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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, if one is offering a better rate it makes sense to take it.
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.
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 might 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.
The standard Hawaii Purchase Contract 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 you are buying a property and you are concerned about the appraisal being low, then you should put a cancellation clause in the offer that allows you to cancel if the appraisal is low. Keep in mind if they have any other offers that do not have this clause in it, then your offer is at a disadvantage.
Normally you would say how low it can go. For example, if the appraisal is $10,000 or less from the contract price you would continue, but if it is over $10,000 you would have the right to negotiate and cancel if you do not reach an agreement.
Most loans other than $0 down loans will still be able to go through with a low appraisal.
If the lender knows you have enough cash in the bank to cover the appraisal short fall, then they can't decline the loan and you won't be able to cancel.
For example, say the appraisal is $10,000 too low, but the lender knows you have $20,000 in the bank after making your down payment. They know you have the $10,000 to put into escrow to cover the low appraisal, so they will not decline the loan and you would be forced to continue.
If you don't have the $10,000, or if the lender does not know about the account with the additional money in it, then they would be forced to decline the loan because you don't have enough cash.
The extra cash can be used to increase your down payment to meet the lender's required Loan-to-Value (LTV). LTV is the amount of the loan compared to the appraised price (the property value).
If by chance your loan can't go through because of the appraisal, which can happen when you are putting very little or no money down, or you have almost no extra cash, 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's 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.
VA Loans are very strict and if something is not permitted then they have certain conditions in order to 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.
Here is what the Honolulu VA says about homes missing permits.
"Where a Building Code is Enforced
If the property is located in a jurisdiction which enforces a State, county or local building code, then VA MPRs require that the construction comply with, the applicable state, county or local building code.
Chapter 12.01 MPR Variations and exemptions may be waived for existing structures with the following documentation:
(1) Veteran is under contract to PURCHASE the property, and
(2) The veteran and lender request the exemption in writing, and
(3) The property is habitable from the standpoint of safety, structural soundness and sanitation, and
(4) VA is satisfied that the nonconformity has been fully taken into account by way of depreciation in the VA valuation.
In addition to satisfying the required conditions above, VA will require:
(5) A hold harmless letter from both the lender and the veteran stating and showing unpermitted areas. Acknowledgment from veteran that unpermitted area(s) is/are the veteran’s responsibility to cure before refinancing/sale of property, and
(6) Official letter from current licensed contractor, electrician, plumber, or engineer that work was completed in accordance with City and/or County of jurisdiction building codes.
All MPR variations and exemptions will be considered on a case by case basis"
Please see the PDF below to understand the ways you can get your final deposit into escrow. GoodFunds.pdf