Tips and FAQs for first-time home buyers in Hawaii.
Congratulations, your offer has been accepted! Now it’s time for about forty-five days of fun before the keys are in your hand.
Closing on a home in Hawaii is a unique process that involves escrow, termite inspections, closing costs, and more.
Here is a sample timeline that explains general dates in the escrow process:
Make initial earnest money deposit. Choose termite inspector. Schedule home inspection. Notify lender of accepted offer.
Submit completed and signed application for your loan.
Receive disclosure and review it within the next 10 days.
Escrow receives title report and reviews it to issue title insurance.
Home inspection completed and agreed upon. Additional deposit is made.
Return escrow paperwork, choosing tenancy.
Review condominium or subdivision documents within the next 10 days, if applicable.
Survey completed. Review any encroachments within the next 7 days.
Conditional loan commitment letter received; satisfy conditions of the letter within the next 7 days.
Termite inspection report completed. Update disclosure, if needed.
Final walkthrough. Verify conditions and requested repairs, if applicable.
Sign the loan paperwork and escrow documents. Make down payment using a wire transfer or cashier’s check from a Hawaii bank.
Seller cleans. They must shampoo carpets, but general cleaning requirements are minimal.
Loan funded, and escrow notifies the state about the purchase.
Keys in your hand!
If your loan is processed and the seller agrees, yes, you could close faster than the Purchase Contract specifies. Be aware that if you change the closing date, and then don’t close on time due to loan issues, you may be breaching the contract.
The closing date can only be extended for a situation beyond your control, like loan processing or appraisal cancellations. Applying to a loan late or not returning escrow paperwork on time, are not items beyond your control; if you need an extension for a reason within your control, the seller would have to agree. If the seller does not agree to a later closing date, they could cancel escrow and potentially keep your deposit.
The buyer and the seller both pay for different items during closing. The following are the basic items and could be added or subtracted based on your individual property and circumstance.
Title Insurance. This protects a buyer if liens or clouds are discovered on the property after the sale. For example, if someone else says they have title to the property after you have closed, the title insurance would cover the legal fees associated with litigation. In Hawaii, sellers typically pay 60% and buyers pay 40% of the buyer’s chosen title insurance, including additional costs for extended policy coverage.
Mortgage/Note Preparation. The buyer pays lender fees, which cover generating and drafting the home loan.
Loan Discount Points. Some loans may offer or require you to buy points, which buy down the interest rates. 1-point costs 1% of the loan amount.
General Inspection. The buyer will pay for inspections. And while an inspection is highly recommended, it is optional.
Termite Inspection. The termite inspection is typically paid for by the seller in Hawaii, and the buyer can choose who they want for their termite inspector.
Appraisal. The buyer typically pays for the appraisal, which is important for the lender to secure financing. The appraisal can cost up to $600 or more in Hawaii.
Survey. The seller typically pays for the survey, which includes marking the official boundaries of the property.
Homeowners Insurance. The buyer will pay the cost of obtaining homeowners insurance, which must be secured by the final closing date.
Property Taxes. Property taxes and homeowners association fees, if applicable, will be paid by the buyer. Pre-payment of taxes or HOA fees by the seller will be prorated to them in escrow, so the buyer will only pay for the days you own the home.
Tip: After closing, lower your property taxes by filling out a claim for a home exemption.
Condominium and/or Association Transfer Fees. If the home is within a condominium or association, the buyer will review documents about budget, house rules, association disclosures, board meeting minutes and more; in Hawaii, the seller generally pays for these documents. The buyer will typically pay association transfer fees.
Government Recording Fees. The seller will pay for any liens on the title. But the buyer will pay for all other government recording fees, like deed and mortgage recording. This recording takes place the county’s Bureau of Conveyances office.
Escrow and Title Document Preparation Fee. Buyers and sellers split the escrow and title company fees in half. Escrow and title companies are the third parties that coordinate executing the Purchase Contract with the buyer and the seller. They also provide title reports, coordinate payments, and prepare documentation.
In Hawaii, the closing process is facilitated through escrow, which is normally done by a title company. Read more about escrow and title companies in Hawaii here. There is not a straight answer to this question.
Many buyers and sellers do not prefer a certain title company, while others do prefer certain companies. Sometimes real estate agents have a preferred title company and escrow company that they trust and know will offer a high level of service; however, know the Real Estate Settlement and Practices Act (RESPA) forbids escrow or title companies from offering any type of incentive to real estate agents who choose their company for closing.
Sometimes a seller will specify the title company that they want used. However, RESPA outlines that a buyer cannot be forced to purchase insurance from a particular title insurance company; therefore, if the buyer has a strong preference for a certain title company, they should be able to choose it, or the seller could agree to pay the premiums for the owner’s and lender’s title insurance to be in compliance with RESPA and also have their preference for title company. Conversely, a buyer that agrees to use the seller’s preferred title company will often be seen more favorably than one opposing the seller’s choice of title company.
Note that Hawaii closing costs can be settled with a different escrow company than where the title insurance is issued; however, this might complicate the closing transaction.
While there are a lot of aspects to the Hawaii home closing process, a team of quality professionals, like your real estate agent and escrow officer, will help assure you meet each deadline and have the keys to your new home in your hand.
Tips and FAQs for first-time home buyers in Hawaii.
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