So you want to move to paradise. You start looking for a home in Hawaii and the next thing you know you are on a plane to view available listings. You get to Kailua Kona, meet your LUVA Real Estate Realtor, and go view open homes. You are in luck! You find one that you fall in love with. A beauty near the ocean with sweeping views and a spacious lanai. Or you find that artist’s cottage where you can retire and use as your home base to travel the islands. Or you may even find that great second home and you can see the income potential as you make your offer.
BUT, before you get to this point, there are important aspects you didn’t know about before getting on that plane. We are going to alert you to some of the pitfalls that you can avoid before you make the offer and while you are in escrow on your dream home in Hawaii.
Mistakes To Avoid in Buying A Home In Hawaii
1. Where is your checkbook for your deposit?
We have seen quite a few people who forget to bring a way to pay for the earnest money to get into escrow after deciding to make an offer on a home. Don’t be that guy who slaps his head. Bring your checkbook.
2. Do you have proof of funds?
In Hawaii, to make an offer, you have to show proof of funds up front for the listing agent and their client to take your offer seriously. Lance Owens, LUVA Realtor offers a tip: You can screenshot your bank info, send it to your Realtor and they can turn it into a pdf for submittal with your offer.
Better yet, bring a letter of proof of funds prepared from your banker. Your lender has to verify the funds in your account to provide a pre approval. Have your lender write a letter verifying that you have the cash available to make a purchase offer.
3. Use a Local Bank/Lender to obtain your mortgage
Sure, we believe in supporting our local economy, but this one can really save you during the escrow process when your mortgage lender in your hometown on the mainland isn’t familiar with lava zones, tsunami inundation zones and other geographical issues that we have that other locations do not in their lending review.
We suggest talking to local lenders in West Hawaii who are familiar with the intricacies of geographical nuances on the Big Island. Talk to your LUVA Realtor for a list of local mortgage professionals.
4. Wiring Funds To Pay For Your Home
Did you know that to wire funds you must be there in person to sign off when sending large amounts of money to Hawaii? You may think that the Big Island has a Wells Fargo, but ours is a mortgage company, not a bank. Make sure you talk to your Realtor and mortgage company before the close of escrow on this issue. Lance shared that he had this issue come up when a couple had already sold their home on the mainland and flown to the Big Island to await close of escrow. Then they called their bank to wire funds to Kona. Alas, the bank required for them to be there in person to sign off on the wire transfer! They almost lost the deal and thankfully family members stepped in while the bank sent small amounts of funds everyday for weeks!
5. Good Funds Act of Hawaii
You can thank the Great Recession for the banks in Hawaii requiring a two day hold on funds coming in from the mainland called the Good Funds Act of Hawaii. Even if you are wire transfering the money, you have to wait two days to make sure your funds clear. Hawaii put this law in place on incoming funds to ensure the money isn’t trapped in a folding bank off island. Keep this in mind when you receive the date of close of escrow and make sure funds are in place to close the deal. Two Days.
A few things to keep in mind during escrow in general:
The buyer has a certain number of days to conduct inspections on the home and request any repairs or closing cost credits as a result of what’s found during inspection (which can be referred to as the inspection contingency date). In Hawaii, common inspections include an initial inspection by a licensed home inspector and additionally a termite inspection (note: a termite inspection usually has its own inspection contingency date in the contract). A mold inspection may also be performed.
LUVA Real Estate wants to ensure your home buying and selling process goes smoothly. Please contact us if you have any questions about buying or selling a home on Hawaii Island.