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1. GATHERING INFORMATION
Our first meeting is both an introduction and an interview. If you're buying a home there's a good deal of information about what you have in mind that we need to understand in order to help you accomplish your goal. We want to know what you picture when you think about your new property i.e., number of bedrooms, bathrooms, type of floor, surroundings, how much land, how big is the house or condo, 1 story or 2, how long you intend to live here, how old should your new home be, etc.? We want to know your long range plans for the property and how skilled you are if we're looking for a "fixer". We want to know how much time you want to spend maintaining your yard or how you feel about hearing your neighbors. Do you mind driving steep hills, how far do you want to commute each day to work or the store or town or the beach. It may sound nosy and demanding but the more we know about your needs the easier our job of locating the right property becomes. What we're doing is combining your needs with our knowledge to make this as enjoyable as possible.
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2. AGENCY
Agency is nothing more than who represents whom. Hawaii state law requires full disclosure of agency in any real estate transaction. Almost all brokerage offices carry listings of properties which makes them representatives of the seller. Regardless of who in the office has taken a listing, they all belong to the broker and since every agent in the office works under the brokers license, they all represent the seller.
There is a situation titled LIMITED DUAL AGENCY in which the agent "represents" both buyer and seller, a difficult task at best. It's called limited because there is limited representation for both parties. As your agent, part of my responsibility is to find out everything we can about the property you're interested in and report back to you. Anything we can learn you will know which in some cases will help us in putting together an offer.
There is a situation titled LIMITED DUAL AGENCY in which the agent "represents" both buyer and seller, a difficult task at best. It's called limited because there is lim-ited representation for both parties. As your agent, part of my responsibility is to find out everything I can about the property you're interested in and report back to you. Anything I can learn you will know which in some cases will help us in putting together an offer.
In a LIMITED DUAL AGENCY position, the agent can not reveal anything to you that is not public information nor can they suggest an offer price. All they can do is pro-vide you with the same information the seller has. LIMITED DUAL AGENCY has been likened to having your attorney represent both you and the other side in court.
By working with Ferrari Pacific Realty you will have a choice of us working exclusively as your agent or, if we find ourselves in a situation where we are already repre-senting a seller of a property you're interested in, we can recommend another com-pany for you, if you choose.
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3. FINANCING
If you are going to use some type of commercial financing there are some things you should know about the loan process. I only touch on the subject because this is an ever changing market with rates moving each day and new loan packages being offered. What is important is that you know how much you are comfortable spending on your mortgage. In most cases, a person will be qualified for more than they are willing to spend. Knowing all the details of your loan will help you arrive at that figure.
There are costs above and beyond the purchase price that you will have to contend with. For example, there are attorneys fees, recording fees, escrow fees, loan origi-nation fees, points, sometimes Private Mortgage Insurance (PMI) for those putting down less than 20% of the purchase price. All of these fees are usually wrapped up in the loan package but it means that you will have to come up with more money than just the amount you intend to "put down". It's no fun facing that surprise when you walk in to sign the final papers so we want to know all the facts before we even begin looking.
We're going to suggest three lenders to you, all of whom are loan brokers; they acquire loans either through their own company or through larger institutions. I work with the brokers because they tend to be more accessible and able to shop around for the best deals. If you intend to work with someone you know on the mainland be certain that they can loan in Hawaii; not all lenders can do that due to certain legalities and licensing requirements.
The loan is a two part process; first is qualifying you, the buyer and then the prop-erty you're buying. There are loans known as No Verification loans for people with new businesses or seasonal income or other reasons where a tax return may not qualify them for the loan. Usually, a No Verification loan will require considerably more of a down payment, maybe as much as 40%. For a conventional loan, the lender will run a credit check, ask for a couple of years of tax returns, verification of income, etc. This is the longest part of the process. To qualify the property, the lender will order an appraisal. As long as that meets or exceeds the purchase price the property will qualify and the lender then gives Final Loan Approval.
Lenders that I highly recommend are:
| | Lynn Karlson
Aloha Lending Group, Inc. | Phone: 808-327-2170
Cell phone: 808-960-4336
E-mail: lynn@alohalending.net |
| | Laura De Boer
Hawaii Community
Federal Credit Union | Toll free: 800-514-2328
Local office: 331-6202
E-mail: laura@hicommfcu.com |
| | Claudine Martin
Western Pacific Mortgage | Toll free: 888-329-8505
Local office: 808-329-8505
Fax: 808-329-0829
E-mail: claudine@westpachawaii.com |
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4. SEARCHING
Using the information from Step 1, we will do a complete search of the Multiple Listing Service data base using your criteria as the search parameters. In addition, we will be contacting other agents to find out if they have "pocket listings" that fit your description. Pocket listings are sellers who may not be ready to list yet but let their agent know they would consider an offer. In some cases, we will contact the owners of similar properties to ask if they have considered selling. Even in a case like this, we do NOT represent the seller; we suggest they get their own agent or choose to represent themselves.
Once we have a list of the properties you're interested in we will discuss neighbor-hoods or condo complexes and in most cases physically inspect these areas. We'll discuss any maintenance fees or association fees you may have to consider.
When you're ready to actually look at property, we'll set showing appointments. In some cases we can get right into a property but usually there is a 24 or sometimes a 48 hour notice to be given by the listing agent. State law does give a tenant up to 48 hours. When the showings are set we'll have a schedule to follow and being on time is important because in many cases people will be expecting us at a certain time. Unlike the phone company we can't just tell them we'll be there between 8:00 and 5:00 and expect them to wait. There are some properties where you may want to see more of than time allows; if that's the case then we will either try to move the next showing if we can contact the agent or return to the one of interest later in the day We'll take you back to a property of interest as many times as you feel are necessary to make your decision.
Our job during this part is two fold. We're there to point out those things you may not see, sometimes being the pessimist. We want you to be aware of the negatives as well as the positives. Secondly, We're there to sometimes remind you of what you originally had intended. While this may sound elementary, people occasionally get off on a tangent while looking at properties and being introduced to new ideas or possibilities.
In most cases we will find what you're looking for in a day or two. There are times when we walk into the right property the first time and there are the other extremes as well. We've worked with people for over a year and one couple for nearly two and a half years before all the elements came together and we found the perfect house.
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5. MAKING THE OFFER
Once we have found the property you want we have to determine a fair market value and a strategy for your offer. We will find fair market value by looking at similar properties that have sold in the last few months and by looking at current market activity. Once we decide on the value then we consider an offer. In many cases, especially in an active market, if you've found what you want I suggest a full price or very near full price offer. The reason is that a good property will not last long when it's a sellers market; there's a shortage of good property and plenty of buyers looking.
It is of the utmost importance that you remember this; just because you put in an offer doesn't mean you have to buy the house, even if the seller accepts your offer. Putting in an offer and getting it accepted by the seller gets your foot in the door so someone else doesn't get there first. There's nothing worse than finding the right property, thinking about it for a day or two then finding out it went into escrow. I suggest putting down a $3, 000 to $5,000 deposit to show your intention to purchase. You may be able to put down less but a sizable deposit makes your offer stronger than a small deposit will. That check is held by the broker until we get acceptance by the seller. At that time, it goes to the escrow company.
In our offer to purchase property called a DROA, Deposit Receipt Offer & Acce-tance, there is an inspection period titled C-51 which gives a specific amount of time, normally 14 days from acceptance, for you to choose not to proceed with the purchase. You will have your deposit returned and continue looking for another property if you choose.
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6. AFTER THE OFFER
A couple of things can happen to the offer once presented to the seller. One, they may accept it as written. Two, they may outright reject the offer. Three, they may counter the offer with one of their own changing the price or one of the other contingencies we may have added at the time we made the offer.
If necessary, we will negotiate with the seller, through their agent, to find a workable agreement. Once that's done and we have an accepted offer, we open escrow.
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7. DROA, THE CONTRACT
Hawaii's offer to purchase, the DROA, is an ever changing document meant to protect both the buyer and the seller in any real estate transaction. It does this through the use of Contingencies, obligations agreed to by both parties that have to be met in a timely manner in order to complete the purchase.
We'll go over the DROA in detail when we put together an offer but here we want to highlight a few of the features meant to protect you, the buyer. We mentioned C-51 above; this one is the Inspection clause that allows you to perform an many inspections as you feel necessary on the property.
There are also contingency clauses, C-23 through 26 that protect you should you not be able to acquire your funding as described in the offer. C-35, C-36 & C-37 re-quire that the title be free and clear and transferable to you before you're committed to buy. On any property with structures we will ask that the seller provide a survey, C-42. If there are problems with setbacks or encroachments that the seller can not correct to your satisfaction you may choose not to proceed. C-44 & C-44A require complete disclosure of any knowledge the seller has on the property. You have to accept the disclosure or, again, choose not to proceed.
As mentioned earlier, just because you have an accepted offer doesn't mean you have to buy the property. It's only after all contingencies are satisfied that you are committed to finalize the purchase.
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8. HOME INSPECTION
Once we get an accepted offer we formally open escrow (see next section for Escrow), this is done with your deposit check after both you and the Seller are sat-isfied with the terms of the purchase contract.
One of the first things we will do when buying a house or condo is to order the home inspection. There are three home inspectors that I recommend, all are certified as inspectors; Hawaii does not license home inspectors. All three are also licensed builders but none of them will do any of the work that may need to be done since that could possibly be construed as a conflict of interest on their part. The three are:
| | Michael Woodbury
Woodbury Home Inspection Services | Phone: 808-322-5174
Fax: 808-322-5178
E-mail: michael@woodbury.com |
| | Tom Sena
Akamai Home Inspections | Phone: 808-329-5484
Fax: 808-326-4888 |
| | Chuck Cartwright
Big Island Inspection Services | Phone: 808-324-0722
www.bigislandinspectionservices.com |
Based on the outcome of the inspection, we have three options. First, if you're not satisfied with the condition of the home you can cancel the offer. If there are prob-lems we can request that the Seller repair all or some of the problems or you can accept it as is. If we request repairs, the Seller can agree to all or some of them; if we don't get a satisfactory response to the request, again, you can cancel the offer. The results of the inspection can reopen negotiations on the offer.
If you're buying a home rather than a condo, more than likely we'll order a survey of the property. This involves marking all corners on the property and locating all improvements (house, outbuildings, etc.) on the property to insure they are within the setback requirements of the county. If there are problems, we again renegotiate the offer and the same is true if there are problems with the title that can't be rectified.
When buying raw land, instead of a survey we'll normally order a staking, C-41 on the DROA. This locates the corners of the lot but since there is usually no structures on the land we're not too worried about encroachments unless it's from a neighbor.
By the time you are committed to proceed with the purchase, you should be satisfied with the condition of the property, the survey and the title so that you know exactly what you're getting.
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9. ESCROW
Escrow is defined as, "...a disinterested third party". Escrow is a neutral party to the transaction. They're the ones that hold the money until all the contingencies of the contract are met by both parties, any liens are cleared, all taxes are paid and any money held for buyers needs is satisfied. When all contingencies have been met they record the transaction with the Bureau of Conveyances, transfer the money due the seller to them and the deed to you.
On a recent land sale priced at $187,000 there was a settlement fee of $372.50, title insurance was $435.60, a lien statement at $31.25, taxes of $15.52, deed recording was $25.00, mortgage recordation was $38.00 and a release fee of $25.00. For a buyer the escrow and title fees will be about 1% to 1.5% of the sale price. Like the loan fees, these are not included in the sale price of the property; however, there are some loans and some creative offers to sellers that can include some or all of these fees.
Once escrow is opened, you will receive a set of "Escrow Instructions" in the mail. This will describe more in detail what escrow is doing for you. You'll also receive a description of the types of tenancy available in Hawaii. There are 4 options for holding title here; Joint Tenancy, Tenants in Common, Severalty or Tenants by the Entirety.
Tenants in Severalty is for a single person holding title in their name only. Tenants by the Entirety is for married couples; in this arrangement puts title in the marriage and not directly to either the husband or wife. It's best to talk to your estate planner or attorney to determine which is best in your particular case.
Closing is when the actual change of deed takes place. We will usually try to close on Tuesday through Friday, not on a Monday. The reason is that your loan is "funded" the day before you close. If the loan is funded on Friday to close on Monday, you pay interest on the loan for two days before the property is yours and that doesn't make any sense.
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10. CLIENTS FOR LIFE
Our service doesn't stop just because we closed the sale. Ferrari Pacific Realty will remain available to answer any questions you may have after the sale or help out in any way we can. In some cases we become friends, in other cases we're just acquaintances but we want to be your Realtor forever. Much of our business is built on referrals to friends or relatives looking for property here. We intend to provide exemplary service, the kind you would want for other people you care about so if there is ever anything we can do to improve we want to know about it.
Earl Nightingale defined success as, "The progressive realization of any worthwhile goal or ideal". Our goal is to continually improve the service we provide to our clients. Your feedback helps us to achieve that goal and in doing so, remain successful.
Having you as a client for life means we're doing our job; if we can do it better we all benefit. Thank you for choosing Ferrari Pacific Realty.
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The next few days should be extremely rewarding and satisfying for both you and me. This short manual is meant to simplify and order the steps we will take together to find the property you're looking for. My experience has shown that an organized approach rather than a haphazard one will find your property in the shortest amount of time with the least frustration. Here is my recommended procedure:
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