Buying a Home in Hawaii is Harder Than You Think!
I have written an article about the pitfalls of buying a house in Hawaii. I did this in order to help others to not make the same mistakes I did. You can find the article here on my own website the Kona Forum: http://www.konaforum.com/bguide.html or you can find my article here on eZineArticles: http://ezinearticles.com/?Buying-Property-on-the-Big-Island-of-Hawaii—A-Beginners-Guide&id=187267.
My first mistake was to think buying property in Hawaii is the same as buying property on the mainland. The experience can be quite different and very frustrating. The offer I authorized Tom to make was lower than the asking price but not a lowball offer. Tom called me the same evening and informed me that the real estate agent for the owner rejected my offer and told him not to bring an offer less than asking price. I believe the real estate agent for the owner is required to bring all offers to the owner no matter how ridiculous. At this point I am mad that the letter of the law is not being followed. But as I am learning this is how things are done in Hawaii. So I went ahead and offered the asking price. I believe that the owner is required to respond within 24 hours. I finally heard back after 48 hours. While I am disturbed by this I am elated that it was accepted. I signed all the paperwork and write the good faith check and wait for the owner to sign the paperwork. Many days later the paperwork is still not signed. Tom has been calling the other agent everyday with no results. I asked Tom to inform the agent I will sue if she doesn’t have the owner sign the paperwork within 24 hours. Tom receives the signed papers the next day. In the meantime my mainland mortgage broker (who is licensed in Hawaii) is busy getting everything together.
After a week I got a call from my mortgage broker. It seems the company that has “Written thousands of mortgages in Hawaii” had never heard of a lava zone before. It just so happens their funding source has heard of lava zones before and refuses to fund my loan due to the fact that my home is in Lava Zone 2. I called numerous other brokers and they all said the same thing. So I started looking for a local broker but I had no luck. It appears I may lose this house and my good faith check. That is when I called Tom and he recommended First Hawaiian Bank and gave me the name of a loan officer he had previously used. At this time I am desperate because the sale can fall through and I really want this house. The loan officer and the bank was very easy to work with. The only problem with using a bank is the cost. Fees are much higher and the loan rate is higher. At the time I could get a home loan from a mortgage broker at 5% to 5.5%. First Hawaiian wanted 6.5%. Then they added 3/8% for it being an investment property. Plus they wanted an additional 5/8% for the house being locatded in lava zone 2. That works out to a whopping 7.5%!!! What a ripoff!!! But I really wanted the house so I take the screwing. I’m feeling a little better now that I have financing and it looks like I will own this house after all. Even though my payments went up a lot due to using a bank over a mortgage broker I am excited about owning this house.
The next item on my to-do list is to get homeowners insurance. I called my insurance company and they informed me that they don’t insure in Hawaii. Great, another obstacle to deal with. So I started calling insurance companies in Hawaii and they all tell me they won’t insure my house in lava zone 2. Apparently, lava zone 3 is the cutoff point. I found out that the only company that is currently insuring homes in lava zone 2 is Lloyds of London. I called them and I got a quote of $3,500 per year!!! I just about fell out of my chair. I am devastated!!! I am having a hard enough time dealing with, and figuring out how to afford the extra mortgage payments and now this happens. There was one more insurance company in the yellow pages that I had not called yet. The company is Liberty Mutual. The reason I mentioned them here is that they saved me from losing the house. They were willing to insure my house in lava zone 2 at a reasonable rate. The only requirement is that I have to insure all my homes and my cars with them. I agreed and have been with them ever since. I cannot complain as their rates are reasonable and my coverage is good. Since then I have been informed they have stopped writing policies in lava zone 2. They also told me that as long as I continue to insure all my homes and cars with them they will not drop the coverage on my Hawaii home.
The last item on my to-do list is I have to start looking for a property manager to rent my house for me. I am told I can get about $1,300 per month for rent. I had a tough time finding two property managers to interview. They don’t typically advertise and like most things in Hawaii I found them by word of mouth. I interviewed both and chose the one I felt was best at the time. It took her about two and a half months to find a tenant for my house. And I have had to reduce the rent to $850 per month. Things are finally settling down and I can relax now.
I dream of retirement and living on the Big Island in my house in Ocean View…
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