A Guide for First-Time Homebuyers
& Returning Homebuyers Who Need a Refresher
For first-time homebuyers who may be feeling intimidated and overwhelmed by the whole purchase process, this step-by-step guide provides some insight into what you can expect when you buy a property here. If you are a repeat homebuyer but you have not bought a home in many years, or if you are just new to purchasing real estate in Hawaii, keep reading – this guide may be helpful to you too!
1. Step One – Let’s Talk!
The best place to begin is with an introductory consultation. We can meet at my office or talk on the phone. I will go over the details of the home buying process with you.
As your Realtor, I will help you to define your goals and research your options, and I will assist with creating a plan to reach your goal of being a homeowner. Working with me, a professional Realtor, will save you time and simplify the process. My service is free to you! (My fees are generally paid by the seller.)
2. Step Two – Get Pre-Approved for a Loan
Once we have discussed your plans, goals and options, the next step is for you to meet with a lender or mortgage broker. They will help you determine what you can afford and what types of loan options are available to you, and they will work on getting you preapproved for a mortgage. If you are a first-time homebuyer, there are special programs designed to keep costs low – these may work for you!
Also, your mortgage consultant will suggest some specific financial steps that are important to follow during this process (for example it’s best to not buy a new car right before you buy a home, as it can affect your ability to get a mortgage). I can refer you to reputable local lenders and mortgage brokers – you may choose to talk to a few and decide which one you would like to work with.
3. Step Three – Choose a Property
Once you have established your price range and your loan options and you are preapproved for a mortgage, we will meet again at my office to look at homes currently available for sale on the MLS. We will search for homes that fit the qualities you are looking for, that fit your lifestyle, and are within your price range. From the available options, you will select some homes you would like to see – usually people choose around 5 or 6 homes.
I will take you to visit these properties, and we will talk about what you like (and what you don’t like) with each one. Also we can review the purchase contract together, and you can take one home to read at your leisure. (The purchase contract is a legal document that sets the buyer’s and seller’s responsibilities and obligations that must be fulfilled in order to complete the sale.)
TIP: As you probably know, it is customary in Hawaii to remove your shoes when you go into a home. Looking at homes will be much easier if you wear shoes that are easy to slip on and off, as we go in and out of each home.
After our initial round of viewing homes, you can take a little time to think about the homes we’ve seen. Then you can choose your favorite picks (usually people select one to three properties), and we will go visit those homes again. If one of those is a fit for you, we will work on putting together your offer.
4. Step Four – The Offer
Once you have found a property you would like to purchase, you will make an offer on the property. I will provide you with a Comparative Market Analysis or CMA, which is a list of properties comparable to the one you have chosen. This information will help you to understand what price similar properties have recently sold for, and help you determine a price you would like to offer for your chosen property.
After you have reviewed this information, we will write up your offer. To do this, we use a Purchase Contract. I will talk to you about the details of your offer, and once the details are to your satisfaction, you will sign your offer and I will submit it to the seller’s agent. Then we wait for a response.
Once the seller’s agent has received your offer, it may be a while before we get a response. Sometimes we hear back quickly, even a few hours. More often it can be a day or a few days before we get a response. In special circumstances it may even take longer. The seller’s response can be one of three things – the seller may accept your offer, reject your offer, or make a Counter Offer. If the seller makes a Counter Offer, then you can decide whether you would like to accept that counter offer, or respond with your own Counter Offer. If the seller rejects your initial offer, you do have the option to submit a new offer to the seller.
If it is not possible to come to an agreement with the seller, and we do not get an accepted offer or counter offer, then we can return to Step 3, and choose another property.
TIP: Sometimes the seller may not respond immediately, or they come back with a counter offer that you do not like. This is a good time to BE PATIENT, and we will be diligent to stay in touch with the sellers agent if the response seems slow, and to craft a Counter Offer with your own terms if you are not comfortable with the seller’s counter offer.
5. Step Five – Open Escrow
Once there is an offer or a Counter Offer that has been accepted, we will open escrow with a local escrow company. The escrow company works with the buyer’s and seller’s real estate agents to facilitate the transaction and will communicate with everyone involved. Typically, the escrow process can take 30 to 60 days to complete.
Get ready – there is going to be a lot for you to do over the next several weeks!
TIP: There will be a lot of communicating going on during escrow! Be sure to let your escrow agent, your mortgage contact, and me, all know how you prefer to be contacted. Do you prefer email, phone calls, or text messages? Let us know. And please make sure to check your emails and respond in a timely manner – many documents are time sensitive.
6. Step Six – Escrow Process
(This is the busy part!)
As we go through the escrow process, which is usually about 45 to 60 days but sometimes can take longer, there will be inspections conducted, documents provided, many items for you to sign, and documents and reports for you to approve. I will work with you throughout the process to keep you informed, answer your questions, connect with you professionals to help you with the process (inspectors, surveyors, and other experts who can help with situations as they arise).
Many details during the escrow process are time sensitive. Documents need to be signed, reviewed, and approved within certain deadlines. As your real estate agent, I will provide you with a timeline and stay in touch with you about what is needed, and where we are at in your escrow process.
TIP: You may feel overwhelmed as we go through this process – there are inspections, documents, reports, emails, phone calls, and more. Make sure to reach out to me if you have questions as we go along!
What to expect during escrow:
- The buyer’s agent and the seller’s agent will open escrow. This means we will submit the contracts and paperwork to escrow and ask them to open escrow for this transaction.
- You will receive initial communications from the escrow company.
- You will submit your initial deposit, also called Earnest Money. (The amount of the initial deposit is one of the details that was written into the Purchase Contract.)
- You will connect with your lender or mortgage broker to finalize the details of your mortgage. There may be details to confirm and choices to make regarding issues such as down payment, interest rate, monthly payment amount and other financial requirements.
- There also will be additional expenses associated with the purchase (Closing Costs) that the mortgage broker and escrow officer can go over with you. Some of these additional expenses can be wrapped into certain types of loans – this is something to discuss with your mortgage broker.
- There are usually inspections that are performed during the escrow process. These include a Home Inspection and a Termite Inspection, and other types of inspections are possible as well. The buyer typically chooses the companies to do these inspections. Usually the buyer pays for the home inspection and seller pays for the termite inspection. (These details will be specified in the Purchase Contract.) The home inspection and termite inspection are usually done as soon as possible upon opening escrow. (I will talk to you about the timing of these, and any deadlines we are working with.)
- When you are buying a house or land, you may want to have a survey. Seller usually pays for the survey. (If you want to have a survey, this is something we will include in the Purchase Contract when we write your offer.)
- If you are buying in a condo or in a planned community there are likely CCR documents (Covenants, Codes and Restrictions) that you will review to understand the community you are considering. These documents describe the responsibilities and obligations of owners and important information about restrictions within a community.
- If you are getting a mortgage, the lender will order an appraisal of the property. This is so the lender can make sure they are comfortable with the appraised value of property – they will want to see it at or above the price on the purchase contract. (An appraisal is not a tax assessment.) The appraisal fee will be a cost to the buyer – this is something your mortgage broker should discuss with you.
- A Tax Assessment is done by the County of Hawaii on a periodic basis and this is what your property taxes are based on. The lending institution often collects the initial property taxes and insurance payments with the mortgage from escrow. You will pay one year of property taxes up front. In addition, you will have to pay the current owner any taxes that he has already paid for, and the mortgage company needs to have enough to pay the next increment.
TIP: A Homeowner’s Exemption could lower your property tax costs!
- During the escrow process, you will receive a Seller’s Disclosure. This is a report completed by the seller in which the seller discloses certain details of the history of the property and damages or repairs that have been done. You will have time to review this document, and bring up any questions you have about items on the disclosure.
- As we get toward the end of the escrow process, there will be a flurry of activity, with mortgage and title documents for you to sign, any last minute contract paperwork, and other tasks to complete the process. Finally, the loan will fund, and you will send any final funds due from you into escrow.
- Escrow will complete their process and get your transaction ready to record.
7. Step Seven: Closing!
Closing happens first thing in the morning, when the sale records at the Bureau of Conveyances on Oahu. I will contact you as soon as I receive notice that we have closed – usually this is around 8:30 am.
At this point, the property is YOURS! You can now get the keys to your new home.
If you are ready to schedule your introductory consultation, or if you have any questions about the home buying process, please give me a call at 808-987-1012.~ Gretchen