Home Buyer’s Information
HOME BUYER’S INFORMATION CHECK LIST
If you will be purchasing a new home with a loan, lenders have varying requirements to support your loan application. Frequently requested documents include:
- Bank names, addresses, and telephone numbers, account numbers and account balances for your checking, certificates of deposit, savings and money market accounts.
- Information on the values and identities of other investments such as savings bonds, stocks, bonds and retirement plans.
- Names and addresses of life insurance companies and the face amounts, current cash values and policy numbers for existing policies.
- Creditor’s names, addresses, account numbers, high and current balances, and monthly payment obligations. These include credit cards.
- Information about other real estate you own including address, current value, lender and loan balance.
- Information on autos you own including current value, lender and loan balance.
- Information on income including salary, bonuses, commissions, social security and retirement income and any other income for all parties who will participate in the purchase.
- Any debts or obligations not included in the above such as alimony, child support. Student loans, etc.
- Employment history. If self-employed profit and loss statements and tax returns for the past two years.
- Social Security Numbers for all participants in the loan.
- Personal checks for the earnest money deposit (usually $1,000) and for the loan advance fees for credit report and appraisal. (between$500 to $600)
- Information on how title to your new home will be vested. Consult your legal or tax advisor to determine the most advantageous vesting for your circumstances.
The choice of lender is yours. It is important to get pre-qualified by some lender as it strengthens your negotiation power during an offer.
PURCHASE OFFER INFORMATION
Hawaii law requires that all real estate purchase agreements be in writing to be enforceable. Because Hawaii real estate law is so protective of both buyers and sellers, the Hawaii Association of Realtors has developed a standard purchase agreement form that is frequently used in the purchase of residential property.
When you are ready to make an offer to purchase, these forms will be prepared by the Realtor and they serve as the complete agreement when signed and agreed to by all parties to the contract. All terms of the offer are negotiable between buyer and seller.
In most cases these pre-drafted forms with simple modifications will be sufficient. If you have an unusual or complex offer, it may be necessary to engage an attorney to draft the necessary contract language.
EARNEST MONEY DEPOSIT
Along with the offer, you will normally write an "earnest money deposit" check. This check is usually for $1,000 and is made payable to the title company that will be handling the escrow. In some instances the seller will ask for a larger deposit and this is always negotiable between the buyer and seller. The check is not immediately cashed, but must be deposited with escrow immediately upon the agreement on a contract.
A buyer may change his mind about an offer at any point until it has been agreed to and signed by all parties. The earnest money deposit is then returned to the buyer. However, the instant the offer is fully agreed to and signed, control of the deposit passes from the buyer and resides in both the buyer and seller, jointly.
The check will then be deposited into an escrow company and cashed. The funds are held in an escrow trust account pending completion of the escrow and recording of the deed. Unless otherwise agreed in writing in the contract, Hawaii law requires the deposit check to be deposited into escrow immediately.
Deposited funds are disbursed by escrow as provided for in the purchase contract, or if the sale is not completed, by mutual written agreement of both buyer and seller. If the buyer defaults on the purchase contract, the seller may have a claim on some or all of the deposit funds as well as other remedies.
At the beginning of the transaction you will be provided an estimate of closing costs. The actual amount cannot be determined until just before escrow closes and will be provided by the Escrow Company.
When escrow closes the deposit will be applied toward the purchase price and closing costs. In most cases additional funds are required from the buyer just before close of escrow to complete the transaction.
Hawaii has a funds availability law that prevents transactions from closing until the actual funds are in the hands of the closer. Funds to close escrow must be in the form of a cashier’s check or wired funds. These funds are due the day of the signing. Recording occurs three business days after all funds are received by escrow. That is the date on which you own the property and receive the keys.
ESCROW AND TITLE INSURANCE INFORMATION
Hawaii’s method for handling and closing real estate transactions provides protection to buyers and sellers. The terms escrow and title insurance may be unfamiliar terms.
In most states real estate closings are handled by the real estate broker or by an attorney retained for the purpose. In Hawaii, although not required by law, such closings are almost universally handled by an independent third party known as an escrow agent. In most cases, buyers and sellers never meet for the purpose of closing the transaction. Instead, escrow companies specialize in these matters are charged with the responsibility of accumulating all the necessary documents and funds, establishing that all the conditions of the escrow have been successfully met, calculating and apportioning all of the costs, causing the deeds to be recorded and disbursing the funds.
In most states title to real property is passed by a Warranty Deed. With this type of deed, the sellers warrants that they have clear and marketable title to the property being purchased. If that turns out not to be the case, the buyer’s recourse is to the seller. In some cases, title insurance is optionally available to protect the buyer from a cloud on the title.
In Hawaii, usually the buyer requests title insurance and is issued title insurance. The title company issues a Title policy indemnifying the buyer and often the seller from clouds on the title. The title company issues a preliminary title report during escrow to the buyer identifying all liens and other clouds on title that will not be insured. In most cases these consist of existing loans, which will be paid in escrow and easements that normally exists. When it turns out that there are other clouds that cannot be extinguished and are not acceptable to the buyer or lender, the sale can be terminated before the buyer is damaged.
In most transactions the sellers pay for 60% of the premium for a standard owner’s insurance. In transactions where a loan is involved the buyer provides and pays for a title policy to the lender for the loan amount. The title company then guarantees a clear and marketable title and if an existing cloud is later identified, the buyer’s recourse is to the title insurance company rather than to the seller.
CONTINGENCIES OF PURCHASE
1. Your obligation to purchase will be contingent upon the satisfaction of a number of contingencies. In Hawaii on the contingencies is the termite inspection and/or treatment. Termites are a fact of life here and our lender may require a termite inspection. If termites are found (likely), then the property will need to be treated – either by fumigation or by spot treating. It is customary in Hawaii for the seller to pay for the inspection and treatment prior to close of escrow. This, however, can be a negotiated item between the contract parties. If subterranean termites are found, it is best to talk with the termite company regarding treatment and satisfaction of the termite contingency.
2. Survey and Staking
The standard contract for real estate calls for either survey or staking. You may elect to have one or the other or neither. Staking will call for a surveyor to mark all the corners. The survey will provide the buyer with a full drawing of the property boundaries showing any improvements on the property as well as along the boundaries. A survey also provides a written narrative addressing whether the improvements on the property are in compliance with our County setback requirements. Encroachments will also be noted.
3. Your Right of Inspection
You are entitled to have licensed, professional inspections or persons of your choice inspect your proposed purchase. It is customary for the buyer to pay for this inspection. You will have a certain amount of time after the acceptance date for the inspection and review of that report. The purchase is contingent on your approval of the results of the inspection. You may reject the inspection report and the property or you may ask the seller to make some repairs. The seller is under no obligation to do so.
4. Under Hawaii Law the seller is obligated to disclose fully and accurately any defect or condition, past or present, which materially affects the value of the property. You will receive the seller’s disclosure in writing and will have a certain amount of time to review and approve, or rescind the offer to purchase the. This written disclosure statement is a) within the knowledge or control of the seller b) is disclosed by documents recorded at the Bureau of Conveyance or c) can be observed from visible, accessible areas. To protect your own interests you may want to check out any public records and seek professional advice about the property.
If you want more than the traditional customer services offered by seller’s agents and subagents to buyers, then you should employ your own agent to represent you, and you alone, in the purchase of a property.
Your agent will be able to confirm information given by the seller and the seller’s agent, evaluate other alternative purchases, actively negotiate price and terms on your behalf, and act solely in your best interest. Whenever you employ a broker to represent you, use a written agreement.
You should decide whether to retain an agent as early as possible in your search for a property. You should clarify and understand your working relationship before you start relying on any broker as being "your agent". Remember, you may not need your own agent in every case. The seller’s agent or subagent may be able to provide you with all the data and information you need, with no financial or written commitment your part.
FREE "E" Market Analysis of your Property
Smith Properties will provide you a market analysis by e-mail. This is not an appraisal and will be based on multiple listing information available at the time. For East Hawaii only.