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10 Basic Tips Canadians (or Any Foreign Buyer) Need to Know Before Buying Real Estate in Hawaii

In the past, 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.

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There are 10 things you should know before you start looking for your Hawaii home

If you can see yourself living the good life in Hawaii, and you are a foreign buyer that wants to buy property, here are some tips to get you started:

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 homeowner association fees). It is always best to know what these figures may be before you submit an offer.

 

3. A Seller Does Not Have to Repair Anything Before Selling

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 Writing 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. 

Tip: 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 – 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.

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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.

Want to Know More?

If you are interested in purchasing real estate in Hawaii, and have questions, feel free to contact us. We are always available and happy to help in any way we can.

So, this is the first half of the list of what you should know before buying your dream home in Hawaii. Read the remaining 5 tips.

Aloha.

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Ken

February 29, 2012

You say a large percentage is ‘distressed properties’, how much is that large percentage on your island? I’ve heard that it’s less than 10% in other Hawaiian islands.

Ken

February 29, 2012

You say a large percentage is ‘distressed properties’, how much is that large percentage on your island? I’ve heard that it’s less than 10% in other Hawaiian islands.

Annie Mendoza, RS

March 1, 2012

Mahalo, Pat! Great info. Regarding getting financing, I recommend that foreign buyers use a lender doing business in hawaii because of the nuances of buying in this state. Especially with condos and the rules about “condo-tels”, occupancy, vacation rentals, etc. Can’t wait for #6-10!

Annie Mendoza, RS

March 1, 2012

Mahalo, Pat! Great info. Regarding getting financing, I recommend that foreign buyers use a lender doing business in hawaii because of the nuances of buying in this state. Especially with condos and the rules about “condo-tels”, occupancy, vacation rentals, etc. Can’t wait for #6-10!

Pat Strausse R(B)

March 1, 2012

@ Ken, the percentage of sold properties last year on the Big Island varies depending on what part of the island you are looking at and whether it was a house or condo. But, just to give you an idea of some of the numbers found on the Big Island – in the North Kohala district distressed sales were 19 of 54 total sales for 35%, and in South Kohala it was 87 out of 212 sales or 41%. Hilo had a similar number of home sales, 192 homes sold but only 58 distressed property sales for 30%. A quick look at some condos sales shows Kona had 325 condo sales last year with 157 sales going for distressed properties for 48% and in South Kohala – the Kohala Coast resorts and Waikoloa Village- there were 230 condos sold with 104 distressed sales or 45% of the sales. So, as you can see last year on the Big Island distressed sales made up a big piece of the pie. But, I don’t think we will see quite those numbers for this year as the total number of distressed properties is going down and in some areas they are really starting to vanish.

Ken

March 1, 2012

So of available inventory (ACTIVE!), what percentage is ‘distressed’?

Ilikea

April 16, 2013

Read what she just shared with you.
Have a look online for properties available.

Pat Strausse R(B)

March 1, 2012

@ Ken, the percentage of sold properties last year on the Big Island varies depending on what part of the island you are looking at and whether it was a house or condo. But, just to give you an idea of some of the numbers found on the Big Island – in the North Kohala district distressed sales were 19 of 54 total sales for 35%, and in South Kohala it was 87 out of 212 sales or 41%. Hilo had a similar number of home sales, 192 homes sold but only 58 distressed property sales for 30%. A quick look at some condos sales shows Kona had 325 condo sales last year with 157 sales going for distressed properties for 48% and in South Kohala – the Kohala Coast resorts and Waikoloa Village- there were 230 condos sold with 104 distressed sales or 45% of the sales. So, as you can see last year on the Big Island distressed sales made up a big piece of the pie. But, I don’t think we will see quite those numbers for this year as the total number of distressed properties is going down and in some areas they are really starting to vanish.

Ken

March 1, 2012

So of available inventory (ACTIVE!), what percentage is ‘distressed’?

Ilikea

April 16, 2013

Read what she just shared with you.
Have a look online for properties available.

Pat Strausse R(B)

March 1, 2012

@ Annie – hey did you take a sneak peek at my part 2? Financing is in that list, so I will be covering it soon.

Pat Strausse R(B)

March 1, 2012

@ Annie – hey did you take a sneak peek at my part 2? Financing is in that list, so I will be covering it soon.

Catherine Klug, R(S)

March 1, 2012

Great blog, Pat! Let’s not forget that at closing the escrow documents will have to be notarized by a US notary. The instructions will likely direct Canadian buyers to do the signing at the US Embassy. It can be time consuming and an appointment will be required ahead of time. Oopps… you may cover that part next!!!

Catherine Klug, R(S)

March 1, 2012

Great blog, Pat! Let’s not forget that at closing the escrow documents will have to be notarized by a US notary. The instructions will likely direct Canadian buyers to do the signing at the US Embassy. It can be time consuming and an appointment will be required ahead of time. Oopps… you may cover that part next!!!

Pat Strausse R(B)

March 1, 2012

@ Catherine – You are correct – getting paperwork signed will also be in part two! Guess I better get busy writing it.

Pat Strausse R(B)

March 1, 2012

@ Catherine – You are correct – getting paperwork signed will also be in part two! Guess I better get busy writing it.

Sean Robertson

March 7, 2013

darn, why did I have to be born Canadian? I dont mind jumping through all the hoops to buy a property but the 6 month time limit per year for visiting really sucks! You’d think that owning a property would be a good enough reason to be allowed to live there full time…

Sean Robertson

March 7, 2013

darn, why did I have to be born Canadian? I dont mind jumping through all the hoops to buy a property but the 6 month time limit per year for visiting really sucks! You’d think that owning a property would be a good enough reason to be allowed to live there full time…

Todd Barrett, R(S)

March 7, 2013

Fantastically informing post Pat! I’ll be forwarding this one on to all of my Canadian clients for sure!

Todd Barrett, R(S)

March 7, 2013

Fantastically informing post Pat! I’ll be forwarding this one on to all of my Canadian clients for sure!

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