“THE BOOK”
The
Real Estate Purchase Process From A - Z
An Information Guide
The Hawaii Home Buying Process A-Z
808
THE 808
Keller Williams Realty is one of the fastest-growing and most
innovative real estate companies in
It would be our pleasure to assist you in finding
"your slice of paradise" on the magical Islands of Hawaii.
Mahalo (Thank you)
“Your One Stop Resource for
Each Office is independently
Owned & Operated
Why
Opportunities
for international real estate investment is wide and varied in the
There
are generally three kinds of real estate investment available to foreigners.
These investments include the commercial estate investment and residential
property investment. Residential properties are further classified into single
family properties, apartments or condominiums and recreational properties.
Regardless of what kind of real estate you are interested in, there are all
sorts of tax ramifications, financing options and legal requirements that you
have to deal with. We can guide you through each of these through our network
of professionals from Tax accountants to Real Estate Attorneys.
Why
Should You Invest in the
You've probably heard of the increasing number of foreign
real estate investments in the
The Hawaii Real Estate Market is unique in many ways, it
is a resort destination and is made up of many micro-markets. The market varies
from island to island, neighborhood to neighborhood and price range to price
range. It is possible that the period of adjustment may be
nearing an end for some areas and price ranges of
No one will know when the bottom
hits until it’s past.
Local
and Foreign investors are currently snatching up great bargains all over the
Hawaiian Islands, there is no shortage of deals in this market.
The
condition of the
The real estate market in
On the
other hand, real estate investments are pretty stable if you would compare it
to stock investments - or even bond or mutual fund investments. With real
estate investment, you'd be putting your money in an investment that would grow
in value as years go by.
Many
distressed properties in
What
are the Benefits of Foreign Real Estate Investment?
Foreign
real estate investment in the
Another
great benefit that you can take advantage of is the availability of mortgage
financing. Lenders have opened their doors to foreign investors who are looking
into purchasing a property. So, you don't have to actually deplete your bank
account. You can actually secure a mortgage loan and gradually pay it off.
Our 10+ Customer
Service Commitment
1. Provide you with 10+ customer service during the entire buying process.
2.
Organize
and schedule your home search process.
3.
Discuss
the benefits and drawbacks of each home in relation to your specific needs.
4.
Provide
you with on-going updates on available homes.
5.
Help
you to compare homes and make a decision.
6.
Advise
you on the terms and issues of the offer and fill out the purchase offer contract.
7.
Present
your offer and negotiate on your behalf.
8.
Coordinate
and schedule all inspections on your behalf.
9.
Coordinate
and supervise the preparation of all closing documents and guide you through
the closing process.
10.
Help
you resolve any closing issues.
11.
Coordinate
move-in and assist with any post-closing issues.
Our Goal
is to make sure that our clients are well equipped and armed with up-to-date
information for your big decision. We
are even prepared to guide you through every phase of the home-buying
process. This packet and our website gives
you helpful information, please use its
reference pages, note pages and
agency
explanations, as an invaluable guide to purchasing property in Hawaii.So let’s
take an exciting journey together! We
look forward to meeting your real estate needs in every way!
About Keller Williams
Realty
Often, we judge the caliber of
people by the company they keep – this is why I would like to tell you a little
bit about Keller Williams® Realty and our office within the Keller Williams
system.
Keller Williams® Realty was founded in
Because each Keller Williams®
We are a profit sharing company where associates are in
partnership relationships with the owners; this means that everyone at Keller
Williams® Realty wants to find your home because everyone benefits.
The Keller Williams culture is based upon a belief system that is
summed up by this acronym: WI4C2TS:
Win-Win or no deal
Integrity do the right thing
Commitment, in
all things
Communication seek
first to understand
Creativity ideas
before results
Customers always
come first
Teamwork together everyone achieves more
Trust begins with honesty
Success results through people
The Home
Buying Process
It is our goal to provide you with the
most
professional and informative service
available.
*If not
already pre-approved
The Home Buying Process
1)
Hire a Realtor® when buying a home
in
Once you have
decided to purchase a property, it is very helpful to talk to an experienced Realtor®
who knows the local markets, current market conditions and is up to date on
Deciding on a neighborhood and/or condo complex in
A buyer’s agent has
a legal fiduciary responsibility to look out for your best interest and
represents only you. In addition, Realtors® are required to follow a strict code
of ethics and are highly penalized if any of these are broken. A buyer’s agent may ask you to sign a Buyers
Agreement during your consultation, even though it is the seller who pays the
commission for both the buyer and sellers agents.
808
Buyer Consultation
Whether you are planning to buy
Hawaii Real Estate in the next week or next 6 months, a Buyer’s Consultation
should be one of the first steps you and your Realtor take. The Buyer’s
Consultation can determine a lot of key points for you and your Realtor, on
average it only takes about 30 min to an hour, and can save many weeks of wasted
time frustration!
A Buyer’s Consultation with our team reviews the
entire home buying process, it also helps get you and our Real Estate
consultant on the same page. It sets the expectation of what’s important to you
not only in your Real Estate goals, but through the entire transaction and
communication process.
What you can expect from
the Consultation which can be done in person or by phone:
Note: Some of these steps maybe
shortened or skipped
depending on your experience in purchasing Real Estate in the
Ø The steps before you write an
offer – We will review what it takes to
reach your desired goals, and what you need to do to be ready when it’s time to
write the offer.
Ø If you are not paying cash and you
have not been Pre-approved for a loan; we can arrange this for you, you will
not be obligated to use this lender. If you are not in
Ø We will discuss the money you will
need up front, and the steps involved from acceptance to closing, and
everything in between.
Ø Our buyer consultants will ask a
lot of questions, this will let your Realtor know and understand what your
needs and wants are in your new home/investment property. Be ready to discuss
all of the things that are important to you to have in your home, and the
things that would be nice to have, but are not deal breakers. This allows your
Realtor® to see your new home through your eyes, so they can always be looking,
even when you are not with them! We may also go on the MLS together to review
pictures and details of properties that fit your criteria.
Ø We will also give you a brief
synopsis of today’s market as well as answer any question or concerns that may
not have been covered. If you have a question and we are unsure of the answer,
we will find it. Establish your preferred method of Contact and how frequently
you expect to be contacted, this way the lines of communication are always
open.
Ø Explain our team concept and the
benefits of working with a full service team and network of Real Estate
industry professionals.
We will also supply publications containing
certain tax information.
NOTE: We are not Attorneys or Tax
Accountants, so we will also recommend consulting with a tax accountant or real
estate attorney that has experience in cross boarder real estate transactions.
It is important to understand the tax benefits and down faults as well as the
tax laws pertaining to international real
estate purchases. We can recommend one if you don’t have one you
currently work with.
The Buyer’s Packet - An added
perk! On our team, we provide a folder that includes everything that was
reviewed in the consultation. It will also include copies of all the Real
Estate contracts that will be used to write an offer on your potential new
home, information on our team.
Ultimately, the Buyer’s
Consultation is meant to educate both of
us; we learn about your goals, needs and wants, and for you to learn about our
market and buying process. It is also meant to build trust and understanding between
you and your Realtor. Taking the time to cover all of the steps involved makes
for less stress, and the ability to find your dream home that much quicker. Not
only that, the process is that much more enjoyable because you know what’s
coming… even some of the potential surprises! So take the time to meet or talk with
your Realtor for the Buyer’s Consultation. You’ll be glad you did!
Pre-Qualification,
Pre-Approval
What is the difference between
Pre-qualification and Pre-approval?
1) Pre-qualification is based on a simple
calculating process performed by a lender to provide an affordability guideline
for buyers. This is only an estimate to give you an idea of how much you can
borrow based on information you have provided about your income and assets. These
are no longer accepted with offers, given the current mortgage meltdown and
credit crisis.
2) Pre approval is a formal process which requires a credit check and is based on
Verification of income, assets, and credit. A Pre- approval letter, if
requested by buyer or buyers agent, is then prepared by the lender and provides
proof of loan Pre-approval to the seller and the seller’s agent when submitting
an offer.
We advise buyers obtain Pre-approval before
they find the home they want to buy.
Why?
Pre-approval
will help you in the following ways:
1. It has become common place to submit a
pre-approval letter as opposed to a pre-qualification letter, with all offers
to purchase.
2. Most sellers
will not even consider an offer with out a pre-approval letter.
3. A seller may
choose to make concessions if they know that your financing is secured. Along with a sizable down payment, this will
make your offer more competitive.
4. With
Foreclosures/Bank Owned properties; if you do not submit a letter with your
offer, it will be rejected or go to the bottom of the in- box with out even be
considered.
5. You can select
the best loan package without being under pressure. No matter what type of loan
you decide on make sure you fully understand all the details, especially if it
is an adjustable rate mortgage or has a balloon payment due.
It is the
lenders responsibility to educate his/ clients as to all of the programs
available that will best fit your needs and limitations.
As a part of
our service we will recommend a few lenders that we use and trust, to contact you
for a pre-approval appointment. If needed this can be done via telephone, this will
not obligate you to work with them.
HOW MUCH CAN YOU AFFORD?
There are several
key factors to consider, here are a few:
1.
Your goals
2.
Your ability to qualify for a mortgage
3.
The down payment
4.
The closing costs associated with your transaction.
DOWN PAYMENT
REQUIREMENTS:
Most loans
today require a down payment of between 5% and 30% depending on the type and
terms of the loan. Loans for investment
properties usually require a minimum of 20% -30%, for Canadians and other international
buyers 30%-40% has become the norm.
CLOSING COSTS:
You will be
required to pay fees for loan processing and other closing costs. These fees must be paid in full at the final
settlement, unless you are able to include them in your financing. Typically, total closing costs will range
between 2-5% of your mortgage loan. A
sample net closing costs sheet for both international buyers and sellers can be
found on our website at www.808HawaiiREP.com
QUALIFYING
FOR THE MORTGAGE:
Most lenders
require that your monthly payment range between 25-28% of your gross monthly
income ( This figure is currently changing constantly). Your mortgage payment
to the lender includes the following items:
§
The principal on the loan (P)
§
The interest on the loan (I)
§
Property taxes (T),
§
The homeowner’s insurance (I).
Your total
monthly PITI and all debts (from installments to revolving charge accounts)
should range between 33-38% of your gross monthly income. These key factors determine your ability to
secure a home loan: Credit Report, Assets, Income, and Property Value.
Note: Due to the current economic state of the
The Ten Commandments
When Applying for a
Real Estate Loan
1.
Thou shalt not change jobs, become self-employed or
quit your job.
2.
Thou shalt not buy a car, truck or van (or you may
be living in it)!
3.
Thou shalt not use charge cards excessively or let
your accounts
fall behind.
4.
Thou shalt not spend money you have set aside for
closing.
5.
Thou shalt not omit debts or liabilities from your
loan application.
6.
Thou shalt not buy furniture on credit.
7.
Thou shalt not originate any inquiries into your
credit.
Making An Offer
Once you have found the home you wish to purchase,
you will need to determine what offer you are willing to make for the home. Our
team will research the property and provide you with a full report which
includes the original list price, amount of days on the market, how much the
current owner paid, tax records, market value at the height of the market,
current market value, and any other information available to assist in
determining an offer price.
To communicate your interest in purchasing a home,
we will present the listing agent with a written offer which should include a
copy of comparable sales and a cover letter supporting your offer, this is
vital in offers for shortsales and bank owned properties. Once the seller accepts an offer it becomes a
legal contract. When you write an offer
you should be prepared to pay an earnest money deposit. This is to guarantee that your intention is
to purchase the property.
After we present your offer to the listing agent it
will either be accepted, rejected, or the seller will make a counter-offer. This is when we will negotiate terms of the
contract if necessary.
The step-by-step contract procedure for most
single-family home purchases is standard.
The purchase agreement used is a standard document approved by our local
real estate board.
The purchase agreement or contract constitutes your
offer to buy and, once accepted by the seller, becomes a valid, legal
contract. For this reason, it is
important to understand what is written on the contract offer.
Once there is offer and acceptance the buyer will
write an earnest money deposit check or send a wire transfer to the
Title/Escrow company and escrow is opened.
What is an Escrow?
An escrow is created after you sign the contract to purchase
your new home. It is a process where the buyer and the seller deposit funds and
documents with an escrow agent that acts as a neutral third party. Using the
escrow agent as a common depository, the buyer and seller can proceed
simultaneously in providing funds, deeds, inspection reports, insurance
information and other required documents. Both parties give written
instructions, the requirements of which must be met before the transaction is
complete, to an experienced escrow officer.
How an Escrow is
opened?
Once the seller has agreed to your offer and a contract has been
completed, your REALTOR® will open the escrow. At this time, any earnest money
and the contract are placed in escrow. The
Title and Escrow Agency acts as a neutral party and by law can only respond to
written instructions mutually agreed on by both interested parties and cannot
alter the contract or create instructions.
What happens during
the Escrow process?
A Title Agency will begin by researching records on the property,
through a title report, for any unusual circumstance (Liens, a cloud on the
title, etc.).
After this, a commitment for title insurance is issued,
indicating a clear title or the description of items that need to be cleared
prior to closing. Your escrow officer will then follow the instructions on your
contract to coordinate deadlines and gather necessary paperwork.
What Happens Next
Now that you have decided to buy your home, what
happens between now and the time you legally own the home? A Title Company may handle the following
items. NOTE: In different parts of the
country, attorneys, lenders, escrow companies and other persons who are
independent of title companies perform some or all of these functions.
Earnest Money – An agreement to convey starts the process once it is
received at the Title Company. Once you
submit the loan application, it is usually subject to a credit check, an
appraisal, and sometimes, a survey of the property.
Tax Check – What taxes are owed on the property? The Title Company contacts the various
assessor-collectors.
Title Search – Copies of documents are gathered from various public
records: deeds, deeds of trust, various assessments and matters of probate,
heirship, divorce, and bankruptcy are addressed.
Examination – Verification of the legal owner and debts owed.
Document Preparation – Appropriate forms are prepared for conveyance
and settlement.
Settlement – An Escrow Officer oversees the closing of the
transaction: seller signs the deed, you sign a new mortgage, the old loan is
paid off and the new loan is established.
Seller, agents, attorneys, surveyors, Title Company, and other service
providers for
the parties are paid. Title insurance policies will then be issued
to you and your lender.
Title Insurance - There are two types of title
insurance:
§
Coverage that protects the lender for the amount of the
mortgage,
§
Coverage that protects the equity in the property.
Both you and
your lender will want the security offered by title insurance. Why?
Title agents
search public records to determine who has owned any piece of property, but
these records may not reflect irregularities that are almost impossible to
find. Here are some examples: an
unauthorized seller forges the deed to the property; an unknown, but rightful
heir to the property shows up after the sale to claim ownership; conflicts
arise over a will from a deceased owner; or a land survey showing the
boundaries of your property is incorrect.
For a one-time
charge at closing, title insurance will safeguard you against problems
including those events an exhaustive search will not reveal.
Home Warranty Protection
When you
purchase a newly built home, the builder usually offers some sort of full or
limited warranty on things such as the quality of design, materials, and
workmanship. These warranties are
usually for a period of one-year from the purchase of the home.
At closing, the
builder will assign to you the manufacturer’s warranties that were provided to
the builder for materials, appliances, fixtures, etc. For example, if your dishwasher were to
become faulty within one year from the purchase of your newly built home, you
would call the manufacturer of the dishwasher – not the builder.
If the
homebuilder does not offer a warranty, BE SURE TO ASK WHY!
RESALE
HOME WARRANTIES:
When you
purchase a resale home, you can purchase warranties that will protect you
against most ordinary flaws and breakdowns (appliances, electrical, plumbing,
etc.) for at least the first year of occupancy.
The warranty may be offered by either the Seller, as part of the overall
package, or by the agent. Even with a
warranty, you should have the home carefully inspected before you purchase it.
As a part of our service we purchase this for our clients.
A home warranty
program will give you peace of mind, knowing that the major covered components
in your home will be repaired if necessary.
Ask me for more details about home warranty packages.
Home Inspection
If you are
purchasing a resale property, we highly recommend that you have a professional
home inspector conduct a thorough inspection.
The inspection will include the following and the offer will be
contingent on your acceptance of the inspectors report:
§
Appliances
§
Plumbing
§
Electrical
§
Air conditioning and heating
§
Ventilation
§
Roof and Attic
§
Foundation
§
General Structure
The inspection
is not designed to criticize every minor problem or defect in the home. It is intended to report on major damage or serious
problems that require repair. Should
serious problems be indicated, the inspector will recommend that a structural
engineer or other professional inspect it as well.
Your home
cannot “pass or fail” an inspection, and your inspector will not tell you
whether he/she thinks the home is worth the money you are offering. The inspector’s job is to make you aware of
repairs that are recommended or necessary.
The seller may
be willing to negotiate completion of repairs or a credit for completion of
repairs, or you may decide that the home will take too much work and
money. A professional inspection will
help you make a clear-headed decision.
In addition to the overall inspection, you may wish to have separate
tests conducted for termites or the presence of radon gas.
In choosing a
home inspector, consider one that has been certified as a qualified and
experienced member by a trade association. We have some great recommendations.
I recommend
being present at the inspection if possible.
This is to your advantage. You
will be able to clearly understand the inspection report, and know exactly
which areas need attention. Plus, you
can get answers to many questions, tips for maintenance, and a lot of general
information that will help you once you move into your new home. Most important, you will see the home through
the eyes of an objective third party.
Once all contingencies are met we
move on to closing and Document Preparation – Appropriate
forms are prepared for conveyance and settlement.
WHAT IS A
A “closing” is where you and I meet with some or
all of the following individuals: the Seller, the Seller’s agent, a
representative from the lending institution and a representative from the title
company, in order to transfer the property title to you. The purchase agreement or contract you signed
describes the property, states the purchase price and terms, sets forth the
method of payment, and usually names the date and place where the closing or
actual transfer of the property title and keys will occur.
If financing
the property, your lender will require you to sign a document, usually a
promissory note, as evidence that you are personally responsible for repaying
the loan. You will also sign a mortgage
or deed of trust on the property as security to the lender for the loan. The mortgage or deed of trust gives the
lender the right to
sell the
property if you fail to make the payments.
Before you exchange these papers, the property may be surveyed,
appraised, or inspected, and the ownership of title will be checked in county
and court records.
At closing, you
will be required to pay all fees and closing costs in the form of “guaranteed
funds” such as a Cashier’s Check. Your
agent or escrow officer will notify you of the exact amount at closing.
Closing the Escrow
Once all terms and conditions are met, the escrow holder causes
the necessary documents to be recorded and disburses funds according to the
real estate purchase contract or instructions. Escrow fees are include in these
costs and are based on the sale price of the property, the loan amount and
services required.
The State of
The authority given to an escrow agent is strictly limited by
terms and conditions agreed to on the real estate purchase contract or
instructions to allocate funds during the escrow period, such as real estate
commissions, title insurance, liens, recording fees and other closing costs.
The real estate purchase contracts also specify the method of collecting funds,
proration of insurance and taxes and time limitations on settling the
transaction. Confidentiality is another important aspect of escrow. The agent
will discuss escrow matters only with the parties directly involved in the
transaction, specifically the buyer, Seller, lender and real estate agent. No
one else has access to this information, except through the proper legal procedures.
The escrow officer retains impartiality and confidentiality concerning the real
estate process.
WHAT IS AN ESCROW ACCOUNT? After the closing.
An escrow
account is a neutral depository held by your lender for funds that will be used
to pay expenses incurred by the property, such as taxes, assessments, property
insurance, or mortgage insurance premiums which fall due in the future. You will pay one-twelfth of the annual amount
of these bills each month with your regular mortgage payment. When the bills fall due, the lender pays them
from the special account. At closing, it
may be necessary to pay enough into the account to cover these amounts for
several months so that funds will be available to pay the bills as they fall
due.
If you have any
questions or would like to schedule a consultation; please feel free to give us
a call toll free at 1-888-308-6284 or send us an email at [email protected] .
Real Estate Glossary
Acceptance: the date when both parties, seller and buyer,
have agreed to and completed signing and/or initialing the contract.
Adjustable Rate Mortgage: a mortgage that permits the lender to adjust
the mortgage's interest rate periodically on the basis of changes in a specified
index. Interest rates may move up or down, as market conditions change.
Amortized Loan: a loan that is paid in equal installments
during its term.
Appraisal:
an estimate of real estate value, usually issued to standards of FHA, VA
and FHMA. Recent comparable sales in the
neighborhood is the most important factor in determining value
Appreciation: an increase in the value of a property due to
changes in market conditions or other causes. The opposite of depreciation.
Assumable Mortgage:
purchaser takes ownership to real estate encumbered by an existing
mortgage and assumes responsibility as the guarantor for the unpaid balance of
the mortgage.
Bill of Sale: document used to transfer title (ownership) of
PERSONAL property.
Cloud on Title: any condition that affects the clear title to
real property.
Consideration: anything of value to induce another to enter
into a contract, i.e., money, services, a promise.
Deed: a written instrument, which when properly
executed and delivered, conveys title to real property.
Discount Points: a loan fee charged by a lender of FHA, VA or
conventional loans to increase the yield on the investment. One point = 1% of the loan amount.
Easement:
the right to use the land of another.
Encumbrance:
anything that burdens (limits) the title to property, such as a lien,
easement, or restriction of any kind.
Equity: the value of real estate over and above the
liens against it. It is obtained by
subtracting the total liens from the value.
Escrow Payment: that portion of a mortgagor’s monthly payment
held in trust by the lender to pay for taxes, hazard insurance and other items
as they become due.
Fannie Mae:
nickname for Federal National
Mortgage Corporation (FNMA), a tax-paying corporation created by congress
to support the secondary mortgages insured by FHA or guaranteed by VA, as well
as conventional loans.
Federal Housing Administration
(FHA): an agency of the U.S. Department of Housing and Urban
Development (HUD). Its main activity is the insuring of residential
mortgage loans made by private lenders. The FHA sets standards for construction
and underwriting but does not lend money or plan or construct housing.
FHA Insured Mortgage: a mortgage under which the Federal Housing Administration insures loans made, according to its
regulations.
Fixed Rate Mortgage: a loan that fixes the interest at a prescribed
rate for the duration of the loan.
Foreclosure: procedure whereby property pledged as security
for a debt is sold to pay the debt in the event of default.
Freddie Mac:
nickname for Federal Home Loan
Mortgage Corporation (FHLMC), a federally controlled and operated
corporation to support the secondary mortgage market. It purchases and sells residential
conventional home mortgages.
Graduated Payment Mortgage:
any loan where the borrower pays a portion of the interest due each
month during the first few years of the loan.
The payment increases gradually during the first few years to the amount
necessary to fully amortize the loan during its life.
Lease Purchase Agreement: buyer makes a deposit for future purchases of
a property with the right to lease property in the interim.
Lease with Option: a contract, which gives one the right to lease
property at a certain sum with the option to purchase at a future date.
Loan to Value Ratio (
Mortgage:
a legal document that pledges a property to the lender as security for
payment of a debt.
Mortgage Insurance Premium (MIP): the amount paid by a mortgagor for mortgage
insurance. This insurance protects the
investor from possible loss in the event of a borrower’s default on a loan.
Note: a written promise to pay a certain amount of
money.
Origination Fee: a fee paid to a lender for services provided
when granting a loan, usually a percentage of the face amount of the loan.
Private Mortgage Insurance (
Second Mortgage / Second Deed of
Trust / Junior Mortgage / Junior Lien: an additional loan
imposed on a property with a first mortgage.
Generally, a higher interest rate and shorter term than a “first”
mortgage.
Settlement Statement (HUD-1): a financial statement rendered to the buyer and seller at
the time of transfer of ownership, giving an account of all funds received or
expended.
Severalty Ownership:
ownership by one person only.
Sole ownership.
Tenancy In Common:
ownership by two or more persons who hold an undivided interest without
right of survivorship. (In event of the
death of one owner, his/her share will pass to his/her heirs.
Transaction
Checklist
A successful
real estate transaction hinges on numerous details involving deadlines that
must be met so that you can move into your ideal home as soon as possible.
|
TO DO: |
DATE COMPLETED: |
|
ü Loan
Application: |
|
|
ü Seller’s
Disclosure must be signed: |
|
|
ü Set
inspection date and time: |
|
|
ü Written
notice due – all items from the inspection that you wish to be repaired: |
|
|
ü Negotiation
of inspection repair items complete: |
|
|
ü Title
Commitment due: |
|
|
ü Insurance: (You are required to arrange for insurance
coverage and to inform your mortgage company of your agent’s name and phone
number). |
|
|
ü Loan
approval: |
|
|
ü Closing Date: |
|
Please
note: During the loan and home-buying
process, you will be asked to supply documentation, respond to phone calls
requesting information, schedule dates into your calendar, etc.