On May 1st the Hawaii Association of Realtors released a new Hawaii Real Estate Purchase Contract for the use of its members and our clients. This may not seem like the most earth-shattering, groundbreaking news — unless you’re a total #nerdalert like me! — but since, the Purchase Contract is the #1 tool we Hawaii Realtors have at our disposal, any improvements that increase the readability, clarity, and understanding for our clients are vitally important. The particulars of buying or selling a home are complicated enough without struggling to interpret a vague contract.
What Has Changed?
This revision of the Purchase Contract overall has added a lot more checkboxes that force Buyers and Sellers to be super specific from the forefront, hopefully helping to avoid confusion and “he said vs. she said” down the road.
- Specifying exactly how the earnest money deposit is being delivered to escrow — Buyer delivering a check, wiring the money, or is the agent dropping off a check the next business day?
- What’s included? A range or separate cooktop and wall oven? Central AC, split system, or window AC units?
- Buyer’s Verification of Cash Funds or Contingency on Obtaining Cash Funds — Where exactly is the purchase money coming from? An investment account? A gift? The sale of another property?
Probably the most significant specific term is the new addition regarding photovoltaic systems (also known as PV) to generate electricity for the property using solar panels on the roof or in an array elevated off the ground. Homeowners wanting to make this significant improvement and take advantage of reduced electricity bills have two options for installation: purchasing a system or leasing a system. As PV leases have become more popular these past few years, they have added an extra layer of complication during real estate transactions. If a PV system is leased, there is a (small) chance that the lease may not be transferrable to the new owner, or, in some rare circumstances, the new owner may not want the system. Then what happens? How do you resolve this when you’re already 14 days into a 30-day closing? Also, since the PV system is not owned outright, it may increase the debt-to-income ratio for the new buyer beyond a lender’s allowable limits and the prospective buyer cannot obtain financing. In order to combat some of these issues, the new Hawaii Purchase Contract has added a provision stating that the Seller needs to provide documents/contracts regarding the system to the Buyer within a certain timeframe and the Buyer has an opportunity to review. The service provider for leased PV systems (as well as security alarm systems) needs to be notified of the Purchase Contract and if the Buyer approves the docs, then they can apply for a transfer of service.
Another seemingly small change that has a big impact is revising the provision regarding the Seller’s obligation to clean the property prior to closing. The old contracts had no blanks to fill in, so it was easy to skim past that section until right before the final walk through and then try to define “clean.” Anyone who has ever had a spouse or a roommate knows all too well that we each have a different definition of clean! 😉
The old contract stated that only carpets had to be professionally cleaned. The new contract has yet another lovely checkbox where a buyer can specify if they would like the entire property to be professionally cleaned and be provided with copies of payment receipts from vendors hired to do the work. Again, this is a great Purchase Contract improvement to align Buyer & Seller expectations from the forefront and “clean up” the confusion that consistently occurs at the end of almost every transaction.
Notice of Rejection
The final change I find particularly impactful is that now the Seller has to actually sign the bottom of any offers they are rejecting and return that rejected contract to the Buyer. The old contract only had checkboxes for Acceptance or a Counteroffer, and no spot for Rejection. The new contract with the Rejection checkbox provides documented proof that the Seller actually viewed the offer and is clearly stating his/her response to it, rather than Buyers watching a ticking clock as the expiration time passes by and wondering what happened.
There are plenty of other small changes that were made to the new Hawaii Real Estate Purchase Contract that released on May 1st, but these, in my opinion, are the most beneficial for my day-to-day use as a productive realtor here on Maui. I welcome the opportunity to discuss with you further and assist however I can with your Maui real estate needs. Aloha for now!