Closing the Deal

You have signed the purchase contract. Now it is time for about 45 days of fulfilling the contract contingencies before receiving the money in your bank.

In Hawaii, closing goes through escrow, a third party that assures all the aspects of the contract are fulfilled by both the seller and the buyer.

Here is a sample timeline that explains general dates in a 45-day escrow process:

Day 1 - Buyer makes initial earnest money deposit, chooses termite inspector, schedules home inspection, and notify lender of accepted offer.

Day 3 - Buyer submits completed and signed application for your loan.

Day 7 - Buyer receives seller’ disclosure and reviews it within the next 10 days.

Day 7 - Escrow receives title report and reviews it to issue title insurance.

Day 12 - Home inspection completed and agreed upon. Additional deposit is made.

Day 15 - Buyer returns escrow paperwork, choosing tenancy.

Day 20 - Buyer review condominium or subdivision documents within next 10 days, if applicable.

Day 30 - Survey completed. Buyer reviews any encroachments within next 7 days.

Day 30 - Conditional loan commitment letter received; buyer satisfies conditions of the letter within the next 7 days.

Day 30 - Termite inspection report completed, with seller paying. Update disclosure, if needed.

Day 40 - Buyer final walk through. Buyer verifies conditions and requests repairs, if applicable.

Day 42 - Sellers and buyers sign the loan paperwork and escrow documents. Buyer makes down payment using a wire transfer or cashier’s check from a Hawaii bank.

Day 42 - Seller cleans, including shampooing carpets.

Day 43 - Seller receives final funds in escrow, and escrow notifies the state about the purchase.

Day 45 - Buyer receives keys.

While you might think selling your home is all about making money, the seller has quite a few closing costs to cover in Hawaii. In fact, seller closings costs are typically much more than the buyers’ costs. Here are the typical items that the seller can expect to pay during closing, with the estimated amount explained for a $800,000 single-family home in Honolulu.

Mortgage Loan Payoff

If you still have a mortgage loan, the purchase proceeds will initially go to pay off your loan, which may also have a payoff fee depending on your original loan agreement. For our $800,000 home example, let’s assume they already paid off their mortgage, resulting in this cost being $0.

Real Estate Commission

Sellers will often pay both the buyer’s agent as well as their own real estate agent. If you were to pay 3% to both the buyer’s and the seller’s agent, the total would be $48,000 on a $800,000 home.

Recording Fees

For the title to be transferred to another owner, or recorded in the Bureau of Conveyances documents, the seller must pay a fee with an estimated cost of $350.

Title Insurance

While various policies can be purchased to protect the title, the seller typically pays for basic title insurance. This title insurance protects against financial losses due to encumbrances, defective title, or adverse claims to the title, resulting from the title company not examining the title record carefully. The estimated cost is $2200 for a $800,000 home.

Escrow Fees

The seller pays a portion of the fees to the title company, which performs the tile search, prepares the paperwork, notarizes documents and more during the closing process. The estimated cost is $1900 for a $800,000 home.

Conveyance Tax

This county tax is calculated based on the sales price of your home. The estimated cost is $1600 for a $800,000 home.

Termite Inspection

In Hawaii, the seller pays for the termite inspection and any remediation, if necessary. The estimated cost is $700 for the inspection.

Cleaning Costs

A professional cleaner should come to clean the home after you move out, including shampooing any carpets. The estimated cost is $400.

Survey for a Single-Family Home

A professional surveyor will verify the boundaries and applicable encroachments of a single-family home, a cost which the seller absorbs. The estimated cost is $950.

Condo or Leasehold Documents

The seller will have to give the documents for the condo or leasehold to the buyer, which could result in a fee to obtain them.

Repairs

If the inspector finds necessary repairs, the buyer may ask the seller to pay for those costs; however, paying for repairs is a negotiated contingency. If a lender requires repairs for the loan, the seller may end up paying those.

Liens or Judgements

If there are any unpaid property taxes or homeowner association dues, the seller will pay those during closing.

While the closing process for the seller is fairly simple with an escrow officer leading the way, the seller will have to pay a significant amount of closing costs. Our $800,000 home example totals around $56,000. But once the final escrow documents are signed and the credits and debits are sorted out, you will hopefully walk away with a significant amount of equity gained.