How to Protect Yourself in the Buying Process: Understand Your Rights
Buying a home is one of the biggest investments you’ll ever make, so it’s important to know your rights and protect yourself throughout the process. Understanding the rights to your contract will help you avoid costly mistakes. Understand the Contract: Know Your RightsOnce you’re in escrow, you have several legal opportunities to back out of the purchase if something doesn’t meet your expectations or if the home isn’t what you thought it was. Did You Know? There are typically seven ways to legally cancel a purchase contract during escrow. Home Inspection Contingency What It Is:This allows the buyer to hire a professional home inspector to check the property for issues like structural damage, plumbing problems, or electrical concerns. How to Protect Yourself:If the inspection reveals major problems, you can negotiate repairs, ask for a credit, or cancel the contract. Typical Timeline:Inspections are usually completed within 7-15 days after escrow begins. Seller Real Property Disclosure Statement (SRPDS) What It Is:A document where the seller lists any known problems with the property, like past damage, repairs, or other issues. How to Protect Yourself:If the SRPDS reveals something significant, such as unpermitted work or recurring problems, you can cancel the deal. Typical Timeline:The SRPDS is typically provided within 7 days of escrow opening. Buyers usually have 5-10 days to review and respond. Condo/Association Documents What It Is:For condos or homes with homeowners’ associations (HOAs), these documents outline rules, fees, and financial information about the HOA. How to Protect Yourself:If you discover something you don’t agree with, like high fees or restrictive rules, you can cancel the contract. Typical Timeline:These documents are usually delivered within 10 days of escrow opening, and you typically have 5-10 days to review and respond. Termite Inspection Contingency What It Is:A termite inspector checks for signs of active infestations or damage caused by termites. How to Protect Yourself:If a termite inspector finds signs of termites and recommends treatment, the seller is usually obligated to pay for that treatment. Ie: Tenting, Spot Treatment, Heat Treatment, etc Typical Timeline:Termite inspections are usually done within 15 days before closing. Survey Contingency (If Applicable) What It Is:A property survey confirms the boundaries and checks if you have a wall or fence on your neighbor's property or vice versa. How to Protect Yourself:If your neighbor's wall or fence is on your property by more than 6 inches you can cancel the contract. Typical Timeline:Surveys are ordered early in escrow and are typically completed within 2-3 weeks. Title Report Contingency What It Is:A title report ensures the property has no liens, legal disputes, or ownership issues. How to Protect Yourself:If the title report reveals problems, you can cancel the deal or require the seller to resolve the issue before closing. Typical Timeline:The title report is usually delivered within 7-10 days of escrow opening. Financing Contingency What It Is:A financing contingency allows you to cancel the deal if you can’t secure a loan for the purchase. How to Protect Yourself:If you can’t get the loan you are not forced to purchase the home. You can walk away without losing your deposits. Typical Timeline:Conditional Loan Approval is due 10 days before closing. Final Loan Approval due 5 days before the closing date. What Happens If You Back Out Illegally or Default?If you cancel the contract without a valid reason or fail to meet your obligations: Loss of Earnest Money: You may forfeit your deposit(s), typically 1-3% of the purchase price. Legal Consequences: The seller may sue for damages, especially if they lose money while relisting the home. Damaged Reputation: Defaulting could make future negotiations harder, as sellers and agents may see you as unreliable.
Escrow: What to Expect and How to Prepare
Escrow is the final step before becoming a homeowner, where all the details of the sale are finalized. Here’s what you need to know and do to ensure a smooth process: What Is Escrow and Why Does It Matter? Escrow is a neutral third-party process that protects both you and the seller. The escrow company holds funds, documents, and agreements until all conditions of the sale are met. It ensures the transaction is handled fairly and according to the contract. How Do You Get Into Escrow? Escrow begins when the buyer and seller agree on a contract. Both parties sign the purchase agreement, which outlines the terms of the sale, including price, contingencies, and deadlines. How Long Does Escrow Take? Escrow typically lasts 30-45 days but can be shorter or longer depending on the terms of your contract and any delays in the process. Staying on top of your responsibilities can help ensure a smooth and timely closing. What Are Your Responsibilities During Escrow? Schedule Inspections: Arrange a home inspection to check for any issues with the property. Complete Loan Finalization: Work with your lender to finalize your mortgage and submit any additional documents they request. Fulfill the Timeline of the Contract: Make sure all deadlines, such as earnest money deposits or contingencies, are met on time. Timeline of Events During Escrow ***These timelines are typical and may vary based on the terms outlined in your purchase contract, lender requirements, and other factors specific to your transaction.*** DAY 1: OFFER ACCEPTED When you’re ready to write an offer on a property, we’ll strategically draft it and carefully review it with you. Once you’ve given us the go-ahead and signed it, we’ll present it to the seller. If the seller accepts and signs, we officially enter escrow. DAY 1-3: INITIAL DOCUMENTS & EARNEST MONEY DEPOSIT If you haven’t already, you will need to submit your lender’s pre-approval letter and proof of funds to the seller. You'll also need to make your initial earnest money deposit. A strong initial deposit is 1% of the purchase price. DAY 5: SELLER DISCLOSURE STATEMENT The sellers will provide you with a Seller's Real Property Disclosure Statement, or SRPDS. The seller is required by law to complete this document and disclose any information past or present that affects the value of the property. DAY 5-7: HOME INSPECTION We strongly recommend hiring a professional home inspector—a generalist who evaluates the safety and functionality of a home. Inspection costs typically range from $350 to $900, depending on the size of the property, and are paid by the buyer. DAY 10-15: END OF INSPECTION PERIOD Based on the findings of the home inspection, you have three options: Move forward with closing. Cancel the contract and receive a full refund of your earnest money deposit. Request a credit or repair from the seller. You’ll need to make a decision before the inspection period ends. If you choose to request a credit or repair, it’s good practice to allow the sellers 24 to 48 hours to respond. This also gives us time to negotiate effectively on your behalf. DAY 10-15: ADDITIONAL DEPOSIT Typically within one or two business days after your inspection period ends, your second deposit is due to escrow. This is typically the same amount as your initial deposit. DAY 12-14: REVIEW HOA DOCUMENTS If the property is in a homeowners association (HOA), then the seller will deliver the associated governing documents to the buyer for the buyer's review. If you find something that you are not satisfied with, you can cancel. DAY 15-25: APPRAISAL If you're using a loan to buy the home, the bank will hire an appraiser to check the home's value, and the cost will typically be covered by you. If the appraisal comes in lower than the purchase price, the lender won’t approve your loan unless you bring in extra cash to cover the difference, or the seller agrees to lower the price. DAY 17: SURVEY If the property is a single-family home or land, normally the seller will pay for a survey to be completed. The survey will show the property line and any improvements (man-made objects like a wall or fence) close to the property line. If your neighbor has an improvement by more than .5 feet over your property line or vice versa, that is called an encroachment. If there is an encroachment, you have the right to cancel, move forward or get an encroachment agreement. DAY 20: TERMITE INSPECTION In the first few days of the escrow period, you, the buyer will select a termite inspector to conduct a termite inspection and produce a report showing any termite infestation that may be present and recommended treatment to remove any live termites. If the report recommends any treatment, the sellers are obligated by the contract to pay for and complete it. DAY 25: CONDITIONAL LOAN APPROVAL Once the lender decides if you can pay off the loan and if the property is suitable collateral for the loan they'll issue a CLA, which the buyer will provide to the seller as assurance that the transaction will close. DAY 30: FINAL LOAN APPROVAL & DOWN PAYMENT About 5 days or so after CLA, the lender will provide another letter giving final loan approval. Around the same time, the buyers should submit the remainder of their down payment. DAY 30-32: SIGNING & FINAL WALKTHROUGH The buyer will do one last walk-through to make sure the property is in the same condition as when the home was inspected. The lender and escrow will prepare a large pile of documents for the buyer to sign. DAY 30, 45, 60: CLOSING! Most transactions in Hawaii take about 45 days to complete, but there can be a lot of variation. In Hawai’i, escrow submits the deed -- which transfers the property from seller to buyer -- and other documents to Hawaii's Bureau of Conveyances (BOC).
Making an Offer: Strategies for Success
The Most Important Thing to Know When Making an Offer Does the seller already have offers in hand, or are they expecting any? Knowing this will help you understand whether you’re competing against other buyers, which will shape your strategy. How to Determine Your Offer Price Start by understanding the market value of the home, validated by comparable sales. This will give you a clear idea of what a fair price is. From there, adjust your offer based on the level of competition and how much you want the home. Pro Tip: Ask yourself: “If I lost to another buyer by $5,000, would I be okay with that?” If the answer is yes, then you’ve likely found your ceiling. Learn the Seller’s Motivation What does the seller want most? Are they looking for a quick sale, a good family to take care of their home, or fewer contingencies? Understanding what’s important to the sellers allows you to tailor your offer to meet their needs, making it more attractive. What if It’s My Dream Home? If this is your dream home and you have to beat out other competing buyers, consider these strategies to make your offer stand out: Offer the highest price you're willing to pay, as sellers often prioritize price. Add favorable terms for the sellers, like waiving contingencies, adding appraisal language, including an escalation clause, offering to pay for the termite inspection, and other special terms that make the offer more appealing to the sellers. Use the strategies in this guide to maximize your chances of standing out and winning against competing buyers. Submit an Offer with a Pre-Approval Letter Submitting your offer with a pre-approval letter and verification of cash funds gives sellers confidence in your ability to purchase.Pro Tip: Have your lender (if applicable) call the seller’s agent directly to provide further confidence in your financial ability to purchase. Write a Personalized Letter to the Seller Sellers who have lived in their home for a long time often want to know it will go to someone who will care for it. A personalized letter can humanize you and help the seller see you as more than just another buyer. Real Life Story: We helped our client secure their dream home despite facing multiple competing offers—including one that was $100,000 higher. What made the difference? A personal connection. The sellers and our buyers shared the same high school, college, and dental school, and the sellers saw a reflection of themselves 30 years ago.
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