your offer is to use comparables to determine the Market Value.
How long should I give the seller to respond to my offer? What happens if they do not respond on time? (top)
The normal time we give is 48 hours. Some sellers might be travelling or might want to wait until the Open House is completed. In this case, the best thing to do is to give them the time needed as your only other option would be to withdraw your offer.
What are the most important points of the Purchase Contract? (top)
What is the difference between a Pre-Approval and a Pre-Qualification letter? (top)
A Pre-Approval is much stronger than a Pre-Qual, so you are more likely to have your offer accepted using a Pre-Approval. This is especially true if there are other offers. With a Pre-Approval, your credit rating is checked, and many times they will ask for copies of pay stubs and other documentation. With a Pre-Qual your credit is not checked and you provide no documentation, so everything is just provided verbally. This is why a Pre-Approval is much stronger than a Pre-Qual.
Does the Pre-Approval have to match the offer? (top)
Yes. The seller would be fine with one that is higher than the offer, but that tells the seller you can easily raise your offer price making it more likely they will counter you. To prevent this, we like to match the Pre-Approval exactly.
Do I need a new Pre-Approval each time I counter higher? (top)
No. Normally your first one is fine, and then once you go into escrow you can update it to match the contract. The assumption is that the difference between your original offer and your new higher counter offer is not that great so you would still be approved.
Cash offers are more attractive to sellers than offers with a loan. This is because offers with loans can have issues with the lender that can cause the offer to fall out. In addition cash offers normally close in 30 days or less, and can close as fast as 10 days. Offers with loan normally need 45 days to close because of the lender.
When making a cash offer it is important to put if there are any contingencies on getting the cash. For example, if you have to sell a property first you need to put that on the contract, or if some of the cash is coming from a family member you should put that too. The reason is this gives you an out should something happen, for example the property does not sell, or the family member changes their mind.
Instead of a pre-approval you should send a copy of the with the offer. This is normally a copy of a bank statement. You can white out the account numbers but your name must be on the statement. Another option is to have your banker write a letter saying you have the cash available. This option is good if you have more cash than the offer amount and you don't want to show the seller that you can easily pay more.
Keep in mind an offer with cash from a Home Equity Loan is not a cash offer, it is an offer with a different type of loan. In this case instead of a conventional loan you are using a Home Equity Loan and that is how the offer needs to be written up.
When do I have to put my deposits into escrow and what form of payments are acceptable? (top)
The earnest money deposit can be put into escrow the day you open escrow and a personal check is fine. We have you hold on to that check until escrow is opened, then escrow can pick it up from you, you can drop it off, or you can mail it.
The additional deposit is due after you and the seller have signed off on the inspection. A personal check is fine. It is important to wait until the seller signs the inspection too, especially if there is a credit or repairs on the inspection sign off that they have to agree to. You don't want to put additional money into escrow only to find out the seller is not agreeing to your request for credit or repairs.
The final deposit must be a wire transfer or a cashier's check drawn on a bank located in Hawaii. It is due 3 to 4 days before you close.
Can I buy a Short Sale or a Foreclosure for a lot less money? (top)
Sometimes you can get a good deal on a Short Sale and a Foreclosure, but don't expect to get a steal. Remember that the market is all about supply and demand, and there are a lot of buyers in Hawaii and the supply is fairly tight.
We have seen situations where a home that is priced low receives over 30 offers and sells for 10% over asking. The point is, the market determines the price, and buyers are willing to pay fairly close to fair market value, so if you see a property priced under that, there is a good chance it will sell for over the asking price.
This is why you won't get a steal, because if it is priced that way you won't be the only offer.
In addition, you can study past sales in the area to see what percentage of asking price sellers are willing to sell at. Sellers feel their asking price is right, so on average you will find they sell at around 95% of asking price. If they are overpriced, they will eventually have to reduce their price and to sell, and then they will still sell around 95% of asking.
For example, say a seller is asking $1,000,000. You might feel the right price is $800,000, or 80% of their asking price. If you offer that most likely they will say no. Perhaps it is only worth $800,000, but the seller still feels their $1,000,000 price is right. Eventually they might drop the price, perhaps to $850,000; now the same $800,000 offer would be close to 95% of asking price and probably would be accepted.
Why are some inclusions missing on the offer? (top)
Most of the time they are missing because the listing agent and seller forgot to add them in. Once in a while they are missing because they do not work or the seller is taking them so they don't want that item listed as an inclusion. For example, you might see a dishwasher in place but perhaps it does not work. The seller will not include it with the sale so this way during the inspection if you ask for it to be fixed the seller can say it is not included with the sale.
Are verbal agreements allowed for parts of the offer? (top)
No. If you have a verbal agreement you have no agreement at all. Many times verbal agreements are not honored and there is no recourse. So if you want to make an agreement about something make sure to get it in writing and signed and make it part of the contract.
However, when negotiating a counter offer many times Emails are used to go back and forth to try to reach an agreement on terms and price. Once an agreement is reached then a contract must be signed to make it official. This is acceptable and normally faster than having to review and sign a written counter offer each time. Just remember that once an agreement is reached, both parties must sign to make it enforceable.
When I submit an offer, is the seller required to respond to my offer? (top)
No. The seller can take another offer and not respond to yours, even if your offer came in first. The seller has no obligation to you until a contract is signed.
We ask they respond in 48 hours, but many times the response does not come that fast. Reasons include the seller wants to wait until they do an Open House or to see if they get more offers. Sometimes they are travelling or busy with something else where they feel they need some extra time. If the seller needs more time the best thing to do is to wait patiently because the only other option is to withdraw your offer.
Is the seller allowed to accept another offer even though they countered my offer and are waiting for my response? (top)
Yes. A counter offer can be withdrawn at anytime, so until a contract is signed the seller has no obligations other than to let you know the counter offer is being withdrawn. This is important to remember because if you take too long to respond to their counter and they get a better offer, you might lose the chance to accept the counter offer.
What is the acceptance date for an offer and why is it important? (top)
The acceptance date is the date a signed contract is delivered to the other party or their agent. It is important to note it is not the date the contract was signed, and it can be delivered and accepted by the agent, even if the agent does not get it to the buyer or seller right away. The reason this date is important is many of the deadlines in the contract are based on the acceptance date, so it is critical to have this date right.
What time of day is the deadline and what happens if the deadline is a holiday? (top)
The deadline is 11:59pm on the day it is due. However, most agents are not working at 11:58pm, so it is a good idea to coordinate with your agent to make sure they get the signed document before they go offline for the evening.
All the deadlines in the contract other than closing go by the day regardless if it is a holiday or weekend. So if your inspection deadline ends on Christmas Day, that continues to be the deadline. However, the closing deadline can only be on a day where you can record with the City, so if your closing day falls on Christmas Day, then it automatically gets extended to the next day when the City is open for recording again.
If the OahuRE Teams represents both the buyer and the seller how does that work? (top)
If the OahuRE Team represents the buyer and the seller then we remain neutral and give our best advice to both parties. We will provide comparables but let you come up the price you want to offer.
We have done this many times and it works well. It is attractive to sellers because they get an additional discount on our commission. Buyers like that their offer is more likely to be accepted because of the commission savings the seller receives. So for a buyer it makes their offer more attractive without having to increase their offer price.
If your company (OahuRE.com) represents both the buyer and the seller how does that work? (top)
In this case the seller would pay our normal discounted commission of 4.5%. We treat this just like we treat a sale from another agency when giving our advice to you. Even though the agent is from our company they are not part of our team and we may not even know them personally so we treat it very similar to a regular sale. That being said there is some extra effort to make sure both sides are treated fairly because our company is representing both sides.
How much should my earnest money deposit be and can I use a personal check? (top)
We normally set the earnest money deposit at .5% and you can use a personal check. Once in a while we are countered higher on this amount but for most offers it works well.
How much should my additional deposit be and when do I make it? (top)
The additional deposit is normally 1% and you can also use a personal check. It is not made until you have approved the inspection. Once you have approved the inspection it is then due.
Do I have to show proof of cash? If so what is the easiest way to do this? (top)
Yes, on most offers you need to show proof of cash within 5 days after the offer is accepted. Proof of cash can be a print out or scan or PDF file of your bank account or brokerage account. You are welcome to cross out the account numbers if you like. Another option is to have a letter written by your banker stating you have the cash. You can scan it or fax it to us. The amount of cash you show must cover all cash funds you will put into escrow including your two deposits and down payment amount.
What is the most important contingency in my offer?(top)
The most important contingency in your offer is your inspection contingency. The reason is you can cancel for any reason during this contingency. After it is up you need a more specific reason to cancel, for example, you do not like some of the statements on the disclosure could be one reason.
When should I order the Home Inspection? (top)
The Home Inspection should be ordered right away. You will normally have around 10 to 12 days to complete it and the inspectors schedule fills up fast so it is important not to delay getting an appointment.
How many days are normal for the inspection period? (top)
Normally it is 10 to 12 days. Some sellers like to shorten it to 7 days, but this can cause an extension to be needed especially if there are some issues that need further looking into by an electrician or contractor.
What time does the inspection period expire? (top)
Technically it is 11:59pm but being we are not at work then it is best to make a decision by around 8pm so we get it submitted that day.
Can I really cancel for any reason during the inspection period? Will I get my money back? (top)
Yes, sometimes sellers are slow to sign the paperwork but I have never had a client cancel within the inspection period and not get their deposits back. Keep in mind you still have to pay the home inspector so unless that was paid outside escrow they will keep part of your deposit to pay that bill.
Should I get a Professional Inspector? (top)
Yes. We always recommend a Professional Inspector. They check everything in the home, things you or your contractor might forget to check, and compared to the price of purchasing the home, it is a very small cost for that peace of mind and a better understanding of the home you are buying.
Should I get a Pool Inspector? (top)
Yes. Regular Home Inspectors are not qualified to do a complete pool inspection, so assuming there is a pool we always recommend a separate pool inspection.
Who do you recommend for inspections? (top)
Please see http://www.oahure.com/vendors.php for our recommended inspectors.
What happens if issues are found by the Home Inspector during the inspection? (top)
You can ask for repairs, credits, price reduction, do nothing, or some combination of these things. The seller has the right to say no, but you have the right to cancel, so normally it is a negotiating process. Sellers will normally fix things like plumbing leaks or hazardous electrical situations, but they don't like to do upgrades. They feel they priced their house according to the condition, so upgrading with new carpet, new paint, new roof, etc. is not something they will normally do.
Sometimes a credit is the best way to go because then you can make sure the job is done right and it is less hassle for the seller as all they have to do is say yes and it is done. Because of this you are more likely to get the credit vs. a repair sometimes.
Can I still ask for repairs even if the As Is Addendum is used? (top)
Absolutely. The As Is does not change your rights at all during the entire contract process, so your right to do an inspection and ask for any repairs is still in place. It does send a message that the seller does not want to do any minor or non-emergency repairs, but it does not change your right to ask for any repairs and cancel if you do not reach an agreement with the seller.
Why do sellers want to use the As Is agreement? (top)
Some sellers believe it gives them more protection after the sale. However, it does not. If they have not disclosed everything they would still have the same liability after the sale whether or not the As Is is used. Some feel it sends a message to the buyer that they do not want to do repairs, and this is probably why they are using it.
OahuRE added paragraph 11 on the Standard Addendum to give you some more room to negotiate issues should you want a credit or repairs. Paragraph 11 states that if you do request repairs or credit, then the inspection would automatically be extended to 48 hours after the you get the seller's response. This is unique to OahuRE's Standard Addendum. In the standard Purchase Contract that all Realtors use, if you request something in writing, you have to get an answer before the inspection deadline, otherwise by default you have accepted the inspection.
If you did not have paragraph 11 in your contract, then by default when the inspection period expires, if no agreement is reached, you have accepted the inspection.
What happens if an agreement is not reached during the inspection period? (top)
If an agreement is not reached during the inspection period you can cancel and get your money back. If you make no choice and let the inspection period expire then by default you have accepted the inspection.
What should I do if a lot of electrical work might be needed? (top)
You need to bring out 1 or 2 licensed electricians to get a quote on how much it will cost. At that point you can ask the seller to fix it using a licensed electrician or you could ask for a credit to cover the costs and then pay an electrician to fix it after you close.
Why is the Lead Paint Addendum being used? (top)
The Lead Paint Addendum is a disclosure that the Federal Government requires to be attached to all homes built prior to 1978. This is when Lead Paint might have been used. You can read more about it at Protect Your Family from Lead Hazards. Most sellers do not know if they have Lead Based Paint or not so it would be up to you to test for it during the inspection period.
If the property is a tear down should I do all the inspections? (top)
If you are 100% sure you are going to tear it down then you can waive all your inspections as it does not matter. If there is even a 1% chance that you will not tear it down then you should do the inspections. Also, a home inspection might be worthwhile so you can tell what types of issues the new home you build might have. For example, was settling a problem, are there ground termites present that will require treatment, etc.
Why would a home on Oahu settle?(top)
Most of the time settling is caused by the soil getting too much water especially during heavy rains on a hillside. Therefore one way to prevent a home from settling is to have the proper drainage around the home so water flows around it and not under it. Once a home settles you can leave it like that or some contractors have equipment to jack up the home and redo the supports, thereby correcting any settlement issue. This is not an inexpensive process as you can imagine, so you should plan on that cost if it is something that needs to be done.
On our vendors page we have a contractor who has the equipment to correct settlement issues and we also have a Soil Inspector who can tell you what is going on with the soil under and around your home and give you suggestions to improve it. http://www.oahure.com/vendors.php
What should I do if the home shows signs of settling? (top)
If the home shows signs of settling you need to have it looked into further to decide what needs to be done to prevent it from settling further and possibly correct the damage already done. Our recommended general contractor is qualified to give you an estimate on the work that needs to be done to fix this situation and prevent it from happening again in the future. http://www.oahure.com/vendors.php
What is the final walk through for? (top)
The final walk through is to verify that everything is in the same condition it was during the inspection. The sellers may or may not be out of the home, as they do not have to be out until the closing and the final walk through needs to be done 4 to 5 days before closing. If you find something that is not in the same condition you can ask the sellers to repair it or give you credit on it. They are not forced to do this so it is a negotiating item and it would be very rare though that a purchase is cancelled because of something found during the final walk through, although I have seen closings delayed while last minute problems are handled.
Can I wait on the final walk through until the seller has moved out of the home? (top)
Sometimes you can but many times you can't. The seller does not need to be out until closing and the walk though needs to be done 4 to 5 days before that so many times they will still be in the home during the final walk through.
What happens if I find a problem during the final walk through? (top)
You can ask the seller for credit or repair. The seller is not forced to do it so it becomes a negotiated item.
Should I use the lender with the cheapest rate? (top)
We recommend using a lender in Hawaii. They understand our contract better and other things that are normal in Hawaii that are not normal on the mainland. Also you need to look at the complete package. A lower rate might be because you are paying up front with points or other fees, so you need to look at everything they are offering and not just the rate. All that being said if everything else is equal with 2 reliable Hawaii based lenders then if one is offering a better rate it makes sense to take it.
Will VA or FHA do the loan if the current home does not match the tax records? (top)
VA Loans are very strict and if something is not permitted then they won't do the loan. FHA has some more flexibility and might be able to do the loan.
If the tax records do not match that means something was done without a permit. Some sellers don't like to hassle with the state to get a permit for every change they make so they make the change without one. The change can still be done by qualified contractors, it is just they don't have a permit. Conventional loans have no problems with this and many homes are bought and sold without having everything permitted.
You can always apply for a permit at some point in the future, although normally not having a permit does not cause any issues. The biggest issue it causes is when you go to sell a property without one you eliminate some buyers who need or want to use these types of government loans.
What happens if the appraisal is low? (top)
In our offers we have a clause that says if the appraisal is low you can renegotiate the price and if an agreement is not reached then you can cancel and get your deposits back.
The standard Hawaii Purchase Contract that most agents use that does not have an option to renegotiate if the appraisal is low. If the appraisal is low but your loan can still go through without an issue then you must continue, you cannot renegotiate. If by chance your loan can't go through because of the appraisal, which can happen when you are putting very little money down, then you have the right to cancel by using your finance contingency, so in this case you can negotiate a new price and cancel if you are not satisfied.
Keep in mind some sellers will try to change the appraisal by providing new comparables. I have seen this tried many times, and I have never seen an appraiser change their figures. To get an appraiser to change their figures it essentially having them say yes I messed up, I don't know what I am doing, and perhaps the bank should not hire me again.
Sellers will normally get a copy of the appraisal when you are negotiating the price because it is low. If the appraisal comes in on target or over the contract price you do not have to provide a copy of the appraisal to the seller.
What are some differences between a FHA/VA appraisal and a regular appraisal? (top)
FHA and VA appraisals are more sensitive to certain issues than a conventional appraisal. For example, things such as vegetation touching the home would need to be removed, all wood must be painted, there should be no plumbing issues, and major fixer-uppers will not be approved with FHA and VA loans.
VA will not do the loan if work on the property was completed without a permit. The FHA is less sensitive so sometimes it goes through and sometimes it will not depending on the scope of work done.
How does a cash offer compare to an offer with a loan? (top)
Cash is always better as there is no financing contingency and there are a lot of escrows that fall out because of the finance contingency. That being said a higher offer is something that wins either way especially if you have a good strong pre-approval with your offer and a good down payment.
Can I increase my offer after it was not accepted? (top)
Yes. There is nothing saying you can't go back with a higher offer. If you were the only offer then hopefully they would at least counter your new higher offer. If there are other offers as long as they do not have an accepted offer they are still allowed to look at all offers and your higher offer might be what they are looking for.
What is the ACT 137 Addendum? (top)
This addendum is asking the seller if their home is at risk for foreclosure or are there any delinquent payments, liens, past due taxes, etc. It is trying to establish if there are problems we need to know about prior to going into escrow. If there are liens or past due taxes they can be paid off at closing, but it is import for us and escrow to know about them ahead of time.
Why is there a Standard Addendum? Does not the standard Hawaii Purchase Contract cover everything? (top)
Our company and our team felt some important things were left off the standard Hawaii Purchase Contract, so they put these things in a Standard Addendum. Most of the things in this addendum are disclosures that help protect everyone, but in OahuRE's Standard Addendum we also have things that protect you such as our low appraisal clause which protects you if the appraisal is low. This is not part of the standard Hawaii Purchase Contract.
Where can I read more about Lead Based Paint or Mold? (top)
A Brief Guide to Mold - understand more about how mold and moisture in your home.
Protect Your Family From Lead Hazards - important to read for all homes built prior to 1978. Brochure put out by the EPA.
What is a 1031 Exchange? (top)
A 1031 Exchange is a way to buy and sell investment property without having to pay taxes. It does not affect the other party, so if the other party is doing one it should not change your transaction at all. If you are interested in doing a 1031 Exchange they can be very complicated and you need to use a good Exchange Company. We recommend http://www.oahure.com/vendors.php#1031exchange.
Will I get a disclosure with a Short Sale and Foreclosure? (top)
You will get a disclosure with a Short Sale assuming the owner has lived there. You will not get a disclosure with a Foreclosure as the bank really knows very little about the property and they are the current owner.
How long is closing? What is the difference between signing and closing? (top)
The typical escrow period is 45 days when a loan is being used, and 30 days or less when it is a cash purchase.
Signing is done 3 to 5 days before closing and it requires signing by hand, not through electronic signatures like your offer. Both the loan documents are signed and the documents escrow generates.
After the signing the lender will fund the loan 2 days before closing.
On closing day we hear from escrow by 9am that you have recorded and at that point the home is yours. Congratulations!
Can I close early? (top)
The first person to ask that question to would be your lender. Cash deals can close as fast as 7 days, so it is really the lender that needs the time to process your loan. If your lender says they can close early then we can ask the seller if that works for them. If the home is vacant then it normally works, but if they have plans to move out on a certain date based on the contract they might not be able to speed up their plans and move out early.
Can I easily extend the closing date as needed? (top)
Not really. You can only extend the closing date if it is due to a situation beyond your control. If you applied for your loan late that would not be a reason beyond your control, so it would not trigger an extension. If you have to extend for a reason that is not beyond your control the seller has to agree to this extension. If they do not agree they could cancel escrow and ask to keep your deposits.
When and how do I get the keys? (top)
You get the keys on the day you close. Normally we hear you closed by 9am and then we can give you the keys.
What are my rights after closing if the seller did not disclose something? (top)
After closing it is complicated to get things done and will most likely require an attorney. You do not have any further rights from the contract after closing, so if something was not disclosed we can bring it up with the seller and see if they will do something about it but if not the only option is to hire an attorney to represent you and mediate or file a lawsuit as needed. To litigate something after closing would cost around $20,000 to $40,000 so it would have to be a major issue to make it worthwhile. Mediation is less expensive but it is also non-binding so there is a chance you could leave without reaching an agreement.
What happens if the tenant does not move out before closing? (top)
The first option is to delay the closing until the tenant is out. Otherwise you might find you have a tenant who won't move out and now you are the new landlord.
What happens if the seller does not do a good job cleaning? (top)
Unfortunately there is not much you can do. Different people have different expectations for cleaning, and many times the buyers are not satisfied even though the seller has cleaned. The best solution is to hire your own professional cleaners to take care of the areas you are concerned with before you move in. You could also ask for escrow to hold some money back for cleaning but the seller has to agree to that.
Who should I use for escrow, does it make a difference? (top)
It can make a big difference. I have seen escrows go horribly wrong due to a mistake by escrow. Sometimes they even cause the transaction to cancel so you would lose the home you desire and time and money too. That being said most escrow officers are very competent and it is very rare that escrow causes a problem, so in general you will be OK with most escrow officers and companies.
What happens if the seller just paid the taxes and other fees before closing? (top)
The timing of paying taxes and home owners associates fees, etc. does not matter as everything is prorated by escrow. So you end up paying these items for the days will own the home, no more and no less.
What portion of the closing costs does the seller cover? (top)
Section F-6 on the contract covers this in detail. The rule is the seller pays 60% of standard Title Insurance. Notice this is standard insurance, if the buyer elects to get additional coverage they pay 100% of the addition coverage amount.
The escrow fee is split 50/50. There are other fees the seller normally pays, such as the cost of the survey, termite inspection, and termite treatment if needed.
How much are the escrow fees and title insurance fees? (top)
You can view the latest fees from the following links. Note that fees at other escrow places are going to be very close to these. Also note that OahuRE clients because of our volume will get 25% off the title insurance fees shown below.
How do I know the home has no title issues? (top)
Escrow has a title department that reviews the title for issues. They are going to issue title insurance so they need to make sure there are not going to be any issues. You can be confident when escrow issues title insurance that your title is free and clear from any liens or other issues.
What is the difference between the two types of title insurance? Should I get the more expensive one? (top)
If you are buying a Short Sale or Foreclosure I always recommend the additional coverage as it covers you for any mechanics liens that might come up. As the seller ran out of money there is a chance they did not pay a bill to a contractor. On regular sales you probably do not need the extra coverage but because it costs so little extra and stays with you the entire time you own the home some buyers get it just in case.
What happens if the home has a tax lien on it or a mechanics lien? (top)
Escrow will clear all liens before transferring the title to you. They can use the money from the sale to do so at closing. If they are not able to clear the lien they will let us know and then unfortunately the sale can't go through.
What type of tenancy should I use to hold the title? (top)
Please see our page on tenancy to help you decide.
No. The acceptance date would be the date the contract is signed by both parties. This could be on a weekend or holiday. Escrow would be opened the next available business day. Many deadlines on the contract are a certain amount of days from the acceptance date, so it is important to remember that the minute you have a signed contract signed by both parties then you have your acceptance date and the escrow clock starts ticking.
Escrow provides a timeline based on the contract, so you will know all the deadlines. We will remind you of any upcoming deadlines too.
How long do I have to review the disclosure and what happens if it is updated later on? (top)
In our contracts we allow 7 days to review the disclosure. This means that within 7 days of the agent or you receiving the disclosure you can cancel and get your deposits back. If later on something new comes up and they need to add this to the disclosure, then you would have another 10 days per our contract to review the new change and decide if you want to cancel or continue.
What happens if the seller did not disclose something? (top)
If it is during the escrow and you find something they did not disclose they then have to disclose it which gives you an additional week to decide if you want to continue or not. If you find something after closing that they did not disclose and if it a major issue you would need to get an attorney involved to see if you can get them to reimburse you for the issue.
If you are a seller keep in mind you can't get sued for something you disclosed, it is only things you do not disclose that can become a problem, so please make sure you disclose everything.
What happens if a new problem is found, does the seller have to add it to the disclosure? (top)
Yes, and then you get another 10 days to think about the updated disclosure and cancel and get your deposits back if you are not comfortable.
Can the seller choose not to write up a disclosure by using the As Is? (top)
No, the As Is does not change the need to disclose everything, and should have no change on how the disclosure is filled out.
What problems might I encounter that the seller will probably not know to disclose? (top)
Sometimes the seller just does not know about an issue. This is why you need a professional home inspection. Many times this uncovers issues that the seller is not aware of. Some electrical and plumbing issues the seller might not have known about until the inspector points them out. Also problems on the roof they might not be aware of.
Should I get a new survey? (top)
It depends on when the survey was last done. If they have a survey that is only a few months old then you probably do not need a new one unless a new fence or wall was put up in the last few months after the survey. If the survey is a few years old then you might want to get a new one because sometimes it is not known exactly when a fence or wall went up or might have been moved.
What is De Minimis? (top)
De Minimis for surveys means you are allowed to encroach up to 6 inches without it being an issue. As surveys use a percentage of 1 foot for their measurements you are allowed up to .5 ft. on the survey. If it is over .5 ft. you have an encroachment situation, if it is .5 ft. or less then it is not an issue.
What happens if the survey finds encroachments? (top)
If an encroachment is found you can ask the seller to get an encroachment agreement. If they are not able to get it you can decide to continue without it or cancel. Most encroachments are minor and have been that way for many years so normally they are not an issue.
When should the termite inspection be done? (top)
The termite inspection is normally done around 15 days before closing. Many lenders will not accept it if it is done sooner so it is important to wait and not do it right away. Sellers also want to be done with the inspection period and some other contingencies before they order and pay for the termite inspection.
What happens if they find live termites? (top)
Normally they will recommend tenting which the seller will pay for. Once in a while they recommend spot treatment but that is very rare, it is almost always tenting.
What happens if they find termite damage? (top)
If they find substantial termite damage the disclosure needs to be updated to include this assuming it was not already mentioned. When the disclosure is updated you get another 7 to 10 days to decide if you want to continue based on the new disclosure.
What happens if the home needs to be tented? (top)
The seller will schedule the tenting and pay for it. Sometimes the tenting can't be done before closing because perhaps there are tenants in the home or for some other reason. In this case some lenders will allow an amendment to be done that holds back the money for tenting to pay for it after closing. However, it is always best to get it done before closing if possible.
What types of termites are they looking for? (top)
They are looking for both Drywood Termites and Formosan Subterranean Termites. Most of the time Drywood Termites are found. They are not as dangerous as Subterranean. Subterranean Termites can cause major structural damage to a home in as little as 6 months. Drywood termites require no connection to the soil and will attack any type of wooden articles such as frames, floors, furniture, etc.
Who pays for the termite inspection and treatment? (top)
The seller normally pays for both but in Short Sale and Foreclosure situations the seller might ask the buyer to pay.
If the seller says they are tenting or they already have a termite warranty should a termite inspection still be done? (top)
Yes, do the termite inspection no matter what the situation is. Even if the seller knows there are termites and is tenting you do not know the extent of the damage and the seller might not either. An inspection will help you understand the extent of the damage. Also even with a termite warranty there could still be termites, so you still need to have the inspection.
Can the seller cancel the escrow? (top)
Not unless the buyer breaches the contract. This assures the buyer that even if the seller receives a higher offer, they can't arbitrarily kick the buyer out of escrow. However, if the buyer misses a deadline then he seller has the right to cancel the escrow.
If the buyer cancels the escrow what happens to the deposits? (top)
If the buyer cancels within the contract terms than they should get their deposits back. If they have breached the contract the seller will probably ask to keep all or part of the deposits. To get a deposit back both the seller and buyer have to sign off on it, so if the seller wants they can withhold signing. If that happens the deposits stay in escrow until an agreement is reached. If this goes on for an extended period of time escrow will eventually hire an attorney who will analyze the situation and decide what to do with the deposits. If is very rare for this to happen because normally the attorney bill would use most of the deposits anyway, so there is very little if anything that is left.
The seller might be motivated to close out the escrow as they can't open a new escrow with the same escrow company until the current one is closed. They can however open a new escrow with a different escrow company.
What happens if I can't get the loan even though I was pre-approved? (top)
The offer has a financing contingency so if you can't get the loan you can cancel the escrow and get your deposits back. Make sure you do it before the closing deadline though because if not sellers have been known to ask to keep part of the deposits because you went past the deadline.
What are HARPTA and FIRPTA that I see on the contract? (top)
These two items apply to seller only; buyers do not need to be concerned with them. If the seller is not a Hawaii Resident then HARPTA says tax must be held back by escrow to cover state taxes. FIRPTA says if the seller is not a U.S. Citizen then escrow must hold back Federal taxes.
Should I order a building permit package? How do I know everything is permitted? (top)
A building permit package costs around $125. You can order one if you like, or you can also browse the permits from the links on OahuRE property detail page. Every property on our Website has a link to their permits. Some feel that the permit package you order is more in depth than the permit information you can get online. If you are concerned about something not being permitted then it is a good idea to review the permits. Normally sellers will know what is permitted and what is not permitted.
What is the Real Property Tax Exemption? (top)
Every owner is eligible to deduct $80,000 from the value of their property when paying their property taxes. Some owners based on age or other things might be eligible for additional exemptions. You can get the form you need to file to claim your exemption and more information form the City's Website.
What happens if my appraisal is low? (top)
If the OahuRE Team is representing you we have a clause in our Standard Addendum that protects you if the appraisal is low. It states that you can cancel or negotiate a new price that you agree with.
If you are not represented by OahuRE then you will find that there is nothing in the standard Hawaii Purchase Contract that protects you from a low appraisal, so you would need to continue with the purchase.
One way you might be able to get out of it is if the lender can no longer do your loan you could use the finance contingency. This works well with low down payment loans, but if you have a large down payment the lender can normally do the loan even with the low appraisal so that strategy does not work.
What happens if the seller won't release my deposits? (top)
If the seller will not sign off on your deposits they will stay in escrow until an agreement is reached. If no agreement is reached after a certain amount of month's escrow would hire an attorney to look into the situation and make a decision on what happens with the deposits. As the attorney charges a lot for their time most of the deposits would be used in attorney's fees, so it makes sense for the buyer and seller to reach an agreement without having escrow hire an attorney.
Sometimes mediation can be used to help the two parties reach an agreement, but that is an optional step and the results are not binding.
Typically what happens is the buyer will give a portion of the deposit to the seller in order to get them released and then the seller signs off on it.
What is the difference between Short Sales and Foreclosures? (top)
As Short Sale is owned by the seller but has to be approved by the bank because once the property is sold the mortgage will not be paid off completely. A Foreclosure is already owned by the bank. You will not get a disclosure with a Foreclosure but you will with a Short Sale. Sometimes Foreclosures can close faster as the bank already knows what price they want and less research has to be done. Short Sales many times will take a few months to get a response to your offer where Foreclosures might be 1 to 3 weeks.
For both of these sales you want to be aware that if there are any monthly fees that come with this property that they seller might be behind in paying them and you would then be responsible to pay them off. Condo maintenance fees and Home Owner Association fees are normally behind with a Foreclosures and sometimes also with a Short Sale. In order to get the past due fees the association will need the seller's permission to release that information so you need to work through the seller's agent to get the past due fees amount.
What do the flood zone codes mean? (top)
Flood Zone Codes - definition of what the flood code means direct from FEMA.
What do the zoning codes mean? (top)
Land Use Codes - details on what the land use codes mean such as R-10, R-20, A-1, AMX-1, AG-1, P-1, etc.
Can I CPR this property?(top)
Normally you will need enough land to put two structures and still be within the zoning codes. For example, if the land is Zoned R-5 which is 5,000 square feet minimum per structure and you have 10,000 square feet of land you can probably do a CPR. We have more information on doing a CPR on our Website at http://www.oahure.com/CPR.php. We also have some recommended attorneys who can help you do a CPR including determining if it can be done. http://www.oahure.com/vendors.php#cpr
Will the seller remove junk on the property? (top)
Yes, the contract calls for all junk to be removed from the property before closing.
How can a 1031 Exchange save on taxes? (top)
A 1031 Exchange allows you to sell your investment property for another one and the profit from the sale are not taxed as they are put into the purchase of the new property.
It is important to note that a 1031 Exchange does not affect the other party so it is causes no issues with a transaction. Also it is important to note this is for investment property only, not for your home.
There are a lot of rules that must be followed in order to do a successful 1031 Exchange, and one rule is you must use a qualified intermediary. We have two recommended companies on our Website. It is important to use a specialist in this area because if you do not do it right then you could end up owing taxes.
Can I do a vacation rental from my home? (top)
Maybe. Some homes have vacation rental or B&B licenses, and in that case you can do it. If the home does not have a license then you are not supposed to do it. That being said it is a well-known fact on Oahu that there are many unlicensed vacation rentals operating. Should you decide to go the unlicensed route the important thing is to still collect and pay your Transient Accommodation Tax (TAT). Also it is important if possible to monitor the rental to make sure no loud noises and parties disturb the neighbors, and also make sure there are no parking issues. Should a neighbor complain about your unlicensed rental you could get a letter asking you to pay a fine and shut down immediately.
One other way people do vacation rentals is to rent at least 1 month or longer. If the term is one month or longer then it is not considered a short term rental. When President Obama rents an unlicensed rental the owner claims he is renting for 1 month so there are no issues, even though the President does not stay here 1 month.
Vacation Rentals can double the income you get from renting out your property if you are in the right location, so it is something to think about but you have to be aware of the pros and cons.
For more information on this touchy subject please contact us.