Understanding the Most Important Points of Your Offer
This is not an actual offer. This is a sample only for educational purposes.
Inspection & Final Walk Through - Section J
This is your most important contingency because you can cancel for any reason and get your initial deposit back.
You will have 12 days to complete this inspection period.
We recommend getting a professional inspection (although it is not required) which costs around $395 for Single Family, $325 for a Town home, and $295 for a Condo.
If the property has a pool, you should bring in a separate Pool Inspector.
If the Home Inspector finds any issues such as electrical, plumbing, roofing, etc. then you can bring in an expert in that area to give you a quote on what it costs to fix it.
After the inspection, you can cancel and receive your earnest money deposit back, or do nothing and continue, or ask for a credit, or ask for repairs. Sellers will normally fix safety issues or leaks but not do upgrades.
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.
The final walk through is to make sure the property is in the same condition it was during the inspection, and to make sure if any repairs that were promised are completed. It is normally done at least 3 to 5 days prior to closing.
Title - Section G
You will get a Title Report which will show you if there are any liens against the property. If there are liens, they will need to be paid off at closing, otherwise you can not get a loan nor can you get Title Insurance. The good thing about Title Insurance is it forces the title company to make sure there are no issues with the title, as they do not want to have to have a claim against the insurance. They are experts in finding hidden or obvious issues and they make sure they take care of these issues at closing.
Financing - Section H
If your loan does not come through, you can cancel and receive your deposits back. Notice, there is no deadline on this contingency, it goes right up to the end of escrow. There are things you have to do on a timely basis such as apply for the loan, deliver a pre-qual, and submit a conditional loan letter 15 days before closing. If you fail to meet any of these deadlines, the seller does have the right to cancel, however, the buyer would get their deposits back.
If your loan does not come through because of something you did not disclose to the lender, then the seller would have an issue with this and try to hold your deposits.
H-1 - We assume there is no contingency on getting your cash down payment, but if it is coming from a relative or from some other source where you are counting on someone else and do not have direct access, then we should change this to H-2 and let them know about the contingency. This protects you in case those funds do not come through. View H-1 on the Purchase Contract.
Disclosure - Section I
The seller must provide a complete disclosure. We ask for 7 days to review the disclosure and if something new needs to be disclosed, you will get an additional 7 days. If you don’t like what you see on the disclosure, you can cancel. Keep in mind that everything must be disclosed even if the seller is selling the home "As Is".
I-8 - There are also a bunch of general disclosures that you should review in this section.
A survey will be done so you will know if there are any encroachments. Keep in mind up encroaching up to 6 inches is allowed. Surveys show encroachments as percentage of one foot, so .5 on a survey equals 6 inches. This means when you get the survey, the first thing to do is scan it for something encroaching over .5. If everything is .5 or under, there are no encroachments.
If there is an encroachment, sometimes the seller can get an encroachment agreement to take care of it. If not, you can continue anyway with the encroachment.
Keep in mind years ago when they built some walls, they did not accurately measure the lot, so there are some walls or fences that encroach slightly. Normally they have been there for many years and are not an issue, so you can leave it as it is without a problem.
If your property encroaches on the city and county property, then you need a variance from the city and county. If it has been like that for years, you can probably leave it there without an issue. Unless the city decides to expand the road, you probably won't have a problem.
Termite Inspection - Section L
You can pick the termite inspector and the seller will setup and pay for the termite inspection. We do have two very good recommended inspectors.
If live termites are found, the termite inspector will recommend treatment which is normally tenting, and in some cases, spot treatment.
Termites are very common in Hawaii. For older houses that have not been tented in the last few years, you most likely will have termites. The key here is that they have not caused too much damage.
Note that you do not have the right to cancel if termites are found, but if there is substantial termite damage that was not previously disclosed, then the disclosure is updated, and that gives you the right to cancel because of the updated disclosure.
For Single Family properties, we request Covenants, Conditions, and Restrictions (CC&Rs), Planned Community Documents, and Subdivision and/or title documents. Many times, none of these documents are available, so we require them only if available. Escrow needs to do a search to figure out what is available, so it is best to request everything that might be available and let escrow research it.
For Condos & Single Family CPR (Condominium Property Regime) homes, you will have a chance to review all the Condo Docs and cancel if you are not comfortable with them. We request all the Condo Docs, although not all of them will always be available. Most of the time you can get these documents now electronically, which saves time and paper. You will have 10 days to review these documents and cancel should you not be comfortable with them.
We give the seller 20 days to get the Condo Documents to you. The reason for this is it costs money to get the Condo Docs, so the sellers like to know you have completed the inspection before they order them. In addition, because you have 10 days from receiving them to cancel, if you do not like something, doing this after the inspection extends your ability to get out of the contract if there are issues you are not comfortable with.
Paragraph 10 - Standard Addendum
In our Standard Addendum, we give you the right to cancel if the appraisal is less than the Purchase Price. This is an important right because in the standard Purchase Contract that all agents use, you do not have that right.
If you have a good down payment, the lender will still do your loan even if the appraisal is low, and therefore you would have no right to negotiate a new price, or cancel if you do not get one.
This option is unique to OahuRE's version of the Standard Addendum as all other addenda that we have seen do not include this right.
D-2 - When escrow is opened the initial deposit is due. This can be a personal check. You can mail or drop your check off at any of escrow's offices. The initial deposit does not mean much as you can cancel for any reason in the first 12 days and 100% of the deposit comes back to you.
After you have completed the inspection, your additional deposit is due. This means more, because now you only have specific contingencies that allow you to cancel and get your deposits back. We normally set the initial deposit at .5% and the additional deposit at 1%.
Your final deposit is due about 3 to 4 days before closing and this has be a cashier's check drawn on a Hawaii bank or a wire transfer.
This is not an actual offer. This is a sample only for educational purposes.
Allowed Time to Respond to the Offer
D-1 - We give the seller 48 hours to respond to the offer. They do not always make the deadline, but even if they respond after 48 hours, we can still open escrow.
Days in Escrow
F-2 - The standard time to complete escrow is 45 days. Cash purchases normally close in 30 days or less, and some lenders can close in 30 days.
F-3(a) - Sellers don't want to go over 45 days, but in some situations we can go up to 60 days.
We do include a 10 day extension, but there is no automatic right to extend. It has to be for a reason beyond your control.
The As Is addendum sounds intimidating, but if you look at it closer, it does not mean much.
It does not change any of your rights during the inspection. You can still cancel, ask for credit, or ask for repairs.
It does not change the seller's responsibility to disclose everything on their disclosure statement.
It specifically says that the Purchase Contract overrides the As Is addendum, so if you call for something to be repaired in the contract, this overrides the As Is addendum.
It does not even help the seller after closing because it specifically says they are still liable for claims where they did not disclose a material fact.
So what does it do for the seller then? It simply sends a message that they prefer not to do repairs. You can still ask for them, but they are saying up front that they prefer not to do any.
Lead Paint Addendum
If the home was built prior to 1978, you will get the Lead-Based Paint Disclosure. However, most sellers do not know if there is Lead Paint in their home, so you need to be aware of that possibility on homes build prior to 1978.
It also requires us to give you the following brochure where you can read more about Lead-Based Paint. Protect Your Family From Lead Hazards
ACT 137 Addendum
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 important for us and escrow to know about them ahead of time.
Short Sales are very similar to regular sales with the biggest difference being you need approval from the bank before proceeding. This approval can sometimes takes months to get, so you have to be patient. While you are waiting, you are not locked in, so you can cancel at anytime.
You also need to be aware of unpaid bills that will need to be paid off at closing, and it is a good idea to invest the extra $200 or so in the upgraded Title Insurance to make sure contractors who have not been paid do not put a mechanic's lien on the property after closing. You can get an idea of Escrow Fees and Title Insurance costs from this First American Price List. All escrow companies fees are around the same.
F-8 - We ask that all assessments, whether lump sum or installments, be paid in full by the seller prior to closing. Typically you will run into assessments with Condos where the maintenance budget did not cover the work needed, so they issue a special assessment to cover it.
HARPTA & FIRPTA
These withholdings apply to the seller only. If the seller is not a Hawaii resident, then HARTPA is applied. If the seller is not a US Citizen, then FIRPTA also applies. This is a withholding to pay taxes. It does not increase the amount of tax a seller has to pay, it just makes sure they pay it out of the withholding and then a refund will be given as needed. For example, if there is no profit on the sale, then there are no taxes due, so the seller would get a complete refund, although it can take about 90+ days to get it for FIRPTA.