If you can see yourself living the good life in Hawaii, here are some tips to get you started
If you are a Canadian that wants to buy property in Hawaii, there are 10 things you should know before you start looking for your Hawaiian home.
In the past few years, Canadians have been at the top of foreign buyers for Hawaii Real Estate. So, although Canadians should know a few points about Hawaii real estate before buying here, it’s still fairly easy for a Canadian to buy their dream home or condo in Hawaii.
So, here’s a look at the first 5 out of 10 things you should know before you buy:
1. Is the property fee simple or leasehold? In Hawaii, there are two types of property – fee simple or leasehold. Fee simple is the term for property where you own the land and all the improvements on the land. With leasehold property, you are paying for the improvements on the land, but do not own the land, instead you pay a lease on the land. If you are buying leasehold, you will want to know the terms of the lease. Also, it can be more difficult to obtain a loan on leasehold property as the loan needs to be for 5 years less than the time left on the lease.
2. Is this a “distressed” property? In Hawaii, a large percentage of the properties for sale are distressed properties – either a short sale by the owner or a REO property. A short sale is a sale where the sales price is not enough to pay off the mortgage, so the transaction must be approved by the seller’s lien holder or lien holders. A REO is short for Real Estate Owned, this is property that has gone through the foreclosure process and is now owned by the bank. While there are many details to these transactions, the key points are:
- Because you need lender approval, the process will take longer than a normal sale – expect anywhere from 2 to 6 months…and maybe even longer.
- Distressed properties are almost always sold “as is” and often have been damaged and may have had appliances and fixtures removed.
- The buyer will often pick up costs that a seller would “normally” pay, such as termite inspection, cleaning of property, and staking of property. The buyer may need to pay for liens on the house, back taxes, or HOA fees (monthly home owner association fees). It is always best to know what these figures may be before you submit an offer.
Condo living is very popular as you have many amenities, but no responsibilities for exterior maintenance.
3. Unlike Canada, where a seller must bring a home up to code when selling, a seller does not have to repair a property before selling it. Hawaii law does require the seller to complete a seller’s disclosure on the property. However, any repairs paid for by the seller have to be negotiated into the sales contract, and in the case of distressed properties, the sale is usually “AS IS” where the seller will not perform any repairs, even those that may be considered a safety issue, but these are the types of homes you can often call a “steal of a deal.”
4. You’ll need your finances in order before you write up an offer. In Hawaii, it is common practice that all offers to buy include documentation on the buyer’s ability to buy the property. If you are paying cash, you’ll need “proof of funds,” or a copy of statements that show you have the needed money for the sale. If you are using financing, then you will want to talk to a lender about getting a pre-qualification, or even better, a pre-approval letter from a lender that is licensed in the State of Hawaii.
FYI, most sellers and seller’s agents prefer to see a lender they are familiar with, one that they feel can get the job done on a loan. You can ask your Realtor for some contact information of lenders that work in the local area.
5. It can take 45 to 60 days to complete your purchase. In Hawaii, this is the usual time to complete the sales process. The first portion of this time is used for buyer due diligence – home inspections, review of documents, review of seller disclosure – this will usually take 10 to 14 days.
The remaining time is for the processing of a loan and the drawing up and signing of sales documents. If you are purchasing with cash, you should be able to close in 30 to 45 days.
So, this is the first half of the list of what you should know before buying your dream home in Hawaii. I’ll be back with the remaining five tips.
I love the Big Island! Aloha.