Furnishings and Inventory in Hawaii Real Estate Sales – How Are They Conveyed?
Are you curious on how furnishings and inventory in Hawaii real estate sales conveyed? Let this post serve as your guide.
I represent buyers and sellers on the island of Maui. I commonly work with colleagues around the state of Hawaii for buyers looking on Hawaii Island, Kauai, and Oahu — there are specialists just like myself who I am happy to help connect you with based on your specific needs.
Generally, in Hawaii real estate purchase contracts, all appliances are included as well as anything attached to the walls (some exclusions do apply, e.g. bank owned properties). This is covered in sections E-2 through E-4 of your purchase contract. It is always very important to cross reference this section very carefully. In a few instances, I have seen a solar hot water heater that was checked as applicable on a purchase contract and signed off by both parties that was not actually there. What happened? The seller and the seller’s agent shared in the cost of purchasing a new one to adhere to the terms of the contract.
This is a contract excerpt from the Hawaii Association of Realtors Purchase Contract. When selling a property, it is very important that you note any exclusions from the furnishings of the property (see contact clause at beginning of post). The most common one that I have seen here is artwork and sentimental personal belongings.
Are Most Properties in Hawaii Sold Furnished? Some Things to Know About Furnishings and Inventory in Hawaii Real Estate Sales
As a matter of statistics, the answer is no as there are more residential transactions in the state of Hawaii that don’t convey furnishings and inventory than there are homes, condos, or short-term vacation rentals that are sold furnished.
However, there are still a significant number of transactions where furnishings and inventory is conveyed with the sale of the real property. In a few instances, I have sometimes seen cars, golf carts, electric vehicles, and ATVs included.
The furniture for a home in Wailea Golf Estates (above) that our team sold earlier this year certainly had some value but really served more of as a convenience as the buyer was moving from L.A. and liked the furniture that was there.
Why Are Some Hawaii Properties Sold Furnished?
- Furniture stores in Hawaii, especially on the outer islands, have a finite amount of supply. This is not to say that we don’t have options, but they are nowhere close to what many consumers are used to in the States. This can make furnishings and inventory in Hawaii real estate sales a bit larger of an issue than in other places.
- It is very expensive to ship things to Hawaii. Those with particular tastes, connections elsewhere, or who are savvy internet shoppers will often do larger purchases either online or in stores and ship a container to Hawaii.
- It’s more convenient. In many instances, new buyers just don’t want to deal with this aspect of the transaction.
Montage Residence #1404 is being sold fully furnished and the furnishings in the majority of this residences are worth anywhere from $200-$500k.
Common Trends for Hawaii Properties Sold With Inventory
- It is very common for short-term vacation rental properties to be sold fully furnished and with some sort of detailed inventory list as well.
- Generally speaking, higher-end properties, or those that have a more transient element to them (e.g. second homes), are sold as furnished. This is especially when the furnishings are more valuable.
- Many new developer offerings (see Montage above and Luana below) do come with some sort of furnishing package. Some of these are built into a pre-determined purchase price, and others are offered as an a la carte expense.
- In many instances, you will find furnishings, inventory, and other inclusions conveyed by means of a separate bill of sale different from the real estate transaction itself.
Furnishings and Inventory in Hawaii Real Estate Sales Rule of Thumb: “Banks Finance Real Property Not Personal Property”
When you are purchasing a property in Hawaii with financing versus an all-cash transaction, there are additional considerations that need to be taken into account. Banks are in the business of providing financing for real property (the real estate) not personal property (furnishings and inventory). Thus, if a property is being sold furnished, during the escrow process, the bank will generally ask for something called a Zero Value Letter.
A Zero Value Letter is a simple letter signed by both buyer and seller affirming that the furnishings have no real monetary value and are simply provided as a convenience. Whether or not this is accurate is generally a moot point for a loan underwriter’s purposes, even though buyer and seller may feel very differently about this. It is very important that everyone is on the same page with this when the purchase contract, addenda, and any counteroffer(s) are fully executed by both parties.
The Luana Garden Villas offering at the Honua Kai Resort and Spa in Kaanapali is a new developer offering for short-term vacation rental properties for sale starting around the $2M mark. You can read about all about fully furnished villas for sale here.
Detailed Inventory Lists
In the instance of short-term vacation rental properties, the owner or management company generally has a detailed inventory list of everything that is in the unit. This covers all furniture, mini-appliances, dish-ware, linens, towels, beach gear, etc. For these types of tractions, furnishings, and inventory in Hawaii real estate sales are fairly straightforward.
When selling a property, it is very important that you note any exclusions from the furnishings of the property (see contact clause at beginning of post). The most common one that I have seen here is artwork and sentimental personal belongings.
When a property is sold and is no longer going to be rented with the same management company, the same inventory is not being conveyed to the new buyer. It is important that you have two lists, or a specific list of exclusions on the inventory. I have sold many short-term vacation rental properties where much of the inventory is actually owned by the management company rather than the sellers. In this instance, if the buyer chooses to no longer work with this company, the inventory will be removed.
The inventory lists are generally prepared by the seller or seller’s agents and ultimately are approved by the sellers prior to the delivery to the buyers. The buyer will generally have anywhere from 7-15 days to approve said list and discuss any discrepancies. Some lists can very detailed (actually counting the numbers of plates and silverware) and others not as much. Ultimately, it is up to the buyer to decide how much detail they want to see in these lists.
Focus on the Real Estate
I have been part of a couple real estate transactions where the buyers and sellers have become way too focused on inventory and other inclusions, rather than the actual real estate itself. It is important to keep in mind that these items do have significance, but in most instances, it is such a nominal consideration relative to the overall purchase price of the property.
Do Your Investment Research about Owning Hawaii Properties Before You Book Your Trip
Most buyers of Hawaii real estate visit Hawaii an average of 3 times before they decide to make the commitment to purchase a Hawaii property. With this, many buyers simply fall in love the first time they come; I have heard this story time and time again. If you are one to make more whimsical decisions — open houses can be great. If you are a bit more calculative — jump online and start compiling your notes.
I personally have written a number of different articles that many of my buyer clients have found helpful in their process. Here are a few:
- How to Properly Prepare for Owning Hawaii Vacation Rental Properties
- 5 Ways to Protect your Hawaii Vacation Rental Investment Property
- Invest in a Hawaii Vacation Rental Property with as Little as 20% Down
- Maui County Publishes Maui County Short-Term Vacation Rental List
- Purchasing a Maui Vacation Rental? 3 Reasons to Call Us First!
- Maui Realtor Interviewing for Your Services Today
- Earn a Part Job in Hawaii by Purchasing a Vacation Rental Property
- Toolkit For Purchasing a Hawaii Vacation Rental Property
- How Technology Facilitates Maui Property Sales via the Internet
- Invest in Maui Property via an Internet Purchase with Jeremy Stice & Hawaii Life
Jeremy Stice R(B) at Your Service
Information about purchasing a Hawaii properties doesn’t provide any value if you can’t get ahold of your Realtor. I make a commitment to pick up my cell phone as best as I can, return voicemails, text messages, and email in a timely fashion. I also work 7 days a week, so feel free to call me anytime you need me. However, if I am busy at the time, I will get back to you shortly. I am here at your service, I look forward to sharing my passion and expertise with you, especially when it comes to Furnishings and Inventory in Hawaii Real Estate Sales.
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