Buying Real Estate in Hawaii
The legal consequences from mistakes or omissions during the buying process can, in some cases, be irreversible. In most cases, they present difficult and expensive problems to fix. While Hawaii does not require that you hire a real estate attorney, the nominal cost of hiring one to protect your interests in the context of your circumstances is invaluable. You’re about to spend hundreds of thousands of dollars—you ought to protect that investment.
Real estate professionals like agents and brokers can help you with all of the customary steps to buying property in Hawaii. Some are very skilled and know the mechanics of contracts and art of negotiation. But generally, agents and brokers have a conflict of interest because they do not get paid their commission until a transaction is complete. Thus, their motivation is to get the sale done as quickly as possible. They might tell you something like “you don’t need 14 days to review the condominium documents because they are all standard—so let’s just do 3 days.” By shortening the time it takes to get to closing, they get paid sooner.
Your attorney can only give you advice and recommendations that are in your best interest. As an independent party looking out for your best interest, a reputable real estate attorney will guide you through the process and ensure that all of the critical aspects of the transaction are accurate, known, and understood. There should be no ‘known unknowns’ or ‘unknown unknowns’ in your deal.
Why do I need legal help when buying real estate?
Additional Considerations From A Real Estate Attorney
You might need to back out of a deal after you’ve done the due diligence to understand exactly what is happening with the property. Mold, plumbing issues, foundation defects, encroachments, or title defects may render the accepted purchase price far too generous. In some cases, serious questions about the sellers’ disclosures arise, which may lead to litigation. These changes to the contract need to be acted on within the time periods specified in your purchase contract. Calendar those dates and ensure that you are prepared to make a tough decision when those deadlines arrive.
Information on this page, and throughout the website should not be construed as legal advice.
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Encroachments. Whether it is a large tree, fence, or roof, there is always the potential for your new property to be encroaching on your neighbor’s property. Encroachments lead to costly legal battles if not detected and dealt with early. Staking your prospective property can help to identify what the risk of encroachment might be. If further investigation is necessary, buyers should consider a survey to get more detailed information.
Title Defects. Hawaii properties often have some type of title defect that results from the State’s recent history of monarchical land ownership and persisting cultural norms. Many families have not probated wills, entrusted property, or devised interests in real property for several generations. Title insurance will not issue if there is any defect in title, so this is typically the buyer’s first indication of such an issue. Defects can be created by name changes, marriage, death, inaccurate deeds, and fraud (among others). Carefully reviewing the title report, including all of the referenced deeds, easements, and encumbrances will help you to understand the true marketability of title to the prospective property.
Association Failures. Many properties in Hawaii are governed by an association. Whether it is a condominium project or a planned community, the primary management functions are performed by volunteer owners. Not every association is as bad as Del Boca Vista where the Board of Directors launched an investigation into allegations that Morty Seinfeld was stealing from the association, just because his son Jerry bought him a Cadillac. But the volunteers who govern associations are not professionals, so there is a lot of room for error. It is critical to review and understand the association’s budget reserves, financial management, and governance procedures (including a recent history of decisions and proposals). Other important factors are the governing documents, special assessments, meeting frequency, and pending lawsuits.
Special Structures. Hawaii ordinances have led to the creation of numerous unpermitted structures. Will the Seller indemnify you if the County requires you to tear down an unpermitted Ohana that serves as a rental unit? Will you be able to afford the property without that income? Fence height restrictions are imposed by County ordinance and are sometimes reduced by CC&Rs. Other common issues are shed buildings that are used for commercial activity in areas that are not zoned for commerce. Confirming and resolving these issues will help to avoid common pitfalls of property purchases.
Special Contract Terms. Early occupancy with rights to production, lease-with-option-to-purchase, seller-financing, and other circumstances that require special contract terms make the real estate transaction much more difficult. A real estate agent who has gone through one of these before will likely know what to do and how to do it, but they will not know why. It is important that you learn about each of the additional contract terms and understand how they affect your deal. Consult with your real estate attorney if you have any questions about these situations because they often have long-term consequences.