On this page you will find...
Honolulu Realtors         HARPTA Tax
Why Use a Realtor?            Mold & Mildew
         Tenancy In Hawaii.       Understanding Termites
               FIRPTA Tax              The Purchase Contract
Honolulu City & County Property Search

 Important information needed to purchase real property in Hawaii
 

Thank you for considering us to assist you in the purchase of real property in Hawaii. The materials included in this packet are designed to be informative and explain important aspects of purchasing property. Please review the material carefully and let us know if you have any questions or concerns.

When a specific property has been selected, we will review the purchase contract with you. This process will take approximately 2 hours and will include discussions about home inspection, termite inspection, survey, and many important facets of the offer.  You can benefit NOW by completing a very important step: 

Obtain a free “Loan Pre-qualification Letter” so that you are knowledgeable about what you can purchase. Including the Loan Pre-Qualification Letter with your offer to the Seller can greatly strengthen your offer. We can arrange a convenient and confidential meeting with a Loan Officer at your convenience.

We look forward to assisting you with a successful purchase and continued satisfaction with our services. Thank you for your business.

Each Office is Independently Owned and Operated

Buying a Home

It Pays to Work with a Realtor®

Without the professional guidance and expertise of Honolulu REALTORS, buying or selling a home can often entail many unnecessary complications regarding real estate transactions. The following information, as prepared by the National Association of Realtors, best describes the many benefits of contacting a professional Honolulu Realtor to handle all your real estate needs. The term Realtor is a registered, collective membership mark, which identifies real estate professionals who are members of the National Association of Realtors and subscribe to its strict Code of Ethics. In the state of Hawaii, the terms used for this professional designation are Realtor, meaning a person who has a Broker’s license, and Realtor Associate, the designation for a Salesperson.

Honolulu REALTORS have the most information in one place about what is “on the market”, including homes listed by other Realtors. You need not waste time looking at unsuitable homes.

Honolulu REALTORS can help you find the home best suited to your needs – size, style, features, location, accessibility to schools, transportation, shopping, etc.

Honolulu REALTORS can supply information on real estate values, taxes, utility costs, municipal services and facilities.

Honolulu REALTORS have no emotional ties to a home, can be objective about it and can point out its advantages and disadvantages.

Honolulu REALTORS act on your behalf, as your agent, to present offers and counteroffers until an agreement is reached.

Honolulu REALTORS will continue acting on your behalf during the “loan” and “escrow” processes and will explain the steps and help make your purchase a smooth one!


As Trusted Realtors in Honolulu, Gayle and I have the Know How, Experience, Skill and Professional Ability to represent you in all of your real estate needs.  If you would like to speak with some of our past clients, please call me, Mike Ramsey Fujita RA, Vice President, Realty Executives Oahu at (808) 630-1828 and I will be happy to set it up for.

Tenancy in Hawaii

The manner in which a person takes or holds real property will have important legal ramifications. The Buyer’s determination as to how title should be taken and held should be made with the advice of legal counsel, and perhaps, a tax advisor or accountant. Since tenancy to real property varies from state to state in custom and interpretation, the following has been prepared to assist the reader in the selection of tenancy to real property located in Hawaii.

TENANCY IN SEVERALTY:

When one person owns property it is referred to as “solo ownership by the severalty”.  It simply means that it is owned by one person only and that he alone can use, mortgage, or dispose of the property. Corporations hold title to property by the severalty.

TENANCY IN COMMON:

This tenancy may exist among any number of people, regardless of relationship. Each person has an undivided interest in the property that he is free to convey or pass on to his heirs or assigns. Tenants in common need not hold equal undivided interests (i.e. one tenant may hold a 2/3 undivided interest and the other may hold a 1/3 undivided interest). If married persons acquire a tenancy in common interest, they may hold their undivided interests as tenants by the entirety between themselves (i.e. a married couple may hold a ½ undivided

interest in property as tenants by the entirety, or joint tenants, between themselves, which interest is held in common with other holders of the undivided interest). Property under this tenancy may be attached.

JOINT TENANTS:

This tenancy may exist among two or more persons, regardless of relationship. Each has an equal undivided interest in the property with right of survivorship. A joint tenant may not “will” his interest or “partition” the property held by joint tenancy. Property under this tenancy may be attached. Divorce does not affect tenancy.

TENANTS BY THE ENTIRETY:

This tenancy may exist only between husband and wife. One tenant by the entirety may not terminate the tenancy by a separate transfer of his interest in the property (though he may convey his interest to the other tenant) nor may he “partition” the property. The death of one vests title solely in the other and therefore, it is impossible to pass title by “will”. The property may not be attached as to the obligations of only one tenant by the entirety. Upon divorce, tenancy by the entirety becomes tenancy in common.

Homeowner’s Property Tax Exemption

The Hawaii home exemption law was enacted to provide some tax relief and encourage home ownership. The basic home exemption is $40,000, meaning that $40,000 is deducted from the assessed value of the property and the homeowner is taxed on the balance (based upon a tax year beginning July 1 and ending June 30).

QUALIFICATION: You are entitled to the home exemption if:

1) You own and occupy the property as your principal home.

2) Your ownership is recorded at the Bureau of Conveyances, in Honolulu on or before September 30 preceding the tax year for which you claim the exemption.

3) You file a claim for home exemption, Form P-3, with the Real Property Assessment Division on or before September 30th preceding the tax year for which you claim the exemption.  Multiple Home Exemptions for Senior Citizens: For those age 55 to 59, the home exemption is 1 ½ times the basic home exemption (1 ½ x $40,000 = $60,000) 

For those ages 60 to 64, multiply by 2 (2 x $40,000 = $80,000)

For those ages 65 to 69, multiply by 2 ½ (2 ½ x $40,000 = $100,000)

For those ages 70 and older, multiply by 3 (3 x $40,000 = $120,000)

To obtain the multiple home exemptions, a taxpayer must be 55 years of age on or by June 30th, proceeding the tax year for which the exemption is claimed.

TOTALLY DISABLED VETERANS: If you are totally disabled veteran due to injuries received while on active duty with the U.S. Armed Forces, your home is exempt from all property taxes except the minimum tax. For this exemption, veterans must file a Form P-6.  The exemption will be valid as long as the veteran remains totally disabled or the widow or widower remains unmarried.

BLIND, DEAF OR TOTALLY DISABLED: If you have impaired sight or hearing or are totally disabled, you may file a claim on Form P-6 for a $25,000 real property tax exemption, which is in addition to your regular or multiple home exemption.

HANSEN’S DISEASE: If you have Hansen’s disease and are confined because of the illness, you are exempt from real property taxes on your real property up to but not exceeding a taxable value of $25,000. This is in addition to your regular or multiple home exemptions.  Claims for this special exemption must be on Form P-6.

MINIMUM $100 REAL PROPERTY TAX: Taxpayers are no longer completely exempt from paying a tax on real property. This means that every parcel of taxable real property, for which the computed tax amounts to less than $100, is liable for this minimum tax.

For additional information call:

County of Kauai: Dept of Finance Real Property Assessment Division in Lihue: (808) 241-6222

County of Maui: Dept of Finance, Real Property Tax Division in Kahului: (808) 270-7297

County of Hawaii: Dept of Finance, Real Property Tax East Hawaii in Hilo: (808) 961-8201

County of Hawaii: Dept of Finance, Real Property Tax West Hawaii in Kailua-Kona: (808) 327-3540

City & County of Honolulu: Dept of Budget & Fiscal Services Downtown Office in Honolulu: (808) 527-5541 (Property Assessment) and (808) 527-5515 (Tax Maps)

City & County of Honolulu: Dept of Budget & Fiscal Services, Real Property Assessment Division Kapolei Office in Kapolei: (808) 692-5541

FIRPTA: Foreign Investor Tax Act

The Foreign Investment in Real Property Tax Act (section 1445 of the IRC code) of 1980 (“FIRPTA”) provided that foreign investment in U.S. real estate would be subject to U.S. capital gains tax on dispositions of U.S. real property interests [defined as (a) any interest in U.S. real property of (b) any interest in a U.S. corporation in which 50% of its assets constitute U.S. real property interests.

GENERAL RULE:

Under the law, the Buyer or transferee of any U.S. real property interest is required to (a) withhold and deduct a tax equal to 10% of the amount realized by the Seller or transferor upon the disposition of the property regardless of the amount of cash otherwise present in the transaction and (b) file Forms 8288 and 8288-A to report and transmit the amount withheld to the IRS, unless one of five exemptions applies.  However, the transferee’s compliance with the withholding requirement does not relieve the transferor from its FIRPTA tax liability. The tax is designed only to approximate the transferor’s tax on net gain and is still required to file a federal income tax return with the IRS for the year in which the sale occurs and either (a) obtain a refund of any amount over

withheld or (b) make additional payments required in excess of the amount of tax previously withheld.

EXEMPTIONS FROM WITHHOLDING:

1. Transferor furnishes Non-Foreign Status Certification. No withholding is necessary if the seller or transferor furnished to the transferee a certification stating that the transferor is not a foreign person and stating their U.S. taxpayer identification number. The transferee must keep such certification for at least 5 years.

2. Purchase Price for Residence. No withholding is necessary if an individual transferor who is owner occupant acquires the property and the price does not exceed $300,000.

3. Transferee Receives IRS Withholding Certificate. The withholding may be reduced or eliminated pursuant to qualifying statement issued by the IRS. The IRS in cases may issue this certificate where (a) the transferor is exempt from U.S. tax, (b) an agreement for the payment of tax is entered into with the IRS, or (c) reduced withholding is appropriate. The IRS must act upon a completed application for a withholding certificate not later than the 90^th day after its receipt.

4. Notice of Non-recognition Treatment. No tax is necessary if transferee (a) receives the appropriate notice from transferor that the transferor is not required to recognize gain or loss with respect to the transfer in compliance with the requirements of Treasury Regulations

91.1445-2(d)(2) and (b) provides a copy of the notice to IRS within 20 days of the property transfer. Have a Tax Attorney review the notice to ensure compliance with requirements of the exemption before closing.

5. U.S. Corporation not USRPI. Sale of stock in a U.S. corporation may be exempt from withholding under certain circumstances. Consult with your attorney on matters related to the sale of stock.

HARPTA: Hawaii Real Property Tax Act

USE OF HAWAII FORMS ON TAX WITHHOLDING: In order to promote a greater level of compliance by nonresidents of Hawaii (whether U.S. persons or foreigners) in reporting income from sales of real property located in Hawaii, the Hawaii legislature enacted (and recently amended Section 235-68, Hawaii Revised Statutes (“HRS”), requiring every Buyer of Hawaii real estate to deduct, withhold and pay to the Hawaii Department of Taxation 5% of the amount realized by the Seller or transferor of Hawaii real estate. This withholding requirement, as amended, is effective on

August 1, 1991.  This 5% withholding tax is designed to enforce Hawaii state income taxes on the sale or disposition of Hawaii real estate in the same manner a the enforcement provisions of The Foreign Investment in Real Property Tax Act of 1980 (“FIRPTA”). Similar to FIRPTA enforcement provisions, the state tax withholding

requirement would not increase the amount of income tax paid by nonresidents since the

amount withheld will be claimed as a payment on the Hawaii nonresident income tax return.

GENERAL RULE: Under the Hawaii withholding requirement, the Buyer or transferee of any Hawaii real estate is required to (1) withhold and deduct a tax equal to 5% of the amount realized by the Seller or transferor upon the disposition of the property and (2) file Forms N-288 and N-288A to report and transmit the amount withheld to the Hawaii Department of Taxation within 20 days of escrow closing, unless one of four exemptions apply.

EXEMPTIONS FROM WITHHOLDING:

1. Transferor furnishes Hawaii Resident Certification. No withholding is necessary if the Seller or transferor furnishes to the transferee a property completed Form N-289 stating (a) the transferor’s taxpayer identification number and (b) that the transferor is a Hawaii resident. However, this exemption will not apply if the transferee has actual knowledge that the information on the Form N-289 is false. (Note that the recent amendments to the definition of Hawaii resident for purposes of the withholding required by HRS 9235-68 would include foreign corporations and partnerships which are

registered with the Hawaii Department of Commerce and Consumer Affairs to do business in the State of Hawaii.)

2. Transferor’s Affidavit of Principle Residence. No withholding is necessary if the transferee receives an affidavit by the transferor stating (a) the transferor’s taxpayer identification number, (b) that the transferor used the property as a principle residence for the year preceding the date of the transfer and (c) the sales price for the property does not exceed $300,000.

3. Transferee Receives Hawaii Withholding Certificate. (a) The withholding under HRS 9235-68 may be reduced or eliminated pursuant to a “withholding certificate” issued by the Hawaii Department of Taxation. A withholding certificate may be issued by the Hawaii Department of Taxation upon receipt of Form N-288B establishing that either (1) the transferor will not realize any gain with respect to the transfer or (2) the transferor will have insufficient proceeds to pay the withholding required by HRS 9235-68 after payment of all costs, including selling expenses and the amount of any mortgages or liens secured by the property. (b) The withholding may also be reduced or eliminated pursuant to a “written agreement” with the Hawaii Department of Taxation. Persons who engage in more than one real property transaction in a calendar year or to whom meeting the withholding requirements are not practicable are eligible to enter into these written agreements.

4. Notice of Non-recognition Treatment. No withholding is necessary if transferee receives from transferor a properly completed Form N-289 stating (1) that transferor is not required to recognize gain or loss with respect to the transfer and (2) briefly describing the transfer and summarizing the law and facts supporting transferor’s claim. Non-Hawaii residents doing 1031 exchanges of real estate may consider this option to avoid withholding.  

Agency: Definition of Client & Customer

Customer:

Seller’s Agents can help you as a Customer write your offer on a standard Purchase Contract, can present your offer to the Seller, and can report back any acceptance or counter offer. In short, they can transmit your offer to purchase even though they are agents of the Seller.  Brokers know that their Sellers are often interested in the Buyer’s background and qualifications. This is especially true when you are asking the Seller to help finance the purchase or to wait until you qualify for a loan. Be prepared to discuss your financial qualifications with the Broker just as if you were talking directly to the Seller.  Without necessarily becoming your Agent, Brokers offer many services that you may find helpful as you decide about the right property and the right terms or the purchase offer.  Even though the Seller employs and pays the Broker, the Broker traditionally works closely with prospective Buyers to provide help and decision-making information, such as: The type of neighborhood, Location of available properties & describe their attributes and amenities, Respond honestly and accurately to questions concerning the property, Disclose material facts the Broker knows, Comparable values, Financing opportunities and procedures, Property’s condition and title, Closing procedures, Estimated monthly expenses, Closing costs.

CLIENT:

If you wish, you can retain the services of a Broker to help you buy real property – just as you would hire an accountant or attorney. You become a Client in the purchase and your Broker represents you exclusively. You gain all the benefits of your Broker’s experience and expertise. Your Broker will write offers, negotiate on your behalf, and share with you as much insight as possible in the negotiations. The Broker, in a Client relationship, owes fiduciary duties of loyalty and faithfulness along with the items listed above which includes providing help and decision-making information.

Company Agency

SINGLE AGENT:

Realty Executives Oahu and its Realtor Associates shall act as Single Agents when representing either the Seller or the Buyer. In an open-house situation, the Seller is the Client and the Buyer is the Customer (when only the listing Realtor Associate is involved), unless the Buyer has already entered into an “Exclusive Buyer Agency” with the Listing Broker before seeing the property. In most cases, however, Buyers are Clients. Sellers are Clients ONLY if the company is the “Listing Broker”, not when the Company represents a Buyer on cooperative brokerage transactions with another firm.

CONSENSUAL DUAL AGENCY:

When listing a Seller’s property, disclosure is made that the Company’s policy is one of Consensual Dual Agency with Seller’s Consent. This occurs when a Buyer-Client, represented by one Sales Associate in the Company, decides to purchase a Seller-Client’s property represented by another Agent in the Company. In the case of dual agency, Realty Executives Oahu and its Sales Associates will limit their fiduciary duties (loyalty and full disclosure) by neither disclosing to the Buyer the lowest price or flexibility in terms that the Seller will accept, nor disclosing to the Seller the highest price or flexibility in terms that a party considers confidential. The Sales Associates will agree to keep the secrets of one Client from the other Client.  In the case of Dual Agency, the Sales Associate has the duty to make a full, fair and timely disclosure of all material facts and information within his/her knowledge readily available to the other Sales Associate which might in any way affect either the Seller’s or the

Buyer’s rights and interests or otherwise influence either party’s actions or decisions in connection with the completed transaction.

NOTE: It is our Company policy to disclose any homicide, felony, or suicide to the best of our knowledge that occurred on the real property no matter how many years have past since the incident occurred. Also, any other information regarding property condition or history known to the Listing Agent (and not disclosed by the Seller) shall be disclosed by the Listing Agent, in writing, and prepared separately from the Seller’s Real Property Disclosure Statement.

DEFINITIONS: A Material Fact, as stated in the law, is “any fact, defect, or condition, past or present, which materially affects the value of the residential real property being offered” for sale. 

The definition of Residential Real Property, for this purpose, shall be any “fee simple or leasehold real property…from one to four dwelling units; or a residential condominium or cooperative apartment…”

EXEMPTIONS: None for the standard homeowner or investor. Banks who acquire title via foreclosure are exempt.

EXCLUSIONS: An occupant is/was afflicted with AIDS or AIDS related complex