Navigating Hawaii’s Rising Homeowner’s Insurance Rates: Selling and Buying Property

Living in paradise comes with challenges, especially for condo owners in today’s real estate market. One significant concern facing Hawaii’s condo owners is the rising cost of homeowner’s insurance, particularly hurricane coverage. We are seeing condo properties raise their HOA monthly dues by 300% to 800% and impose special assessments to cover the insurance gaps.

Here’s a guide to help current owners selling their property and potential buyers understand the situation:

Why Are Insurance Rates Increasing?

1. Hurricane Insurance: Condominiums require their master insurance to have full hurricane coverage, and many insurance companies do not provide full coverage. Therefore, condominiums are looking at secondary markets for full insurance, which comes with increased rates. More information can be found on Civilbeat.org.
2. Rising Costs of Repairs and Maintenance: Construction materials and labor costs have steadily increased. This means that the costs to repair or rebuild have surged in the event of damage, leading insurance companies to hike their rates to cover these higher potential payouts. More details are available in the Insurance Associates PDF on “The Landscape of Property Insurance in Hawaii.”
3. Limited Market Competition: Hawaii has a relatively small market with few homeowner’s insurance providers. This lack of competition often results in higher condominium prices, as there are fewer options.

The Impact on Condo Owners: Navigating the Increasing Rates for Sellers

As a seller, it is essential to be transparent with potential buyers about rising insurance rates and how they affect your monthly and future homeowner’s association (HOA) dues. Here are some strategies to help you disclose this information and make your property more attractive to buyers.

1. Full Disclosure

Transparency is key. Potential buyers must be informed about the current homeowner’s rates and any anticipated increases. Providing them with detailed information about the homeowner’s association (HOA) dues, including any recent hikes and special assessments due to rising insurance costs. Clear communication builds trust and helps buyers make informed decisions.

2. Offer Solutions

Discussing special assessments, increased monthly insurance maintenance bills and your complex’s financial stability with your real estate agent is crucial. The more information your agent has to present to potential buyers, the better equipped you are to develop effective solutions.

3. Emphasize the Benefits of Your Property

Despite the rising insurance rates, emphasize the unique benefits and features of your property and its location. Proximity to amenities, high-quality construction, recent upgrades, and the overall lifestyle offered by the community can outweigh concerns about insurance costs.

The Effect on Buyers: Purchasing a Condo

Potential condo buyers in Hawaii face unique challenges due to the rising homeowner’s insurance rates. Here’s how these increases can impact prospective buyers:

1. Increased Monthly Expenses

Higher insurance premiums mean increased monthly expenses for condo owners. Buyers must consider these additional costs when budgeting for a condo purchase, which can affect affordability.

2. Loan Approval Complications

Lenders consider the total cost of ownership, including insurance, when approving mortgage loans. Higher insurance premiums can push some buyers beyond their affordability limits, making it harder to secure financing. Speak with your lender and discuss your limits and if there is flexibility with your affordability.

3. Decreased Market Appeal

Condos with high insurance costs may become less attractive to buyers, potentially leading to more extended time on the market and lower selling prices. This is affecting today’s real estate market, and properties are staying for sale longer. It’s essential to understand who pays for the special assessments, when they will take effect, what the special assessment pays for, and if the monthly dues will increase over the next few years. Now is the time to ask questions and carefully review your HOA documents provided during escrow!

4. Pressure on Negotiations

Buyers might leverage the higher insurance costs, asking sellers to reduce the purchase price,  cover the special assessment, or even assist with HOA bills. This can create additional pressure for sellers looking to sell a property.

While navigating the rising homeowner’s insurance rates in Hawaii can be challenging, staying informed, transparent, and proactive is the best way to better understand the changing market and make the process smoother for sellers and buyers.

With Aloha,
Leeana