Finding your new home on the Big Island of Hawaii can be an extremely rewarding and satisfying experience for both the buyer and the real estate agent. This short manual is meant to simplify and order the steps we will take together to find the Hawaii real estate you are looking for. Experience has shown that an organized approach rather than a haphazard one will find your real estate in the shortest amount of time with the least frustration. Here is an overview of the real estate buying process that we will go through together:
1. A meeting to gather information that will help focus our search
2. Agency: our discussion of how you will be represented
3. Exploration of financing options available and initial steps to pre-qualify
4. Conducting the search
5. Putting together and negotiating an offer to purchase
6. What happens after the offer is made
7. Your protections & obligations using the standard Deposit Receipt Offer & Acceptance (DROA) form
8. Escrow: making certain that all the contingencies are met
9. My continuing service to you
1. Our first meeting is both an introduction and an interview. If you're buying a home there's a good deal of information about what you have in mind that I need to understand in order to help you accomplish your goal. I want to know what you picture when you think about your new property i.e., number of bedrooms, bathrooms, type of floor, surroundings, how much land, how big is the house or condo, 1 story or 2, how long you intend to live here, how old should your new home be, etc.? I want to know your long range plans for the property and how skilled you are if we're looking for a "fixer". I want to know how much time you want to spend maintaining your yard or how you feel about hearing your neighbors. Do you mind driving steep hills, how far do you want to commute each day to work or the store or town or the beach? It may sound nosy and demanding, but the more I know about your needs, the easier our job of locating the right property becomes. What we're doing is combining your needs with my knowledge to make this as enjoyable
and productive as possible.
2.
Agency is nothing more than who represents whom. Hawaii state law requires full disclosure of agency in any real estate transaction. Almost all brokerage offices carry listings of properties, which makes them representatives of the seller. Regardless of who in the office has taken a listing, they all belong to the broker and since every agent in the office works under the broker's license, they all represent the seller.
As your real estate agent, I will represent you, the buyer,
in dealing with all other companies. It
will be my job to help you discover information
about a property that will strengthen your offer
to purchase and assure that you are getting just
what you want. If you happen to choose to
purchase real estate that is listed by our agency, it
will bring about a situation known as Limited
Dual Agency, in which the real estate agent "represents"
both the buyer and the seller. It's called
limited because there is limited representation
for both parties. In a Limited Dual Agency
position, the agent cannot reveal anything to
you that is not public information nor can they
suggest an offer price. All they can do is
provide you with the same information the seller
has. This is not the optimal situation for
the seller or the buyer, but if all parties are
aware of the limitations and are comfortable
with them, we will proceed. If you have any
reservations, we will recommend that you obtain
an outside agent to act on your behalf. Our
first concern is that you are getting our best
service.
3. If you are going to use some type of commercial financing, there are some things you should know about the loan process. I only touch on the subject because this is an ever- changing market with rates moving each day and new loan packages being offered. What is important is that you know how much you are comfortable spending on your mortgage. In most cases, a person will be qualified for more than they are willing to spend. Knowing all the details of your loan will help you arrive at that figure.
There are costs above and beyond the purchase price that you will have to contend with. For example, there are attorney's fees, recording fees, escrow fees, loan origination fees, points,
and sometimes Private Mortgage Insurance (PMI) for those putting down less than 20% of the purchase price. All of these fees are usually wrapped up in the loan package, but it means that you will have to come up with more money than just the amount you intend to "put down". It's no fun facing that surprise when you walk in to sign the final papers, so we want to know all the facts before we even begin looking.
The loan is a two part process; first is qualifying you, the buyer, and then the
qualifying the property you're buying. There are loans known as
No Verification loans for people with new businesses or seasonal income or other reasons where a tax return may not qualify them for the loan. Usually, a No Verification loan will require
a considerably larger down payment, sometimes as much as 40%. For a conventional loan, the lender will run a credit check, ask for a couple of years of tax returns, verification of income, etc. This is the
most time consuming part of the process. To qualify the property, the lender will order an appraisal. As long as that meets or exceeds the purchase price, the property will qualify and the lender then gives Final Loan Approval.
4.
Using the information from Step 1, we will do a complete search of the Multiple Listing Service database using your criteria as the search parameters. In addition, I will be contacting other agents to find out if they have "pocket listings" that fit your description. Pocket listings are sellers who may not be ready to list yet, but
have let their agent know they would consider an offer. In some cases, I will contact the owners of similar properties to ask if they have considered selling.
In a case like this, I do NOT represent the seller; I suggest they get their own agent or choose to represent themselves.
Once we have a list of the properties you're interested in, we will discuss neighborhoods or condo complexes and, in most cases, physically inspect these areas. We'll discuss any maintenance fees or association fees you may have to consider.
When you're ready to actually look at property, we'll set showing appointments. In some cases we can get right into a property, but usually there is a 24, or sometimes, a 48-hour notice to be given by the listing agent. State law does give a tenant up to 48 hours.
When the showings are set, we'll have a schedule to follow. Being on time is important because, in
most cases, people will be expecting us at a certain time. Unlike the phone company we can't just tell them we'll be there between 8:00 and 5:00 and expect them to wait.
If you decide that you want to spend more time
at a property than we have allowed, I will
attempt to reschedule the next appointment or
arrange to return to the one of interest later in the day. I'll take you back to a property as many times as you feel are necessary to make your decision.
My job during this part is two fold. I'm there
to point out those things you may not see,
sometimes being the pessimist. I want you to be
aware of the negatives as well as the positives.
Secondly, I'm there to sometimes remind you of
what you originally had intended. While this may
sound elementary, people occasionally change
their minds about what they want when they see
new possibilities. I want to be sure that you
get what you really want.
In most cases we will find what you're looking
for in a day or two. There are times when we
walk into the right property the first time and
there are the other extremes as well.
Occasionally it takes an extended amount of time
before all the elements come together and we
find the perfect home.
5.
Once we have found the property you want we have to determine a fair market value and a strategy for your offer. We will find
the fair market value by looking at similar real estate that has sold in the last few months and by looking at current real estate market activity. Once we decide on the value, we consider an offer. In many cases, especially in an active real estate market, if you've found what you want I suggest a full price or very near full price offer. The reason is that a good property will not last long when it's a sellers' market; there
is a shortage of good property and plenty of buyers looking.
It is of the utmost importance that you remember this: just because you put in an offer doesn't mean you have to buy the property, even if the seller accepts your offer. Putting in an offer and getting it accepted by the seller gets your foot in the door so someone else doesn't get there first. There's nothing
more disappointing than finding the right property, thinking about it for a day or two
and getting your heart set on it, then finding out it went into escrow. I suggest putting down a $5,000 to $10,000 deposit to show your intention to purchase. You may be able to put down less, but a sizable deposit makes your offer stronger than a small deposit will.
Coldwell Banker Aloha Properties holds that check until we get acceptance by the seller. At that time, it goes to the escrow company.
6.
In our offer to purchase property, called a Deposit Receipt Offer & Acceptance
(DROA), there is an inspection period titled C-51 which gives a specific amount of time, normally 15 days from acceptance, for you to choose not to proceed with the purchase. You will have your deposit returned and continue looking for another property if you choose. We'll talk more about C-51 as well as a number of other clauses and contingencies that have to be met by you and the seller prior to a final commitment to buy.
One of three things can happen to the offer once
it is presented to the seller: they may accept it as written, they may reject the offer
outright, or they may counter the offer with one of their own, changing the price or one of the other contingencies we may have added at the time we made the offer.
If necessary, we will negotiate with the seller, through their agent, to find a workable agreement. Once that's done and we have an accepted offer, we open escrow.
7. Hawaii's offer to purchase, the DROA, is an ever-changing document meant to protect both the buyer and the seller in any real estate transaction. It does this through the use of
contingencies, obligations agreed to by both parties that have to be met in a timely manner in order to complete the purchase.
We'll go over the DROA in detail when we put together an offer, but I want to highlight a few of the features meant to protect you, the buyer. I mentioned C-51 above; this one is the
Inspection clause that allows you to perform as many inspections as you feel necessary on the property. In most cases this involves a certified home inspector. Sometimes an engineer is called in, sometimes a termite inspection
is requested (a mandatory one is paid for by the seller later on in the process), maybe a pool inspection or a septic inspection
will be ordered, or whatever you deem necessary to answer any questions you may have.
Fifteen days is usually enough time to conduct these inspections. If at any time or for any reason you choose to walk away during this time, just say so and the offer is void.
There are also contingency clauses, C-23 through 26 that protect you should you not be able to acquire your funding as described in the offer. C-35, C-36 & C-37 require that the title be free and clear and transferable to you
before you're committed to buy. On any property with structures, we will ask that the seller provide a survey, C-42. If there are problems with setbacks or encroachments that the seller cannot correct to your satisfaction, you may choose not to proceed. C-44 & C-44A require complete disclosure of any knowledge the seller has of the property. You have to accept the disclosure or, again, choose not to proceed.
As mentioned earlier, just because you have an accepted offer doesn't mean you have to buy the property.
It's only after all contingencies are satisfied that you are committed to finalize the purchase.
8.
Escrow is defined as, "...a disinterested third party". Escrow is a neutral party to the transaction. They're the ones that hold the money until
each of the contingencies of the contract are met by both parties, any liens are cleared, all taxes are paid, and any money held for buyer's needs is satisfied. When all contingencies have been met, they record the transaction with the Bureau of Conveyances
and transfer the money due to the seller and the deed to you.
On a recent land sale priced at $187,000, closing costs included a settlement fee of $372.50, title insurance
of $435.60, a lien statement at $31.25, taxes of $15.52, deed recording was $25.00, mortgage recordation was $38.00, and a release fee of $25.00. For a buyer, the escrow and title fees will be about 1% to 1.5% of the sale price. Like the loan fees, these are not included in the sale price of the property, however, there are some loans and some creative offers to sellers that
can include some or all of these fees.
Once escrow is opened, you will receive a set of "Escrow Instructions" in the mail. This will describe in detail what escrow is doing for you. You'll also receive a description of the types of tenancy available in Hawaii. There are 4 options for holding title here: Joint Tenancy, Tenants in Common,
Tenant in Severalty, or Tenants by the Entirety.
Tenancy in Severalty is for one person, holding title in their name only.
Tenants by the Entirety is for married couples; this arrangement puts title in the marriage and not directly to either the husband or wife.
Tenants in Common may hold equal or
unequal interests in the property and there is
not automatic right of survivorship.
Joint Tenants hold equal interests in the
property and there is the right of
survivorship. It's best to talk to your estate planner or attorney to determine which
type of tenancy is best in your particular case.
Closing is when the actual change of deed takes place. We will usually try to close on Tuesday through Friday, not on a Monday. The reason is that your loan is "funded" the day before you close. If the loan is funded on Friday to close on Monday, you pay interest on the loan for two days before the property is yours, and that doesn't make any sense.
9. My service doesn't stop just because we closed the sale.
I will remain available to answer any questions you may have after the sale or help out in any way
I can. Much of my business is built on referrals to
your friends or relatives looking for property here.
I intend to provide exemplary service, the kind you would want for other people you care about, so if there is ever anything
I can do to improve, I want to know about it.
Having you as a client for life means I'm
doing my job; if I can do it better, we all
benefit.
Carole Kwiat, RS
Realtor Sales
Coldwell Banker Aloha Properties
Making Your Hawaii Real Estate Dreams Come True!
